Tuesday, 31 August 2021

S&P 500 hits another record high, earnings “unequivocally strong”

The S&P 500 rose 0.4 percent on Monday to hit another record high.

Ryan Detrick, chief market strategist for LPL Financial, said in a note to clients on Monday that “we expect corporate America’s efficiency and the strength of the reopening to continue to power earnings ahead and lead to additional gains for stocks over the rest of 2021”.

Bank of America suggested that “the earnings profile is unequivocally strong” and even with moderation, “will still be high enough to present a conducive environment for equities”.

Still, Morgan Stanley’s Mike Wilson sees a 10 percent correction soon in the market.

“With record GDP and earnings growth, rising inflation and the rates of infection from the Delta variant peaking, the Fed will feel more pressure to remove what is essentially emergency monetary accommodation,” he wrote.

BTIG’s chief equity and derivatives strategist Julian Emanuel is also cautious, telling CNBC on Monday that the market’s record price action is mimicking late 1999, and it could spark a 10 to 20 percent correction within the next month.

“Be very much aware of the fact that if and when it reverses, the consequences could be severe,” he said.

Emanuel remains bullish over the longer term “because the long-run trend is higher and pullbacks having been bought have been rewarded all along the line”.

Monday, 30 August 2021

The pandemic and China’s economy

China has largely kept the COVID-19 pandemic under control even amid the spread of the Delta variant in the rest of the world.

Still, the country’s economy is likely to be affected by the pandemic, according to Yu Yongding, a former member of the Monetary Policy Committee of the People’s Bank of China.

Excerpt from his Project Syndicate article: The Pandemic’s Impact on China’s Growth Prospects:

It is safe to say that the fight against COVID-19 is far from over. For China, this means that more small-scale coronavirus outbreaks – with the associated economic disruptions – are all but inevitable. Given this, it is very likely that China’s total growth in 2021 will fall short of previous market expectations.

Saturday, 28 August 2021

S&P 500 at record high, shrugs off Powell taper talk

Markets were mostly higher on Friday.

The S&P 500 rose 0.8 percent to a record high while the STOXX Europe 600 rose 0.4 percent.

Earlier in Asia, markets were mixed, with the Nikkei 225 down 0.4 percent but the Shanghai Composite up 0.6 percent.

US investors shrugged off remarks by Federal Reserve Chairman Jerome Powell on Friday at the Jackson Hole, Wyoming symposium that the Fed likely will begin cutting the amount of bonds it buys each month before the end of the year.

“The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff,” Powell added.

“Interest rate hikes are far, far away, and investors are happy about that,” said Michael Arone, chief investment strategist for the US SPDR Business at State Street Global Advisors. “The market seems well prepared for the start of tapering.”

Friday, 27 August 2021

S&P 500 falls amid taper talk

The S&P 500 snapped a five-day winning streak on Thursday, falling 0.5 percent.

The Federal Reserve's Jackson Hole symposium will be held on Friday but already, talk of tapering the Fed's bond purchases is sending jitters in markets.

Esther George, president of the Kansas City Fed, said on Thursday that “the level of accommodation we’re providing right now is probably not needed” and “I would be ready to talk about taper sooner rather than later”.

James Bullard, St Louis Fed president, said on Thursday: “I think we want to get going on taper. Get the taper finished by the end of the first quarter next year.”

Dallas Federal Reserve President Robert Kaplan said on Thursday: “It would continue to be my view that when we get to the September meeting, we would be well served to announce a plan for adjusting purchases and begin to execute that plan in October or shortly thereafter.”

Thursday, 26 August 2021

S&P 500 hits record high, COVID-19 cases seen peaking

Markets were mostly little-changed on Wednesday.

The S&P 500 rose 0.2 percent to a record high while the STOXX Europe 600 was flat and Asian markets were mixed.

Analysts are optimistic on stocks.

Fundstrat’s Tom Lee said in a note to clients on Tuesday that “we are shifting further into full risk-on” while Wells Fargo Securities head of equity strategy Christopher Harvey lifted his year-end S&P 500 target to 4,825.

On the COVID-19 pandemic front, some optimism is creeping in again.

Lee noted an “apexing of COVID-19 cases in a number of states” in the US while Tapas Strickland, director of economics and markets at the National Australia Bank, wrote that “China’s delta outbreak also appears to be under control with two consecutive days of no new domestic cases”.

Elsewhere, though, the picture remains grim. COVID-19 cases continues to surge in Australia, with New South Wales in particular hitting another daily record of 1029 infections, while Japan's government has decided to extend its pandemic state of emergency to eight more regions.

Wednesday, 25 August 2021

Markets rise, COVID-19 cases “likely to roll over soon”

Markets rose on Tuesday, with the MSCI world equity index up 0.57 percent and the S&P 500 up 0.15 percent to hit another record high.

The Leuthold Group’s chief investment strategist Jim Paulsen thinks the stock market could see further gains.

Paulsen noted on Monday that Treasury yields are firming again, “suggesting the Covid variant here is likely to roll over soon and economic activity is likely to pick up”.

Others share similar views on a waning COVID-19 surge in the US.

“I thought there was an indication the South was peaking, and I think it’s pretty clear right now the South has peaked,” Dr Scott Gottlieb, the former Food and Drug Administration commissioner, told CNBC on Monday.

“The percent increases in cases and hospitalizations are declining each week, indicating progression towards a nationwide peak,” Chris Meekins, health policy research analyst at Raymond James, said in a note.

That would be good news for the US economy.

Aneta Markowska, chief financial economist at Jefferies, said that the latest surge is “really just causing a loss of momentum rather than pronounced economic weakness, and there is good chance that it will be pretty short-lived”.

Tuesday, 24 August 2021

Markets rise, oil jumps

Markets rose on Monday.

The S&P 500 rose 0.8 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 jumped 1.8 percent.

Oil prices rose, snapping a seven-day losing streak. West Texas Intermediate crude futures jumped 5.6 percent while Brent rose 5.5 percent.

“The economic recovery is what is driving corporate earnings and the stock market to all-time highs, and we expect that to continue through 2021 and into 2022,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

Similarly, Barclays said that “strong Q2 results have provided a fundamental justification and reinforced our confidence in the sustainability of the recovery”.

Saturday, 21 August 2021

Markets mixed, Hang Seng in bear market

Markets were mixed on Friday.

The S&P 500 rose 0.8 percent and the STOXX Europe 600 rose 0.3 percent.

Earlier in the day, though, Asian markets fell. The Nikkei 225 fell 1.0 percent and the Shanghai Composite fell 1.1 percent. The Hang Seng plunged 1.8 percent, leaving it in bear market territory.

China’s one-year loan prime rate (LPR) and five-year LPR were both left unchanged at 3.85 percent and 4.65 percent respectively on Friday but investors remained nervous about the country's tech sector amid regulatory uncertainty as the country passed a major data protection law on Friday.

In the US, the COVID-19 pandemic and possible Federal Reserve taper remained concerns.

“The spread of the delta variant is weighing on both consumption and productions, and pushing out growth,” Goldman Sachs’ Chris Hussey said in a note.

“With Fed tapering coming while delta variant keeps spreading, the transition away from liquidity/policy regime to more mid-cycle markets means we may experience a bumpier ride ahead,” Barclays equity strategists said in a note.

Friday, 20 August 2021

Markets mixed amid Fed taper talk and COVID-19 surge

Markets were mixed on Thursday.

The S&P 500 rose 0.1 percent, snapping a two-day losing streak.

However, elsewhere, the STOXX Europe 600 tumbled 1.5 percent and the Nikei 225 fell 1.1 percent.

Stocks have been under pressure since the release of minutes of the Federal Reserve's July monetary meeting on Wednesday showed that the central bank has started considering tapering its monthly bond purchases before the year-end.

And that as the US continues to reel from COVID-19, with infections up 47 percent over the last two weeks and deaths up 97 percent.

Goldman Sachs cut its US economic growth forecast for the current quarter to 5.5 percent from 9 percent, with chief economist Jan Hatzius saying: “The impact of the delta variant on growth and inflation is proving to be somewhat larger than we expected.”

Wednesday, 18 August 2021

S&P 500 falls, Shanghai Comp tumbles on new rules

Markets were mostly lower on Tuesday.

The S&P 500 fell 0.7 percent and the Nikkei 225 fell 0.4 percent.

However, the STOXX Europe 600 edged up 0.1 percent.

The Shanghai Composite tumbled 2.0 percent after the State Administration for Market Regulation issued draft rules on Tuesday aimed at stopping unfair competition on the internet.

Monday, 16 August 2021

S&P 500 breaks records as COVID-19 breaks US hospitals

The S&P 500 rose 0.7 percent last week, closing at a record high.

Ed Yardeni, president of Yardeni Research, told CNBC on Friday that the US economy is on the cusp of “nirvana”.

“Buy a little bit of everything,” he said. “Earnings are still going to continue to move to record highs.”

“I’ve got 5,000 on the S&P 500 by the end of next year or earlier,” he said.

However, Yardeni did say that there are risks.

“Nothing is cheap,” he said of stock prices, while inflation “has yet to demonstrate as actually transitory”.

And then there is the COVID-19 pandemic, which Yardeni described as “disturbing”.

Indeed, Dr. Francis Collins, the director of the National Institutes of Health, said on Sunday: “I will be surprised if we don't cross 200,000 cases a day in the next couple of weeks, and that's heartbreaking considering we never thought we would be back in that space again.”

As it is, the US medical system is in dire straits.

"The system is breaking," CNN medical analyst Dr Jonathan Reiner said on Saturday. "It's not just the beds... But it's qualified people to staff those beds.”

Saturday, 14 August 2021

US and European stocks hit record highs again

Markets were mostly higher on Friday.

The S&P 500 rose 0.2 percent to a record high. The STOXX Europe 600 also rose 0.2 percent to a record high.

Earlier, though, Asian markets were mostly lower, with the Nikkei 225 dipping 0.1 percent.

“If investors are concerned about rising Delta variant cases globally there’s little evidence that it is prompting any undue worry, although markets in Asia have been a little more cautious,” said Michael Hewson, chief market analyst at CMC Markets UK.

“The bull case remains intact despite factor/sector leadership remaining inconsistent,” said JPMorgan’s Andrew Tyler.

However, Geir Lode, head of global equities at the international business of Federated Hermes, said: “With equity markets almost doubling since the start of the pandemic and a bull market lasting over a decade, investors are questioning how far the bull market can rally.”

Meanwhile, on the COVID-19 front, cases continued to rise around the world.

Japan's daily total of COVID-19 cases surpassed 20,000 on Friday, logging a record figure for the third straight day.

Prime Minister Yoshihide Suga said that “the medical system in Tokyo is in a dire situation” while experts described the situation in the capital as “a disaster-level emergency situation that is out of control”.

In the US, COVID-19 hospitalisations are rising by more than 2,500 patients a day over the past week, with Florida and Louisiana now reporting record numbers of COVID-19 hospital admissions. Florida has the highest hospitalisation rate in the country.

Friday, 13 August 2021

Stocks rise to record highs as COVID-19 cases surge

Markets were mostly higher on Thursday.

The S&P 500 rose 0.3 percent to a record high and the STOXX Europe 600 rose 0.1 percent to also hit a record high. However, the Nikkei 225 fell 0.2 percent.

Investors celebrated record highs for stock markets even as COVID-19 cases continued to surge around the world, not least in the US.

The White House COVID-19 response team on Thursday reported that the seven-day numbers for new COVID-19 cases reached about 113,000 new cases per day in a 24 percent increase from the previous week. Hospital admissions rose 31 percent and fatalities rose 22 percent.

Rochelle Walensky, the director of the Centers for Disease Control and Prevention, said that “now over 90 percent of counties in the United States are experiencing substantial or high transmission”.

Thursday, 12 August 2021

S&P 500 hits record amid high inflation and COVID-19 cases

The S&P 500 rose 0.2 percent to another record high on Wednesday.

Investors shrugged off a report showing that US consumer prices rose 5.4 percent in July from a year ago.

Mike Loewengart, managing director of investment strategy at E*TRADE Financial, said that “while inflation continues to run hot, it’s likely that investors are already pricing it in”.

Seema Shah, chief strategist at Principal Global Investors, said that the report “tentatively suggests that inflation may have peaked”.

Meanwhile, Barry Gilbert, asset allocation strategist at LPL Financial, said that because of the rise in COVID-19 cases in the US, “we could still see some drag on economic growth as some restrictions are reintroduced and consumers potentially become more cautious”.

Nevertheless, Gilbert added that “we believe the S&P 500 is still likely to see more gains through the end of the year”.

Wednesday, 11 August 2021

Markets rise, US Senate passes infrastructure package

Markets rose on Tuesday.

The S&P 500 rose 0.1 percent to an all-time high, the STOXX Europe 600 rose 0.4 percent to also hit an all-time high, and the Nikkei 225 rose 0.2 percent.

Michael Hewson, chief market analyst at CMC Markets UK, said that “cautious optimism continues to outweigh concern about rising Delta variant rates in Asia, and to a lesser extent the U.S.”.

US stocks were boosted by the Senate’s passage of an infrastructure package.

Tuesday, 10 August 2021

Stock market in “bubble”, Boston Fed chief suggests taper soon

Markets were mixed on Monday.

The S&P 500 fell 0.1 percent, the STOXX Europe 600 rose 0.2 percent and the Shanghai Composite rose 1.1 percent.

Oil prices fell. West Texas Intermediate crude fell 2.6 percent and Brent fell 2.4 percent.

“The biggest challenge for oil markets remains the uncertainty around COVID as the ‘delta variant’ has made for the highest daily case counts since early 2021,” Bank of America said.

“The surge in cases continues to pressure the cyclical parts of the stock market the most including cyclical sectors like energy and industrials and small cap stocks,” said Jim Paulsen, chief investment strategist at the Leuthold Group.

Meanwhile, Richard Bernstein, the CEO and CIO of Richard Bernstein Advisors, said on CNBC on Monday: “We are right in maybe the biggest bubble of my career.”

“The Fed has so distorted the long-end of the curve that we are seeing a very natural reaction among long-duration assets which is then taking on a life of its own,” he said.

Bernstein added that a rapid drying-up of liquidity is “unlikely” so “the probability of a major bear market is probably much lower than people might think”.

Still, the view that the Fed should begin withdrawing liquidity soon may be gaining ground.

Eric Rosengren, the president of the Federal Reserve Bank of Boston, said on Monday that the central bank should announce in September that it will begin reducing its purchases of Treasury and mortgage bonds.

“I don’t think asset purchases are having the desired impact on really promoting employment,” he explained.

Monday, 9 August 2021

COVID-19 pandemic nowhere near the end

The COVID-19 pandemic shows no signs of coming to an end.

As of Friday, the seven-day average of daily COVID-19 cases in the US was more than 107,100, the highest average in nearly six months. More than 66,000 Americans were hospitalised with COVID-19 as of late Saturday, the highest number since February.

According to data from the Centers for Disease Control and Prevention, more than 97 percent of Americans live in areas with “substantial” or “high” Covid-19 transmission.

Even countries that had previously done well in controlling the pandemic is now seeing a surge in cases.

“The Asia-Pacific countries, by and large, have had an incredibly successful year and a half responding to Covid,” said Karen A GrĂ©pin, an associate professor at the University of Hong Kong's School of Public Health.

For examples, countries like China and Australia have reported just 4,848 and 939 deaths from COVID-19 respectively.

However, the emergence of the highly transmissible Delta variant changed things, with millions of people in Australia and China now back in lockdown and health systems in Malaysia, Thailand and Indonesia becoming overwhelmed.

“If anyone thinks this is over, they're wrong,” said Dale Fisher, a professor in infectious diseases at Singapore's National University Hospital.

Dr Larry Brilliant, an epidemiologist who was part of the World Health Organization’s team that helped eradicate smallpox, similarly said that the world is nowhere near the end of the pandemic.

“I think we’re closer to the beginning than we are to the end,” said Brilliant.

Brilliant said the Delta variant is “maybe the most contagious virus” ever, and there may be more variants to come.

“Unless we vaccinate everyone in 200 plus countries, there will still be new variants,” he said.

Saturday, 7 August 2021

S&P 500 hits record high on “really, really good” job numbers

Markets were mostly higher on Friday.

The S&P 500 rose 0.2 percent to a record high and the Nikkei 225 rose 0.3 percent. The STOXX Europe 600 was flat.

US stocks were boosted by a report showing that the US economy added 943,000 jobs in July.

“I think this is really, really good numbers for the stock market,” said James Paulsen, chief investment strategist for The Leuthold Group.

“The backdrop for risk assets remains constructive,” Third Point hedge fund manager Dan Loeb wrote in a note.

China was one of the exceptions to the generally upbeat mood in stock markets as the Shanghai Composite fell 0.2 percent.

China on Friday reported 124 new COVID-19 cases, its highest daily count since the start of the latest outbreak.

That is dwarfed by the number of new cases in Japan, which hit a record high of 15,645 on Friday. The total since the pandemic began last year is now more than 1 million.

Friday, 6 August 2021

Markets rise, US COVID-19 cases hit six-month high

Markets were mostly higher on Thursday.

The S&P 500 rose 0.6 percent, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 rose 0.5 percent.

In the US, travel stocks rebounded after struggling over the past week amid the spread of the Delta variant of COVID-19.

“It’s nice to have a day where we’re seeing a rebound in reopen and travel,” said Stephanie Link, chief investment strategist at Hightower Advisors.

Nevertheless, the trajectory of the pandemic in the US remains grim, with infections hitting a six-month high of over 100,000 on Wednesday.

Southern states are reporting the most COVID-19 cases and hospitalisations.

“23% of new COVID hospitalisations in the US are in Florida, and their hospitals are being overwhelmed again,” White House Press Secretary Jen Psaki said on Wednesday.

Thursday, 5 August 2021

Markets mixed, US private sector jobs disappoint

Markets were mixed on Wednesday.

The S&P 500 fell 0.5 percent but the STOXX Europe 600 rose 0.6 percent.

A report from ADP on Wednesday showed that jobs in the US private sector rose by 330,000 in July, well short of the consensus estimate of 653,000.

Analysts remain sanguine though.

“While earnings and growth may be peaking, it doesn’t mean that they’re going to go negative, just decelerate,” said Chris Osmond, chief investment officer at Prime Capital Investment Advisors.

Some also appear undaunted by the renewed surge in COVID-19 cases, which, on Tuesday, resulted in more than 50,000 hospital beds across the US being occupied by COVID-19 patients, more than triple the number a month ago.

Wells Fargo Investment Institute strategist Scott Wren said that “based on the fact that the major equity indexes are near all-time record highs, one can make a rational argument that right now investors are not all that worried about the delta variant’s potential for rattling the economy”.

Wednesday, 4 August 2021

Markets rise, pullback “can’t be ruled out”

Markets were mostly higher on Tuesday.

The S&P 500 rose 0.8 percent to a record high and the STOXX Europe 600 rose 0.2 percent. However, the Nikkei 225 fell 0.5 percent.

Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, said that “valuations are fairly high” and expects “the market to be mostly sideways with slightly elevated volatility”.

“The delta variant of the virus is now rapidly spreading in the U.S. and a modest pullback in activity can’t be ruled out,” Solita Marcelli, CIO Americas at UBS, said in a note.

Tuesday, 3 August 2021

Markets mixed amid COVID-19 surge, strong earnings

Markets were mixed on Monday.

The S&P 500 fell 0.2 percent but the STOXX Europe 600 rose 0.6 percent.

Canaccord Genuity analyst Tony Dwyer said that views on the market are divided as “fear over the Delta variant of the Covid-19 virus and the other side of ‘peak everything’ has investors on edge, while the monetary and fiscal support for the economy coupled with historically strong earnings keeps liquidity high”.

Indeed, the US is averaging more than 63,000 new COVID-19 cases cases a day over the last 7 days, near its highest level since April this year.

However, 88 percent of S&P 500 companies that have reported results have topped EPS estimates, and the S&P 500 is on track to post earnings growth of 85.1 percent for the second quarter.

Monday, 2 August 2021

Economy could “sputter” as COVID-19 surges

The S&P 500 rose 2.3 percent in July, its sixth consecutive positive month.

However, Rosenberg Research president David Rosenberg warned on Friday that surging COVID-19 Delta variant cases paired with the culmination of fiscal stimulus pose risks to the stock market.

“We have to be prepared here for the economy to sputter in the next several months,” said Rosenberg.

Indeed, health experts and officials expect the surge in COVID-19 cases to worsen as long as large segments of the country remain unvaccinated.

“We will see this big, steep acceleration,” said Dr Peter Hotez, co-director for the Center for Vaccine Development at Texas Children's Hospital.

The hit to the US economy may not be too great though if lockdowns do not return.

“I don’t think we’re going to see lockdowns,” said Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases. “I think we have enough of the percentage of people in the country - not enough to crush the outbreak - but I believe enough to not allow us to get into the situation we were in last winter.”