Follow us on Facebook

Recent Tweets

Categories

Subscribe to Our Blog | Newsletter

Please complete to receive our insights and newsletters.

Daily Market Report | July 11, 2022

US FINANCIAL MARKET

Stocks Turn Lower Ahead of Earnings Season – Wall Street Journal, 7/11/2022

  • U.S. stocks declined as earnings season is set to kick off this week, spurring concerns about the impact of inflation on corporate profits.
  • The S&P 500 fell 0.9% as the broad-market index started the week off on a negative note. The Nasdaq Composite Index shed 1.7%, pointing to losses for technology stocks. The Dow Jones Industrial Average was 0.4% lower.
  • Investors are also awaiting corporate earnings reports for indications of how much higher prices and weaker consumer sentiment have eroded companies’ profits.
  • Many household-name firms are set to post earnings this week, including PepsiCo on Tuesday and Delta Air Lines on Wednesday.
  • Major financial firms including JPMorgan Chase and Morgan Stanley are scheduled to report earnings on Thursday, followed by BlackRock, Citigroup and Wells Fargo on Friday. KBW Nasdaq Bank Index was down 0.8% in morning trading.
  • Twitter fell 7%. Elon Musk filed a statement on Friday evening, saying he was terminating his $44-billion bid for the social-media company, saying it had violated the merger agreement. Twitter also put out a statement indicating it will sue Mr. Musk.
  • Bond markets continued to flash a key warning sign. The U.S. yield curve remained inverted, with yields on shorter-dated bonds above those of longer-dated debt.
  • The yield on the benchmark 10-year Treasury note edged down to 2.994% from 3.098% on Friday. The two-year Treasury yield was at 3.035%.
  • Oil prices extended their decline. Brent, the global benchmark for crude, retreated 1.5% to trade at $102.86. It fell more than 4% last week.
  • Overseas, the pan-continental Stoxx Europe 600 slid 0.4%. The Nord Stream pipeline which transports Russian gas to Germany and other Western European countries shut for planned maintenance starting Monday.
  • Uniper fell 16%, extending last week’s 30% plunge. The utility has asked for a bailout from the German government, saying it has been hit by dwindling gas supplies.
  • In Asia, most major benchmarks declined. Chinese stocks dropped after Shanghai reported its first local case of the BA.5 Omicron subvariant on Sunday, and the country recorded more than 2,300 locally transmitted Covid-19 cases nationwide over the last seven days.
  • The Shanghai Composite Index slipped 1.3% and Hong Kong’s Hang Seng Index fell 2.8%.
  • Officials in Macau set a weeklong shutdown of casinos and other businesses to combat the surge in cases. Gambling stocks tumbled, with Sands China sliding 8.2%, Wynn Macau shedding 6.7% and Galaxy Entertainment Group down 4.9%.
  • Over the weekend, Beijing fined some of the country’s largest internet companies for failing to make proper antitrust declarations, weighing on tech stocks.
  • Alibaba, Tencent Holdings and Ping An Healthcare & Technology, which were named in the latest executive punishment notices, fell 5.8%, 2.9% and 3.4%, respectively.
  • In Japan, the Nikkei 225 index rose 1.1% on Monday after current Prime Minister Fumio Kishida’s ruling coalition won the majority of parliamentary seats in an election on Sunday.
  • The Japanese yen dropped to a fresh 24-year low of more than 137 against the dollar.

Twitter Stock Drops After Elon Musk Looks to Nix Deal – Wall Street Journal, 7/11/2022

  • Elon Musk’s effort to terminate his deal to buy Twitter sent shares of the social-media company tumbling, as investors prepare for what is expected to be a messy courtroom battle.
  • Twitter stock is trading about 37% below the $54.20-a-share price at which Mr. Musk agreed to buy the company in April, marking a stunning turnaround for what has been considered the buzziest deal of the year.
  • Its shares also are trading below where they were in early April before Mr. Musk took a surprise 9% stake in the company, which officially kicked off his takeover attempt.
  • In his bid to terminate the deal, Mr. Musk said Friday that Twitter had violated the agreement, arguing that it was making critical changes to the ordinary running of the business without his consent.
  • He also accused the company of withholding data from him. Mr. Musk doubled down on his view in the early hours of Monday with a series of characteristic memes and replies to users on Twitter.

U.S. bank profits to tumble on higher bad loan reserves – Reuters, 7/11/2022

  • Second quarter profits at big U.S. banks are expected to fall sharply from a year earlier on increased loan loss reserves, as the pandemic recovery gives way to a possible recession.
  • Analysts expect JPMorgan Chase & Co will report a 25% drop in profit on Thursday, while Citigroup Inc and Wells Fargo & Co will show 38% and 42% profit declines, respectively on Friday, according to Refinitiv I/B/E/S data.
  • Bank of America Corp, which like its peers has big consumer and business lending franchises, is expected to show a 29% drop in profit when it reports on July 18.
  • Morgan Stanley, the sixth-biggest U.S. bank by assets and a major Wall Street player and investment manager, also reports on Thursday and is expected to show a 17% decline in profits.
  • The fifth-biggest bank, Goldman Sachs, is expected to report a 51% profit drop when it reports on July 18.
  • The plunge in profit stems from lenders adding to their reserves for expected loan losses, a reversal from a year earlier when they benefited from reducing those cushions as anticipated pandemic losses failed to materialize and the economy strengthened.

Battered Euro Edges Ever Closer to Parity as Dollar Runs Rampant – Bloomberg, 7/11/2022

  • Europe’s common currency edged closer toward parity with the US dollar Monday as energy concerns and the risk of recession weighed on the outlook for the euro area, while risk aversion fueled a broad rally in the greenback.
  • The euro dropped as much as 1.3% to $1.0057, eclipsing its low from last week. The last time it was this low was back in 2002. The Bloomberg Dollar Spot Index jumped as much as 1%
  • Other currencies fell even more against the greenback Monday, with the Australian dollar leading declines among Group-of-10 counterparts, followed by peers from Norway and New Zealand.
  • The Chilean peso was the biggest major emerging-market loser, tumbling close to 3% and pushing past the psychological 1,000 per dollar level, while the Hungarian forint and Colombian peso were also hammered.

Oil Sinks Amid Risk-Off Mood as China’s Virus Cases Climb Again – Bloomberg, 7/11/2022

  • Oil declined as a renewed increase in China’s virus cases fed into weakness across global markets.
  • West Texas Intermediate dropped near $101 a barrel. Covid cases continued to climb in Shanghai and other regions, with new sub-variants posing a challenge to the country’s Covid Zero strategy.
  • Oil also fell on a stronger dollar, and on the cancellation of a court order halting loadings from a key Russian terminal.
  • Despite Chinese demand concerns, the oil market is still supported by tight supply, in part due to upended trade flows from Russia following its invasion of Ukraine.
  • Time-spreads have firmed in a bullish backwardation structure, which indicates scarce volumes.

Europe Gas Falls as Return of Key Pipeline Part May Ease Tension – Bloomberg, 7/11/2022

  • European natural gas fell after Canada said it would return a stranded turbine for a key Russian pipeline to Germany, raising optimism that tensions with Moscow over energy supplies will ease.
  • Benchmark futures dropped as much as 12%. The Canadian move comes as much-needed relief for Germany, and more widely Europe, with deeply reduced shipments through the Nord Stream pipeline threatening the region’s plan to fill storage sites in time for winter and bringing the risk of rationing.
  • The Kremlin said last week that the equipment would help raise shipments to Europe.
  • Gazprom PJSC has been using just 40% of the pipeline’s capacity since last month after the turbine was sent to Canada for maintenance and wasn’t returned because of sanctions on Russia. Berlin urged for it to be sent back.
  • Germany had voiced concerns over whether supplies, and how much of it, will resume.
  • Gazprom needs six major turbines to operate the link at full capacity, but not all of the components that are still in Russia are in working condition because they need maintenance, the company has said.

Chip Giants to Build Factory in France as Global Supply Race Rolls On – Wall Street Journal, 7/11/2022

  • GlobalFoundries and STMicroelectronics, two of the world’s largest chip makers, said they would team up to build a semiconductor factory in France, leaning on government subsidies in what has become a global race to strengthen control over technological supplies.
  • The factory in Crolles in southeastern France would be jointly operated by the two chip makers and receive what they described as major financial support from the French government.
  • The three parties plan to invest a total of more than $5.7 billion in the plant, which they said should open by 2026 and create more than 1,000 jobs. They didn’t detail how the investment would be divided.
  • Both chip makers and the French government said Monday that a goal was to support the European Union’s ambition of becoming less dependent on other countries for important technologies.

Broadcom President Departs, Duties Shift to CEO – Wall Street Journal, 7/11/2022

  • The president of Broadcom is leaving the company for another job, with his responsibilities shifting to Chief Executive Hock Tan.
  • The microchip powerhouse said in a regulatory filing Monday that Thomas Krause has accepted a role at a privately held enterprise software company and will formally depart on July 15.
  • The position of president will be eliminated as Mr. Tan will be assuming Mr. Krause’s responsibilities, Broadcom said.
  • Broadcom also on Monday said its chief operating officer, Charlie Kawwas, is now the president of the Semiconductor Solutions Group, the company’s semiconductor portfolio.
  • He will remain responsible for global operations and sales in both the semiconductor and brocade storage networking business segments.

Airbus revises up jet demand forecast amid higher energy costs – Reuters, 7/11/2022

  • Europe’s Airbus has revised up its forecast for jet deliveries over the next 20 years as soaring fuel bills prompt airlines to seek new, more fuel-efficient planes.
  • Despite the war in Ukraine and a spike in inflation, Airbus edged up its average forecast for annual GDP growth to 2.6% from 2.5% in its latest 20-year outlook published on Monday.
  • But it saw passenger traffic growing more slowly than before, by 3.6% a year rather than 3.9% forecast in November.
  • Airbus predicts total deliveries of 39,490 jets over the next 20 years, up from 39,020 forecast previously.
  • It expects deliveries to include 38,600 passenger jets – up from 38,140 previously forecast – and 890 freighters, up from 880.
  • For the second time in three years, Airbus has changed the way it breaks down jet demand, this time into two categories – “typically single-aisle” which includes its A320neo or Boeing’s 737 MAX and accounts for 31,620 projected deliveries, and “typically wide-body” jets which account for 7,870 units.

US ECONOMY & POLITICS

Home-Sale Cancellations Jumped in June as Buyers Backed Away – Bloomberg, 7/11/2022

  • The US housing market saw a rise in the percentage of deals cancelled in June as rising mortgage rates made homes more expensive, pushing some buyers to walk away from deals.
  • Across the country, nearly 60,000 home sales fell through, according to an analysis by Redfin Corp. That was equal to 15% of transactions that went into contract that month, the highest share of cancellations since April 2020, when early Covid lockdowns froze the housing market.
  • Even in a more normal time, deals can fall through for a wide range of reasons. Mortgage applications get denied and inspections reveal the need for expensive repairs. Sometimes a buyer just gets cold feet.
  • In June 2021, when buyers were waiving contingencies and flooding into open houses, the number of canceled transactions equaled roughly 11% of contracts entered that month.

Congress Juggles China Bill, Democrats’ Climate and Drug-Pricing Ambitions – Wall Street Journal, 7/11/2022

  • Congress returns on Monday with Democrats aiming to revive central pieces of President Biden’s stalled economic agenda while trying to keep on track a separate, bipartisan bill targeted at boosting competitiveness with China that top Republicans are threatening to block.
  • The three-week work period may be the last chance lawmakers have for a legislative victory before campaigning begins in earnest for midterm election races across the country.
  • Republicans are heavily favored to win back control of the House this fall, while the Senate is seen as a tossup.
  • Lawmakers have been working since last year to negotiate the China bill, which aims to bring semiconductor manufacturers to the U.S., by reconciling differing versions passed by the House and Senate.
  • The bill, called USICA in the Senate, was inching toward the finish line when Senate Minority Leader Mitch McConnell (R., Ky.) last month said he wouldn’t move forward unless Democrats dropped their efforts to revive economic proposals that Republicans oppose.

Global Tax Talks Hit Another Delay – Wall Street Journal, 7/11/2022

  • Efforts to deliver the most significant changes to global tax rules in a century will face fresh delays after negotiators Monday said it would take longer than planned to reach a formal agreement on how countries with large consumer markets collect more corporate tax revenue.
  • The new rules, initially promised by mid-2022 as part of a multilateral deal negotiated under the auspices of the Organization for Economic Cooperation and Development, won’t be completed until next year.

The delay increases the risk that some governments will lose patience with the process and press ahead with their own national taxes on the big U.S.-based technology companies that are the prime targets of the effort.

EUROPE & WORLD

Shanghai Outbreak Swells as First Sub-Variant Case Detected – Bloomberg, 7/11/2022

  • Covid-19 cases in Shanghai continued to climb as parts of China’s financial hub face more rounds of mass testing, with new sub-variants providing a constant challenge to the country’s zero-tolerance approach to the virus.
  • The city recorded 69 new infections for Sunday, the most since late May and up from 57 the day before.
  • Shanghai found its first case of the more contagious BA.5 sub-strain of the omicron variant Friday, triggering two rounds of mass testing between Tuesday and Thursday in nine districts, plus other areas where cases have been found, a health official said Sunday.
  • Elsewhere, Shandong province reported 80 local cases and Beijing recorded one infection.
  • Flareups also led to movement restrictions and testing in Hainan and Guangdong provinces — in China’s south — over the weekend. Nationwide, China reported 352 cases for Sunday.

Macau Shuts Casinos as City Enters Weeklong Lockdown – Wall Street Journal, 7/11/2022

  • The gambling enclave of Macau will enter a citywide lockdown early Monday, as authorities seek to contain a spiraling Covid-19 outbreak.
  • Aside from essential services such as supermarkets, healthcare facilities and restaurants selling takeaway, all other businesses have been ordered to shut for a week, with residents required to stay at home.
  • The order, issued Saturday by the territory’s chief executive, Ho Iat-seng, comes as Macau struggles to contain an outbreak that had already shuttered venues such as cinemas, salons and swimming pools.
  • The lockdown order specified that all adults who needed to leave their homes would be required to wear masks of KN95-standard or above. Those who violated that order could be subject to jail time.

China regulator fines Alibaba, Tencent for disclosure violations – Reuters, 7/11/2022

  • China has imposed fines on technology giants Alibaba and Tencent as well as a range of other firms for failing to comply with anti-monopoly rules on the disclosure of transactions, the country’s market regulator said on Sunday.
  • The State Admnistration for Market Regulation (SAMR) released a list of 28 deals that violated the rules. Five involved units of Alibaba, including a 2021 purchase of equity in its subsidiary, the Youku Tudou streaming platform.
  • Tencent was involved in 12 of the transactions on SAMR’s list.
  • Under the anti-monopoly law, the maximum potential fine in each case stands at 500,000 yuan ($74,688).

Large Chinese Bank Protest Put Down With Violence – Wall Street Journal, 7/11/2022

  • Hundreds of bank customers demonstrating over frozen deposits were attacked by men in plainclothes in the central Chinese city of Zhengzhou, marking a violent end to one of China’s largest public protests in recent years.
  • Images of the clash, which was widely videotaped, spread quickly enough on Chinese social media to outrun the country’s army of internet censors, sparking a wave of online criticism.
  • It was the second protest launched by customers of four Zhengzhou banks after the lenders froze their accounts amid a government investigation into financial misconduct.
  • The first, smaller protest occurred in May and ended with a similar clash.
  • Another protest attempt in June was foiled by the local Zhengzhou authorities, who used a health code designed to control Covid-19 to restrict the movements of petitioning bank customers.
  • The pre-emptive operation, while successful in preventing the protests, drew a wave of criticism nationally and resulted in the firing of several local officials accused of abusing the health codes.

Sri Lankan President Gotabaya Rajapaksa to Resign Amid Protests – Wall Street Journal, 7/11/2022

  • Sri Lankan President Gotabaya Rajapaksa, whose family has dominated the country’s politics for much of the past two decades, has agreed to resign, the parliament’s speaker said, after antigovernment protesters stormed and occupied the president’s residence and office.
  • In a televised statement on Saturday night, Sri Lanka’s parliamentary speaker, Mahinda Yapa Abeywardena, said the president had informed him of his intention to step down Wednesday “to ensure a peaceful transition of power.”
  • Braving tear gas and water cannons in the capital, Colombo, protesters—many waving the national flag and clad in black—stormed the president’s residence and office Saturday, in one of the largest antigovernment demonstrations in the country this year amid a deepening sovereign debt crisis.
  • Television news footage showed large crowds overrunning security barricades before breaching the official residence of Mr. Rajapaksa. Some were later seen taking a dip in the compound’s swimming pool.
  • Videos purportedly filmed by protesters and shared widely on social media showed scores of men rifling through drawers, sitting in chairs and lounging on a four-poster bed inside a bedroom of the residence. One man was shown doing bicep curls in a gym.

Factmonster – TODAY in HISTORY

  • Pope Clement VII excommunicated England’s King Henry VIII. (1533)
  • Former vice president Aaron Burr fatally wounded former secretary of the treasury Alexander Hamilton in a duel. Hamilton died the following afternoon. (1804)
  • The Rev. Dr. Martin Luther King, Jr., was posthumously awarded the Presidential Medal of Freedom for his work to advance civil rights. (1977)
  • The United States and Vietnam established full diplomatic relations. (1995)

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy assures success or protects against loss. Any economic forecasts set forth may not develop as predicted. All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. Material presented is excerpts derived from third party content and you may need a subscription to access the full the content. The views and opinions expressed are those of the authors and do not necessarily reflect the views of Pence Wealth Management or LPL Financial. Prior to making any investment decision please consult your financial advisor regarding your specific situation.

Share This Post!