The Market Today
Early Indications Delta May Be Slowing in Some States
by Craig Dismuke, Dudley Carter
PMIs and Home Sales: The August Manufacturing, Services, and Composite PMIs are scheduled for 8:45 a.m. CT. All three are expected to remain I positive territory but pull back from July’s level. July’s Existing Home Sales report is scheduled for 9:00 a.m., with sales expected to dip 0.5% MoM. Already released this morning, the Chicago Fed National Activity Index rose from -0.01 to +0.53 in July, the highest since March. The aggregate index of 85 different economic variables was boosted by strength in production and income, and the employment metrics.
Markets Bounce Back as PMI Data Reflect Uneven Economic Impact from Delta’s Spread: Global equities are in the black on Monday, bouncing back from broad declines last week amid concerns that the Delta variant may be impacting economic activity (more below). The gains were widespread across all regions, lifting a gauge of stocks in the Asian Pacific by more than 1% and boosting the Stoxx Europe 600 by 0.5%. Tech shares, among the hardest hit last week by continued regulatory uncertainty in China, were leading the way higher overnight. Commodities also surged back after posting steep losses, with oil prices up more than 3% heading into U.S. trading. U.S. WTI fell 9% last week to a three-month low of $62.32 a barrel but had bounced back above $64 early Monday morning. U.S. futures had risen by more than 0.3% around 6:30 a.m. CT, extending a solid jump on Friday that limited last week’s losses for the major indexes. Treasury yields had also moved higher but trailed larger increases across Europe. Prior to the release of its U.S. reports later this morning, Markit’s preliminary August composite PMIs showed mixed effects of Delta’s global spread. Composite PMIs in Australia and Japan, where rising cases have elicited sharply tighter government restrictions, slipped to some of the lowest levels since the early months of the pandemic. The Eurozone’s measure inched down from 60.2 to 59.5, nearly matching the 59.6 expected, as manufacturing and services activity cooled to a still solid level. The same index dropped more than expected in the U.K., from 59.2 to 55.3, a six-month low. Ten-year yields in the U.K., France, and Germany had all risen around 3 bps at 7 a.m. CT, outpacing a 2.0-bp increase for the 10-year Treasury to 1.27%.
ICYMI – August 20, 2021 Weekly Market Recap: Stocks declined last week and Treasury yields moved lower as uncertainty about the impact of Delta’s spread on the recovery cast a shadow over confirmation in the Fed’s July Minutes that tapering was likely to begin this year. Markets entered last week against a backdrop of rising geopolitical uncertainty as a result of weekend developments in Afghanistan and on the heels of a sharply weaker-than-expected consumer confidence report for August amid rising cases and hospitalizations in the U.S. data Monday showed the variant’s spread may also be impacting economic activity in other countries, as a slew of economic reports from China widely missed expectations. A couple of manufacturing reports from regional Federal Reserve banks released throughout the week pointed to a slowdown and housing activity continued to reflect a softer tone. Total retail spending remained high in July but monthly declines were larger than expected. Although Wednesday’s Fed Minutes from July’s meeting showed general support for beginning to taper asset purchases this year, Dallas Fed President Kaplan, one of the earliest officials to voice support for tapering asset purchases “sooner rather than later,” said Friday he is open to altering his position if Delta begins to have a more significant impact on activity. For the week, the S&P 500 dropped 0.6% after hitting its lowest level since July 22. The 10-year yield fell just marginally, down 2.2 bps to 1.26%. Click here to view the full recap.