‘Follow the Money’: Major Players Betting on Vaccinations to Keep Global Economy Afloat

The coronavirus is in the news again, not last year’s pandemic fueling COVID-19 version, but the fast-spreading Delta variant. While dominating the mainstream news in the United States (See CNN and FoxNews), and globally on business website such as CNBC, Reuters and Bloomberg, to name a few, we’re not really seeing a major impact on the financial markets.

This is interesting to note because the mainstream story is centered on rising infection numbers, the slow pace of vaccinations and what is likely to happen if countries don’t start clamping down on the spread of the virus. In other words, people’s health. Some experts are even calling it a “life or death” situation.

In the financial markets, obviously we’re not seeing the same reaction as we did in 2020 with stocks dropping 20% in a matter of weeks and crude oil testing prices below $20 a barrel. Instead we’re seeing a relative calm.

Is this telling us to “follow the money?” Is this telling us that since the situation is not as bad as last year, there is no need to panic? Are the financial markets indicating there is not enough information yet to understand the impact of this new outbreak? Do we wait for the bad economic numbers or do we anticipate them?

The answer is all of the above.

Of course, I don’t recommend putting your finances ahead of your health. I don’t think anyone is doing that. Traders are making their decisions on what they know at this time. Some are even basing their decisions on their belief in the vaccinations.

In this case, they feel that enough people are vaccinated so major economic shutdowns are warranted at this time. But we’ve seen different reactions all around the globe, which could be adding to the confusion over what to do. Lighten up on the long side? Buy more, start selling? Move to the sidelines?

I don’t think I am going to be able to answer any of these questions in this article, but if I had to center on one, I’d have to say “follow the money”. But I should add that I am vaccinated, so I may be biased.

Here’s What Others are Saying and Doing

Fed’s Powell Downplays Delta Variant’s Threat to the Economy

The spread of the COVID-19 delta variant is raising infections, leading some companies and governments to require vaccinations and raising concerns about the U.S. economic recovery, according to the AP.

But on Wednesday, Federal Reserve Chair Jerome Powell injected a note of reassurance, suggesting that the delta variant poses little threat to the economy, at least so far.

“What we’ve seen is with successive waves of COVID over the past year and some months now,” Powell said at a news conference, “there has tended to be less in the way of economic implications from each wave. We will see whether that is the case with the delta variety, but it’s certainly not an unreasonable expectation.”

“Dining out, traveling, some schools might not reopen,” he said. “We may see economic effects from some of that or it might weigh on the return to the labor market. We don’t have a strong sense of how that will work out, so we’ll be monitoring it carefully.”

More Corporations are Requiring Workers to Get Vaccinated ~ Axios

The federal government in May said that it is legal for companies to require employees to get vaccinated for coronavirus.

Google CEO Sundar Pichai sent an email to employees announcing that those going back to the office needed to be vaccinated. The company is also extending its work-from-home policy through October 18.

Facebook said that anyone going back to work in their U.S. campuses must be vaccinated.

Netflix is requiring that the casts for all of its U.S. productions be vaccinated, as well as everyone who comes in contact with them.

Drop in UK COVID-19 Cases Indicates Infections Surge May Be Past Peak ~ Reuters

Early last week, the UK added to the confusion when it reported its lowest daily total of new coronavirus cases since July 4, adding to signs that a recent surge in infections driven by the spread of the Delta variant may have passed its peak.

Sydney Readies for the Army as Lockdown Fails to Squash Australia Delta Outbreak ~ CNN

Sydney’s poorest neighborhoods on Friday braced for military enforcement of the city’s toughest and longest lockdown of the COVID-19 pandemic as the infection as the infection numbers held persistently high five weeks since restrictions began.

The situation appears to be so bleak in Australia that economists are already predicting a third quarter contraction.

Oil Climbs, Notches Fourth Monthly Gain on Growing Demand – Reuters

The crude oil market is interesting since it sold off sharply early in July when the Delta-variant story first broke. The biggest concern was demand destruction.

Since then, however, both WTI and Brent have recovered enough to post a fourth monthly gain, with demand growing faster than supply and vaccinations expected to alleviate the impact of a resurgence in COVID-19 infections across the world.

Conclusion

The best advice appears to be: bet on the vaccinations to work, keep monitoring the global economy especially output and labor and keep an eye on gasoline demand.

For a look at all of today’s economic events, check out our economic calendar.

China Manufacturing PMI Eases; Hong Kong, China Shares Tumble on Regulatory Restrictions, COVID Worries

China released economic data early Saturday that showed factor activity expanded in July as the slowest pace in 17 months as higher raw material costs, equipment maintenance and extreme weather weighed on business activity, adding to concerns about a slowdown in the world’s second-biggest economy, Reuters reported.

The report follows a week of volatile trading in Chinese markets that left Hong Kong Hang Seng Index 5% lower. Both Hong Kong and mainland-listed stocks fell on Friday, losing the partial recovery they made after diving earlier in the week.

China’s Factory Activity in July Grows at Slowest Pace Since February 2020

The official manufacturing Purchasing Manager’s Index (PMI) eased to 50.4 in July from 50.9 in June, data from the National Bureau of Statistics (NBS) showed on Saturday, but remained above the 50-point mark that separates growth from contraction.

Analysts had expected it to slip to 50.8. It was the lowest figure since the index slumped to 35.7 in February 2020, after China began lockdowns to control the coronavirus pandemic.

The official non-manufacturing Purchasing Managers’ Index (PMI) eased to 53.3 in July, from 53.5 in June, a separate survey from the NBS showed.

Hong Kong, China Stocks Resume Slump on Regulatory Concerns, COVID Jump

Shares in Hong Kong and China resumed their slump on Friday after rebounding in the previous session, with key indexes booking their worst monthly performance in years, as persistent concerns over regulatory crackdowns outweighed Beijing’s attempts to calm markets.

China’s blue-chip CSI300 Index closed down 0.8% and posted its biggest monthly loss since October 2018, while the Shanghai Composite Index lost 0.42%, capping its worst month since 2019.

Hong Kong tech shares slumped again, pulling the benchmark Hang Seng Index to its biggest monthly fall since October 2018.

The Hang Seng closed down 1.4%, following Thursday’s 3.3% rally. Tech giants such as Meituan and Alibaba led Friday’s decline. The Hang Seng Tech Index plunged 2.56%, extending its weekly fall to 6.7%.

Global investors have been dumping shares in Chinese companies after Beijing banned for-profit tutoring on core school subjects, following crackdowns earlier this year on the tech sector. The regulatory moves have revived worries about the risks of investing in China.

Finally, a resurgence in COVID-19 cases in mainland China and Hong Kong also dented investors’ risk appetite.

Chinese Companies Looking for US Listings Must File More Disclosures – SEC Chair

The chair of the US Securities and Exchange Commission said on Friday that he had asked staff to mandate certain disclosures from offshore issuers associated with China-based operating companies before registration statements can be declared effective.

Gary Gensler also said in a statement that the new disclosures will require Chinese companies tell the regulator and investors whether certain actions could affect the firm’s “financial performance and the enforceability of the contractual arrangements.”

For a look at all of today’s economic events, check out our economic calendar.

Japan, South Korean Shares Pressured by Chinese Technology Crackdown, Renewed COVID-19 Concerns

The major Asia-Pacific stock indexes finished lower across the board on Friday, ending a mostly bearish week on a down note. The markets were rattled all week as a Chinese crackdown on its technology sector and rising cases of the Delta coronavirus variant raged against still-dovish monetary policy and mixed earnings from a range of companies.

Friday’s Cash Market Performance

In Japan, the Nikkei 225 Index settled at 27283.59, down 498.83 or -1.80%. In Hong Kong, the Hang Seng Index finished at 25961.03, down 354.29 or -1.35% and South Korea’s KOSPI Index closed at 3202.32, down 40.33 or -1.24%.

China’s benchmark Shanghai Index settled at 3397.36, down 14.37 or -0.42% and in Australia, the S&P/ASX 200 Index finished at 7392.60, down 24.80 or -0.33%.

Nikkei Ends at Over 6-Month Low on Virus Worries, Earnings Lag

Japan’s Nikkei stock average closed at its lowest since the start of the year on Friday as spiking COVID-19 cases, some earnings disappoints and a decline in U.S. stock futures dented investor sentiment.

The Nikkei’s 1.8% decline on Friday was its biggest decline since June 21 and the lowest close since January 6.

For the month, the Nikkei slumped 5.24%, its worst performance since the coronavirus-induced market meltdown in March last year, after recording an 11th straight decline on the final trading day of the month.

In COVID-related news, Japan’s government on Friday proposed extending the state of emergency through August 31 for Tokyo and some other prefectures, as COVID-19 cases spike to record highs.

“The earnings weren’t that bad, but in terms of the outlook, there doesn’t seem to be a lot of confidence,” which is weighing on stocks, said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

“The market is wary that the Nikkei could break below 27,000.”

South Korea Stocks Post Worst Month Since March 2020 on Weak China Shares, Virus Woes

South Korean shares tumbled more than 1% on Friday, and posted its worst monthly decline in more than a year, weighed by continued worries about the Chinese government’s regulatory crackdown and the COVID-19 pandemic.

The KOSPI ended down 40.33 points, or 1.24%, at 3,302.32, its sharpest daily fall in more than two months. The index ended the month down 2.86%, its sharpest monthly decline since March last year, and snapped an eight month winning streak.

In economic news, Friday’s data showed South Korea’s factory output in June rebounded from May on a boost in semiconductor and car production.

In COVID-related news, South Korea reported 1,710 new cases for Thursday, still near the record infections marked this week, even after the country imposed the toughest distancing measures in the metropolitan Seoul area and some neighboring cities.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Month in Review – July 2021

The Majors

It was another bullish month for the European majors in July, logging a 6th consecutive monthly gain.

The CAC40 and the EuroStoxx600 rose by 1.61% and by 1.97% respectively, while the DAX30 struggled, rising by just 0.09%.

It was a choppier month for the European majors. Concerns over the resilience of the economic recovery tested support for the majors at the start of the 3rd quarter of the year.

A continued rise in new COVID-19 cases across the world added to the market angst in the month.

Economic data from Germany was also disappointing, pegging the DAX30 back.

Central bank assurance of support, dip buying, corporate earnings, and economic data for France and the Eurozone delivered support, however.

The Stats

Key stats in the month included inflation, consumer spending, consumer sentiment, private sector PMIs, and 2nd quarter GDP numbers.

Once more, the stats were skewed to the positive, delivering support to the broader market.

The Private Sector

The Eurozone’s composite PMI rose from 59.5 to 60.6 in July, according to prelim numbers. Service sector activity picked up, delivering the upside at composite level.

Germany’s Manufacturing PMI increased from 65.1 to 65.6, which was key as private sector activity across France saw slower growth.

As a result of weak numbers from France, the Eurozone’s Manufacturing PMI fell from 63.4 to 62.6.

The German Economy

From Germany, while survey-based numbers were upbeat, non-survey-based data disappointed in the month.

Factory orders (-3.7%) and industrial production (-0.30%) were weak, with Germany’s trade surplus narrowing from 15.9bn to 12.6bn EUR.

German business and consumer confidence also failed to impress in spite of the reopening of the economy. Rising cases of the Delta variant across the world raised uncertainties over the economic outlook in the month.

Late in the month, 1st estimate GDP numbers for the 2nd quarter were also in focus.

The German economy expanded by 1.5%, quarter-on-quarter, partially reversing a 2.1% contraction from the previous quarter. Economists had forecast 1.9% growth.

A positive in the week, however, was a fall in the unemployment rate from 5.9% to 5.7%, which should support consumption.

The Eurozone

For the Eurozone, the economy expanded by 2.00% in the 2nd quarter, reversing a 0.3% contraction from the previous quarter.

The numbers were aligned with the ECB’s optimistic outlook on the economic recovery.

Inflation

In the month, the ECB also revised its price stability target, increasing the inflation target to 2.0%. The move was viewed as dovish, giving the ECB more legroom before having to make a move on the policy front.

In spite of this, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, according to prelim figures.

From the U.S

Economic data delivered mixed results for the markets.

Inflationary pressures continued to build, though following assurances from the FED, failed to spook the markets.

The market’s preferred ISM private sector PMIs for June were disappointing for June, which raised concerns over the economic recovery.

Weekly jobless claim figures also failed to impress, with claims falling to a month low 360k before climbing to a high 419k.

In the final week of the month, consumer confidence and 2nd quarter GDP numbers delivered mixed results.

Consumer confidence picked up in July, suggesting a further increase in consumption. In June, retail sales had risen by a modest 0.5%. On the economic growth front, however, the U.S economy grew by just 6.5% in the quarter, falling well short of a forecasted 8.5%.

Monetary Policy

In July, both the ECB and the FED left monetary policy unchanged. Both central banks delivered assurances of unwavering support, ultimately propping up the European majors in the month.

The Market Movers

For the DAX: It was a bearish month for the auto sector in June. Continental and BMW slid by 7.88% and by 6.09% respectively. Daimler and Volkswagen ended the month down by 0.44% and by 2.49% respectively.

It was also a bearish month for the banks. Deutsche Bank fell by 2.86%, with Commerzbank sliding by 9.03%.

From the CAC, it was a bearish month for the banking sector. BNP Paribas fell by 2.69%, with Credit Agricole and Soc Gen seeing losses of 0.42% and 0.52% respectively.

It was also a bearish month for the auto sector. Renault slid by 6.02%, with Stellantis NV ending the month down by 2.20%.

Air France-KLM fell by a further 3.71%, while Airbus SE rallied by 6.69%.

On the VIX Index

It was a first monthly gain in 6-months for the VIX in July.

Reversing a 5.55% loss from June, the VIX rose by 15.22% to end the month at 18.24.

In July, the S&P500 rallied by 2.27%, with the Dow and the NASDAQ ending the month up by 1.25% and by 1.16% respectively.

VIX 310721 Monthly Chart

The Month Ahead

Following some mixed numbers from Germany, we can expect increased sensitivity to the German numbers in the month ahead.

Private sector PMIs will also remain key, with any fall back in private sector PMIs likely to test support for the majors.

Following the latest spike in inflation, a further pickup in inflationary pressure will also raise questions over consumption. As a key component of the economic recovery, any concerns over consumption would also pressure the majors.

From the U.S, labor market numbers will now be the key area of focus as inflationary pressures continue to pick up.

Consumer confidence and consumption numbers will need to impress to support riskier assets.

From elsewhere, private sector PMIs and trade data from China will also need tracking.

Away from the economic calendar, COVID-19 news will also need monitoring. As new cases continued to rise in July, the threat of a vaccine resilient variant remains, which would materially impact the growth outlook.

European Equities: A Week in Review – 30/07/21

The Majors

It was another choppy week for the majors in the week ending 30th July, with the majors taking another slide to kickstart the week.

The DAX30 fell by 0.80%, while the CAC40 and the EuroStoxx600 ended the week with relatively modest gains of 0.67% and 0.05% respectively.

Concern over the continued rise in new Delta variant cases weighed on the markets and sentiment towards the economic outlook.

Mixed economic data from Germany, in particular, also pressured the markets in the week.

There were a number of support avenues for the majors, however.

Upward growth revisions from the IMF for advanced economies, a dovish FED, and corporate earnings provided support.

GDP numbers from France and the Eurozone were also ahead of forecasts at the end of the week. The data limited the damage in what was a bearish end to the week.

The Stats

Through much of the week, the German economy was in focus.

Business and consumer sentiment figures delivered mixed results. While business sentiment waned in July, consumer confidence remained unchanged, in spite of the reopening of economies.

Unemployment figures from Germany were upbeat. The unemployment fell from 5.9% to 5.7% in July.

Inflationary pressures continued to surge, however, with Germany’s annual rate of inflation accelerating in July to 3.8%.

At the end of the week, 1st estimate GDP numbers and prelim inflation figures were the key stats of the week.

Quarter-on-quarter, the French economy grew by 0.9% versus a forecasted 0.7% in the 2nd quarter.

Germany saw growth of 1.5%, falling short of a forecasted 1.9%. In the 1st quarter, the economy had contracted by 2.1%.

For the Eurozone, the economy grew by 2.0%, coming in ahead of a forecasted 1.5%. The economy had contracted by 0.3% in the previous quarter.

Inflation also ticked up, aligned with member state numbers. According to prelim figures, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, rising above the ECB’s 2% target.

From the U.S

Consumer sentiment and durable goods orders drew attention early in the week.

In June, durable goods orders ex transportation rose by 0.3%, following a 0.5% increase in May.

More significantly was a pickup in consumer confidence in July. The CB Consumer Confidence Index rose from 128.9 to 129.1. Economists had forecast a decline to 126.0.

On Thursday, jobless claims and 2nd quarter GDP numbers were in focus. The stats were skewed to the negative, however.

In the 2nd quarter, the U.S economy grew by 6.5%. This fell well short of a forecasted growth of 8.5%.

Jobless claims also fell short of expectations, with initial jobless claims falling from 424k to 400k. Economists had forecast a decline to 370k.

At the end of the week, personal spending and inflation figures came in ahead of forecasts, however.

Personal spending rose by 1.0% in June, with the annual rate of inflation seeing a pickup from 3.4% to 3.5%.

While the stats were material, the FED monetary policy and press conference were the main events of the week.

In line with market expectations, the FED left policy unchanged. The FED Chair also looked to assure the markets that there would be no near-term moves, the guidance considered dovish.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Daimler rose by 0.32% to buck the trend in the week. Continental slid by 2.49% to lead the way down, however. BMW and Volkswagen also struggled, ending the week down by 1.64% and by 1.34% respectively.

It was also a mixed week for the banking sector. Deutsche Bank rose by 1.18%, while Commerzbank fell by 0.18%.

From the CAC, it was a bullish week for the banks. BNP Paribas and Soc Gen rose by 1.74% and by 1.06% respectively, with Credit Agricole gaining 0.77%.

The French auto sector also found support with Stellantis NV and Renault seeing gains of 2.64% and 2.59% respectively.

Air France-KLM slipped by 0.05%, however, while Airbus rallied by 3.77%.

On the VIX Index

It was a back into the green for the VIX.

In the week ending 30th July, the VIX rose by 6.05%. Partially reversing a 6.78% fall from the previous week, the VIX ended the week at 18.24.

3-days in the green from 5 sessions, which included a 10.13% jump on Tuesday delivered the upside.

For the week, the NASDAQ fell by 1.11%, with the Dow and the S&P500 ending the week down by 0.36% and by 0.37% respectively.

VIX 310721 Daily Chart

The Week Ahead

It’s a relatively busy week ahead on the economic calendar.

Private sector PMIs for Italy and Spain will be in focus. Finalized numbers for France, Germany, and the Eurozone are also due out.

Any revisions to prelim numbers and Italy’s PMIs will likely draw the greatest interest.

Early in the week, Eurozone and German retail sales figures will also be key, however. The ECB is looking for a consumption driven economic recovery.

Later in the week, the ECB Economic Bulletin and member state trade data will also be in focus.

From the U.S, ISM Manufacturing and Non-Manufacturing PMIs will be key through the 1st half of the week.

On the labor market front, however, ADP nonfarm employment change, weekly jobless claims, and nonfarm payrolls will also influence.

Away from the economic calendar, corporate earnings and COVID-19 news updates need continued monitoring.

S&P 500 Weekly Price Forecast – S&P 500 Continuing Upward Trajectory

S&P 500 traders have been bullish for quite some time, and even though this week has been a bit quiet, it should be noted that we did pierce the 4400 level, which of course is a relatively bullish sign. The same standard playbook applies to this market, simply that we should be buying dips as the Federal Reserve will continue to keep monetary policy very loose for the foreseeable future, the same thing they have been doing over the last 13 years since the Great Financial Crisis.

S&P 500 Video 02.08.21

There is a nice uptrend line underneath, and of course the 4200 level should offer support. After that, I see the 4000 level as the “floor the market” as there will be a lot of options barriers there, and of course is large, round, psychologically important figures tend to attract a lot of attention. Furthermore, we also have the 50 week EMA racing towards that area and of memory serves me correct, the 200 day EMA is currently sitting right around the same area as well.

To the upside, I think the 4500 level will offer a little bit of hesitation, as it is a big figure, but ultimately this pair does tend to move in 200 point increments, thereby having me target the 4600 level over the next several weeks. Keep in mind that August does tend to be very quiet so do not be surprised at all to see this more of a grind than anything else or even the possibility of a bit of sideways trading. Once September hits, traders come back to work and the momentum start picking up yet again.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Price Forecast – Stock Markets Continue to Grind Sideways Looking for Next Push Higher

The S&P 500 has pulled back a little bit to kick off the trading session on Friday but turned around to show signs of life again. Because of this, the market looks as if it is ready to go much higher given enough time. I think there is plenty of support underneath at the uptrend line, which of course is followed right along by the 50 day EMA. With this being the case, it is difficult to imagine area where I would be short at, because quite frankly between here and there I anticipate there will be plenty of value hunters.

S&P 500 Video 02.08.21

If we did break down, the 4200 level and of course the 4000 level both offer enticing areas to pick up value, especially the 4000 level as it would be a 10% correction. It should be noted that the 4400 level has caused a bit of noise, but if we can break above there then the 4500 level is my next target but ultimately, I would anticipate seeing markets go much higher than that. My year-end target at the moment is 4600, but quite frankly this market continues to outperform expectations I do not see why it would be any different now.

The Federal Reserve has stated this week that it was not going to get close to tapering anytime soon, so that continues to drive the market higher. We are in the midst of earnings season which of course was very strong, but I think that was already expected considering what we had seen over the last year.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Retreat As Amazon Drags Down Tech Shares

Stocks Are Under Pressure Ahead Of The Weekend

S&P 500 futures are moving lower in premarket trading as Amazon‘s disappointing quarterly results put pressure on tech stocks.

Amazon released its second-quarter report yesterday, after the market close. The company reported revenue of $113.1 billion and GAAP earnings of $15.12 per share, missing analyst estimates on revenue and beating them on earnings.

The market focused on the disappointing revenue performance and weak third-quarter guidance as Amazon forecasted revenue of $106 billion – $112 billion in Q3 2021.

Currently, the stock is down by about 7% in premarket trading, and Nasdaq futures are down by roughly 1%. It remains to be seen whether traders will rush to buy the dip in Amazon shares and other tech stocks ahead of the weekend or choose to take some profits off the table near record highs for S&P 500 and Nasdaq.

Personal Income Increased By 0.1% In June

U.S. has just released Personal Income and Personal Spending reports for June. The reports indicated that Personal Income increased by 0.1% month-over-month in June compared to analyst consensus whcih called for a decline of 0.3%. Personal Spending grew by 1% compared to analyst consensus of 0.7%.

Today, traders will also have a chance to take a look at the final reading of Consumer Confidence report for July. Analysts expected that Consumer Confidence declined from 85.5 in June to 80.8 in July.

WTI Oil Settles Above The $73 Level As Traders Shrug Off Virus Worries

WTI oil managed to get above the $73 level and continues to move higher as traders bet that demand for oil will continue to increase despite the recent surge in the number of new COVID-19 cases which was caused by the Delta variant of coronavirus.

Recent data indicates that crude inventories are moving lower, which is bullish for oil. Today, oil-related stocks will have a good chance to continue their rebound after strong results from Exxon Mobil and Chevron.

For a look at all of today’s economic events, check out our economic calendar.

Ferrari’s Revenue to More Than Double in Q2; Target Price $238

The luxury sports car maker Ferrari is expected to report earnings of $1.26 per share for the second quarter, representing a 3,050% increase over $0.04 per share a year earlier.

The company, known for its prancing horse logo, would post revenue growth of over 107% to around $1.3 billion. According to ZACKS Research, the company has beaten earnings per share (EPS) estimates in three of the last four quarters.

The U.S. listed Ferrari shares have slumped about 6% so far this year. The stock closed 1.88% higher at $216.21 on Thursday.

Analyst Comments

“Growth potential and strong execution. Global shipments of >11k units in 2021, growing at a 9.1% CAGR to 2030 ending at ~22k shipments. Adj. EBITDA margins rise to 35% in 2021 on improved mix and pricing after launching 5 new models in 2020 and 2 in 2021,” noted Adam Jonas, equity analyst at Morgan Stanley.

Ferrari trades at a justified premium to luxury brands, in line with luxury leader, Hermes, albeit with more opportunity to grow organically via: new customers, new segments and geographically in China & Asia-Pac, as well as exhibiting a unique moat with a world-renowned brand and a 12+ month customer order book.”

Ferrari Stock Price Forecast

Nine analysts who offered stock ratings for Ferrari in the last three months forecast the average price in 12 months of $238.63 with a high forecast of $281.00 and a low forecast of $202.00.

The average price target represents a 10.35% change from the last price of $216.24. From those nine analysts, four rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $265 with a high of $350 under a bull scenario and $160 under the worst-case scenario. The firm gave an “Overweight” rating on the luxury automaker’s stock.

Several other analysts have also updated their stock outlook. BofA slashed the price objective to $281 from $287. UBS Group cut their price objective to $238 from $247 and set a buy rating.

NASDAQ Bearish Divergence, Amazon’s After-Hour Losses Weighing on US Futures Overnight

U.S. stock index futures are down sharply in Friday’s pre-market session as a disappointing earnings report from Amazon.com threatened to dampen an otherwise strong month ahead of July’s final day of trading. The early price action has put the major futures indexes in a position to post a potentially bearish closing price reversal top. If confirmed, this could mean a weak start to August.

Early Trading Results

At 04:41 GMT, September E-mini S&P 500 Index futures are trading 4378.25, down 33.50 or -0.76%. September E-mini Dow Jones Industrial Average futures are at 34863, down 111 or -0.32% and September E-mini NASDAQ-100 Index is trading 34861, down 113 or -0.32%.

Possible Bearish Divergence

On Thursday, the S&P 500 Index and the Dow Jones Industrial touched record highs but the NASDAQ Composite underperformed. This created a divergence in the major indexes, suggesting weakness in the technology sector.

Weighing on the tech-heavy NASDAQ Composite during the regular session were shares of Facebook, which tumbled 4% after the social media company’s earnings report.

A disappointing IPO from online brokerage firm Robinhood helped cap NASDAQ’s gains throughout the regular session. The stock opened at $38 per share on Thursday, but eventually closed its debut session more than 8% lower at $34.82 per share.

The weakness carried over into the after-hours and pre-market sessions after e-commerce giant Amazon and social media platform Pinterest released their earnings reports to investors.

Amazon equity sank 7.4% in extended trading after it reported its first quarterly revenue miss in three years and gave weaker guidance. The move in Amazon’s stock helped weigh on NASDAQ-100 futures. Pinterest fell even further, down 19%, after saying it lost monthly users during the three months ended June 30.

Thursday Recap

Thursday’s positive session came despite a government report that showed U.S. second-quarter gross domestic product accelerated 6.5% on an annualized basis, considerably less than the 8.4% Dow Jones estimate. Meanwhile, weekly initial claims surprisingly came in higher-than-expected.

Helping to underpin the markets was the Fed news from late Wednesday. Many investors were relieved that the Federal Reserve signaled no imminent plans for dialing back asset purchases.

Fed Chairman Jerome Powell also noted that while the economy has come a long way since the COVID-19 recession, it still has a ways to go before the central bank considers adjusting its easy-money policies.

Near-Term Outlook

The bearish divergence between the NASDAQ and the other major indexes could be an early sign that a major top is forming. If the tech-heavy NASDAQ trades sharply lower, it will drag the technology sector of the S&P 500 with it. The Dow is not likely to feel as much pain since it is tech unweighted.

The U.S. stock markets could be facing several near-term headwinds including summer vacation until after the U.S. Labor Day holiday. This would lead to low volume trading sessions. Overvaluation is another concern as well as the coronavirus outbreak.

One major concern is that investors won’t have a clue as to what the Fed is planning to do about tapering until it meets on September 21-22.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: 2nd Quarter GDP and July Inflation in Focus

Economic Calendar

Thursday, 29th July

German Unemployment Change/Rate JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate Flash Q2

Italian GDP Growth Rate Adv Q2

Eurozone Core Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2

Italian Inflation Rate MoM Prel JUL

Eurozone Inflation Rate Flash JUL

The Majors

It was another bullish day for the European majors on Thursday.

The CAC40 rose by 0.37%, with the DAX30 and the EuroStoxx600 ending the day up by 0.45% and by 0.46% respectively.

Market reaction to Wednesday’s dovish FED and economic data from the Eurozone and the U.S provided the majors with support.

From the Eurozone, German unemployment figures impressed, while stats from the U.S looked to have put a near-term lid on any need for the FED to make a move. U.S GDP and jobless claims figures were good enough, however, to support riskier assets and not spook the markets.

Support also came from corporate earnings releases on the day.

The Stats

The German economy was in focus once more on Thursday, with unemployment and inflation the key stats of the day.

In July, unemployment slid by 91k, following a 39k decline in June. As a result of the decline, the unemployment rate fell from 5.9% to 5.7%. Economists had forecast a 22k decline and for the unemployment rate to fall to 5.8%.

On the inflation front, Germany’s annual rate of inflation accelerated from 2.3% to 3.8% in July, according to prelim figures. Economists had forecast a pickup to 3.2%.

Month-on-month, consumer prices rose by 0.9%, following a 0.4% increase in June. Economists had forecast a 0.4% rise.

From the U.S

1st estimate GDP numbers for the 2nd quarter were out along with the weekly jobless claim figures.

In the 2nd quarter, the U.S economy grew by 6.5% in the 2nd quarter, ticking up from a 1st quarter 6.4%. Economists had forecast 8.5% growth in the quarter, however.

On the employment front, U.S jobless claims fell from 424k to 400k in the week ending 23rd July. Economists had forecast a decline to 370k.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Thursday. Daimler rallied by 2.80%, with BMW and Volkswagen ending the day up by 1.40% and by 1.28% respectively. Continental saw a more modest 0.80% gain on the day.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 3.23% and by 1.74% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas gained 1.78%, with Soc Gen and Credit Agricole rising by 1.55% and by 1.38% respectively.

It was also a bullish day for the French auto sector. Stellantis NV rallied by 3.36%, with Renault ending the day up by 0.62%.

Air France-KLM and Airbus SE also found further support, rising by 1.06% and by 0.61% respectively.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Thursday, marking the 2nd decline of the week.

Following a 5.42% fall on Wednesday, the VIX declined by 3.33% to end the day at 17.70.

The NASDAQ rose by 0.11%, with the Dow and the S&P500 ending the day up by 0.44% and by 0.42% respectively.

VIX 300721 Daily Chart

The Day Ahead

It’s a particularly busy day ahead on the economic calendar. Eurozone and member state 1st estimate GDP numbers for the 2nd quarter are due out later today.

Expect plenty of interest in the numbers. We have seen concerns over the resilience of the economic recovery test support for the majors of late. Weaker than expected numbers would weigh.

Prelim inflation and consumer spending figures are also due out but will likely play 2nd fiddle to the GDP numbers.

From the U.S, inflation and personal spending figures will also influence late in the session.

Away from the economic calendar, corporate earnings and COVID-19 news updates will also need continued monitoring.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 21 points.

For a look at all of today’s economic events, check out our economic calendar.

Asia-Pacific Markets Called Higher on Opening as Investors Hope to Ride Wall Street’s Bullish Wave

A strong performance on Wall Street on Thursday and a rebound in Hong Kong the previous session following a steep plunge earlier in the week is expected to lead to stronger openings in the Asia-Pacific region on Friday.

In the U.S., the major stock indexes rose to record levels as investors shrugged off economic data pointing toward slower-than-expected growth. Investors also showed a delayed reaction to dovish news from the Federal Reserve the previous session.

Many investors were relieved that the Federal Reserve signaled no imminent plans for dialing back asset purchases. Fed Chairman Jerome Powell cautioned that although the economy is making progress towards its goals, it has a ways to go before the central bank would actually adjust its easy policies.

In economic news, U.S. second-quarter gross domestic product accelerated 6.5% on an annualized basis, considerably less than the 8.4% Dow Jones estimate.

Meanwhile, a separate data point showed that 400,000 people filed initial claims for unemployment benefits for the week ended July 24. That level is nearly double the pre-pandemic norm and above a Dow Jones estimate of 385,000.

Asia-Pacific Investors Hoping to Feed Off Wall Street’s Gains

Asia-Pacific investors are hoping to build on gains from Thursday fueled by a rebound in Hong Kong from a two-day slump earlier in the week and after the U.S. Federal Reserve left its benchmark interest rate near zero.

On Thursday, Hong Kong’s Hang Seng Index jumped 3.3% to close at 26,315.32. The index had dived more than 8% over two days early this week.

Meanwhile, Chinese tech stocks in Hong Kong, which were hit hard by the market rout earlier in the week, soared. Shares of Tencent jumped 10.02% while Alibaba gained 7.7% and Meituan climbed 9.49%. The Hang Seng Tech Index soared 8% to 6,958.77.

Helping to ease concerns in the region was the news that China’s securities regulators told brokerages late Wednesday that the country will allow Chinese firms to go public in the U.S. as long as they meet listing requirements, a source familiar with the matter told CNBC.

Traders should pay particular attention to the Australian stock market. Prices should firm because of strength in the energy and gold sectors due to strong gains on Thursday. Crude oil futures settled 1.41% higher. Gold futures posted a 1.54% gain.

For a look at all of today’s economic events, check out our economic calendar.

Today’s Market Wrap Up and a Glimpse Into Friday

Stocks finished the day in the green after investors were able to brush off signs that the economic recovery may have hit a snag. The Dow Jones Industrial Average tacked on more than 150 points, while the S&P 500 and tech-heavy Nasdaq also inched higher. The market indices showed resilience even as the delta variant threatens to throw a wrench into economic expansion for the rest of the year.

Second-quarter GDP expanded at an annual rate of 6.5%, which catapults the economy beyond pre-COVID levels but falls short of estimates. Meanwhile, the forecast for the rest of the year could be threatened by the uncertainty from the delta variant. Companies have responded by delaying the return to the office or in some cases reinstating mask policies for consumers. It’s déjà vu all over again.

Investors were able to focus on the glass half full. For example, consumer spending and corporate earnings have been bright spots of late. Meanwhile, supply chain issues seem to be a stumbling block.

Stocks to Watch

Amazon reported its Q2 results, and the stock sank 5% in after-hours trading. While the e-commerce giant reported revenue of slightly more than USD 113 billion, Wall Street analysts were looking for USD 115 billion. Amazon’s revenue outlook for Q3 also falls below consensus estimates, and the stock is being punished. The latest quarterly performance unfolded just before Jeff Bezos was replaced as CEO by Andy Jassy earlier this month.

Pinterest is also under pressure in extended-hours trading, falling 14%. The company fell short on its number of monthly active users, which came in at 454 million compared to estimates of 482 million. This indicator could also come back to bite Pinterest in Q3, for which management failed to provide any forecast and blamed the pandemic.

Robinhood’s IPO was a flop after the stock fell more than 8% on its first day of trading on the Nasdaq. The trading app’s shares opened at USD 38 and finished the day at just under USD 35. Robinhood sought to appeal to retail investors but was in for a rude awakening. The broker finished the day with a market cap of USD 29 billion.

Look Ahead

On the economic front, Personal Income & Spending for the month of June comes out on Friday. Wells Fargo economists predict that income fell 0.2% while spending increased 2% vs. May levels. The weaning away of the stimulus is pressuring incomes.

S&P 500 Price Forecast – 4400 Level Gets Cleared

The S&P 500 has rallied a bit during the course of the trading session on Thursday as we continue to find plenty of reasons to go higher. The S&P 500 is moving based upon the idea of liquidity measures and of course the fact that Jerome Powell was so dovish certainly helps the situation as well. Ultimately, this is a market that I think will continue to find plenty of buyers on dips based upon that, and of course the fact that we have a lot of support underneath. The 4400 level itself of course is an area that will attract a certain amount of attention, but beyond that we also have the 50 day EMA and the uptrend line.

S&P 500 Video 30.07.21

If we were to break down below there, then the 4200 level should be supportive, and then the 4000 level underneath would be the “floor in the market”, as we have the small gap and of course the 200 day EMA coming into the picture to offer a bit of support. If we were to break down below there, then I would be a buyer of puts, but I would not necessarily short the market flat out.

To the upside, the 4500 level is a target for the short term, as it is a big figure that a lot of people should pay close attention to. If we can break above there, then we will probably go looking towards the 4600 level, as the market tends to move in 200 point increments, as the past action has shown. Ultimately, this is a market that I have no interest in shorting and do not see an opportunity to do so anytime in the near future.

For a look at all of today’s economic events, check out our economic calendar.

The Inadvertent Debt/Inflation Trap – Is It Time To Face The Music?

What happens to a global economy after 10+ years of global central bank efforts to support a recovery attempt after a massive credit/debt collapse originates from a prior credit/debt housing bubble?  What happens to global economies when they become addicted to easy money policies and central bank activities that support greater and greater risk-taking? What is the end result of these actions after more than 10+ years of excess and central bank support for the markets?

Let’s play this out a bit to think about how the current market environment may be similar to what happened in the mid/late 1990s and see if we can come to any real conclusions. Remember, we are using our research and technical analysis skills to play a “what if” scenario in this research article.  Our current trading systems have not warned us of any major Bearish price trends of price collapses that may take place. Our systems are still trading the US markets based on current market trends.  This research is completely speculative in the sense that we are trying to identify “what if” scenarios based on events in the recent past.

One thing that our research team has been discussing over the past 8+ months, since shortly after the US elections in November 2020, is the idea that the new US President/US Federal Reserve may engage in policies that are initially perceived as supportive of the global markets in a post-COVID world – yet may engage in very dangerous end results.  An example of this is the continued stimulus efforts for a world that has somewhat moved beyond the initial COVID shock and has transitioned into a new form of economic activity.  Another example would be the US Federal continuing to act in a manner to support the US equities market while Inflation and consumer activity have recently shown extreme pricing/buying activities.

One idea that my research team suggested is this activity may be similar to President Ronald Reagan’s Star-Wars project in how Reagan was able to prompt a spending excess between the US and Russia which eventually broke the Russian economy.  The process between that event and what is happening right now are strangely similar.

The Strange Outcome Of Global Central Bank Policies – The US Is The Clear Winner

The US and many foreign central banks have pushed the envelope of easy money policies over the past 8+ years by continuing to run programs to support a stronger economic outcome.  The focus has been on creating an inflationary target to start a more traditional shift away from the ongoing easy money policies.  Inadvertently, these global central banks may have created and supported one of the biggest asset shifts/bubbles in the past 50+ years.

The COVID-19 virus event may have actually pushed the US Federal Reserve and foreign global central banks into an inadvertent process of creating a massive inflation trap at a time when the global economy and corporate world was banking on much more mild inflationary trends.  The reflation trade that came after June 2020 is likely to have pushed assets, commodities, credit & debt cycles beyond any conceivable scope of reason, while putting unimaginable pressure on foreign central banks in Asia, South America, Africa, and most of the emerging markets.

The incredible rally in commodities, asset values (homes, stocks, US equities, and others) prompted capital to shift towards the strongest and most capable outcomes on the planet.  This created a liquidity trap in many foreign markets where traders moved assets into US equities, Cryptos, US ETFs, and other assets while shunning less dynamic and secure global assets.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/07/2021-07-16_WorldMarketCap-1.jpg

(Source: https://data.worldbank.org/indicator/CM.MKT.LCAP.CD)

What has transpired over the past 10+ years is that the US equities markets have risen to levels above the 2007~08 peak levels. US equities have also continued to skyrocket higher as foreign investors seek to move assets into US Dollar-based equities and ETFs, and away from stagnant, under-performing local equities and assets.  Currently, the US stock market total capitalization makes up nearly $48T of the total global market capitalization. The next closest foreign market exchange is China, which makes up nearly $12T in total capitalization.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/07/2021-07-16_GlobalStockMarketCap-2.jpg

(Source: https://www.advratings.com/companies/the-largest-stock-exchanges)

When one takes into consideration the massive expansion of state, corporate, consumer, and global credit/debt that has taken place over the past 10+ years in China (and the risks associated with servicing that debt as well as increased commodities/asset costs which have taken place over the past 24+ months) one starts to consider if China may suddenly turn into Russia of the late 1990s.

At that time, the inflation rate in Russia reached over 120% and took place after a number of key economic events set up an almost perfect storm. The aftermath of this event continued to create moderate global market crisis events.

  • 1973 & 1979 Energy/Oil Crisis
  • 1982 US Interest Rate Peak/Recession
  • 1983 Israel Bank/Stock Crisis
  • 1987 Black Monday
  • 1991 India Economic Crisis
  • 1994 Mexican Peso Crisis
  • 1998 Russian Financial Crisis

Although the names and dates of these events are much different than what is set up today, imagine the 1973/79 oil/energy crisis was the peak in oil prices in 2018.  Imagine the 1982 peak in US interest rates was the peak in interest reached in 2018.  Imagine the Israel Bank/Stock Crisis and the 1987 Black Monday was the 2020 COVID crisis.  Imaging the 1991 India Economic Crisis, and 1994 Mexican Peso Crisis were the post-COVID economic and current crisis events that have taken place over the past 14+months throughout the world.

Now, imagine that China is the new 1998 Russian Financial Crisis taking place.  One of the biggest and strongest economies in the world is now at risk of entering a severe inflationary period where excess credit/debt of the past few decades may be washed away – just like what happened in Russia.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/07/russia_inflation_rate2.jpg

(Source: https://www.timetoast.com/timelines/financial-crisis-1900s-2017)

Lastly, remember what came about after these events took place and how isolated the world was from the Russian economic collapse in the late 1990s. The world is not so isolated any longer.  If China initiates a credit/debt crisis event, there is a very strong likelihood that the global markets will react to this event moderately violently.

The Hang Seng Index May Foretell A Collapse In The Making

The typical process of the unwinding of this excess credit/debt/liability usually takes place in a common process.  First, individuals, corporations, and state-run agencies load up on cheap debt while inflation and costs are relatively consistent.  Then, as the economy heats up, inflation, commodity prices, and equipment/material costs begin to skyrocket – eating into operational profits for these entities. Meanwhile, the need to service the debt/credit persists.  As fractures in the system become evident (usually starting with isolated debt defaults by some large entities), investors start pricing greater risks into the credit/debt markets – further complicating the issues for these entities that are burdened with excess debt and diminishing profit margins.

Looking at the Russian Inflation Rate chart, above, any type of major inflationary increase will usually push these entities over the edge in terms of sustainability.  Once the cost of refinancing the debt and ongoing profit margins have been squeezed beyond limits, the crisis escalates to a point of implosion.

https://www.thetechnicaltraders.com/wp-content/uploads/2021/07/HSI_W_F.png

Given the rise in Real Estate, Commodities, Oil/Energy costs, and other factors, we believe this event may be unfolding right before us in current market trends.  China may be the focus of what Russia was in the late 1990s with extensive credit/debt issues, massive imports of raw materials, commodities, and food, and extensive global foreign debt/credit issues related to the Belt Road project.  If a global event were to unfold, which we are only speculating MAY happen at this point, China and Asia would become the focal point for this process.

More than ever, right now, traders need to move away from risk functions and start using common sense.  There will still be endless opportunities for profits from these extended price rotations, but the volatility and leverage factors will increase risk levels for traders that are not prepared or don’t have solid strategies.  Don’t let yourself get caught in these next cycle phases unprepared.

Want to know how our BAN strategy is identifying and ranking various sectors and ETFs for the best possible opportunities for future profits? Please take a minute to learn about my BAN Trader Pro newsletter service and how it can help you identify and trade better sector setups.  My team and I have built this strategy to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

As something entirely new, check out my new initiative URLYstart to learn more about the youth entrepreneurship program I am developing. This is an online program of gamified entrepreneurship designed to introduce and inspire kids to start their own businesses. Click-by-click, each student will be guided from their initial idea, through the startup process all the way to their first sale and beyond. Along the way, our students will learn life lessons such as communication, perseverance, goal setting, teamwork, and more. My team and I are passionate about this project and want to reach as many kids as possible!

Have a great day!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

S&P 500, Dow Scale All-Time Highs as Economy Picks Up Pace

By Sagarika Jaisinghani

Ford Motor Co jumped 5.9% to hit a more than three-week high as it lifted its profit forecast for the year.

Industrials Boeing Co and Caterpillar Inc, and banks including JPMorgan Chase & Co, Bank of America Corp and Citigroup Inc gained between 0.4% and 1%, a day after the Federal Reserve said it was not yet time to start withdrawing its massive pandemic-era monetary stimulus.

The central bank’s comments also assuaged fears that a rise in cases of the Delta variant would hurt a solid U.S. economic rebound. Data on Thursday showed gross domestic product increased at a 6.5% annualized rate in the second quarter, while jobless claims fell to 400,000 for the week ended July 24.

“What really stands out (in the GDP data) is consumption; it really means that consumers are carrying the economy,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

Trading on Wall Street in the past few months has also been dictated by rising inflation, and fears that higher prices would not be as transient as expected have recently knocked the benchmark S&P 500 off record highs.

Investors are now focused on the June reading of the personal consumption expenditures price index – the Fed’s main inflation measure, which is due on Friday.

“Once we have normalized our supply chains, there won’t be much of this inflation pressure, which can be achievable in the next six months, but the spread of the Delta variant is a wild card, which could derail the recovery process,” said Arthur Weise, chief investment officer at Kingsland Growth Advisors.

At 9:42 a.m. ET, the Dow Jones Industrial Average was up 0.49%, the S&P 500 was up 0.44%, and the Nasdaq Composite was up 0.36%.

Trading in the shares of technology behemoths Apple Inc, Amazon.com Inc, Netflix Inc and Google-parent Alphabet Inc was muted.

The group has tended to underperform the broader market during times of economic optimism, when investors prefer stocks such as mining and energy, which are expected to benefit more from a steady business recovery.

 

Graphic: U.S. reflation trade hurts Nasdaq, lifts Dow: https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkqakwpx/Pasted%20image%201627564664970.png

 

Facebook Inc fell 3.2% as it warned revenue growth would “decelerate significantly” following Apple’s recent update to its iOS operating system that would impact the social media giant’s ability to target ads.

KFC-owner Yum Brands Inc, on the other hand, gained 3.8% after beating expectations for quarterly sales.

China’s Didi Global jumped 14.4% after a report said it was considering going private to placate Chinese authorities and compensate investor losses since the ride-hailing firm listed in the United States. Didi denied what it called a “rumor” that it could go private.

Focus later in the day will be on shares of Robinhood Markets Inc, which is scheduled to start trading on the Nasdaq under the ticker “HOOD” after the company raised $2.1 billion in its initial public offering on Wednesday.

Advancing issues outnumbered decliners 3.36-to-1 on the NYSE and 2.52-to-1 on the Nasdaq.

The S&P index recorded 40 new 52-week highs and one new low, while the Nasdaq recorded 46 new highs and 10 new lows.

(Reporting by Sagarika Jaisinghani, Sruthi Shankar and Shashank Nayar in Bengaluru; editing by Uttaresh.V and Aditya Soni)

Exxon Mobil’s Revenue to Nearly Double in Q2; Target Price $68

Exxon Mobil, an American multinational oil and gas entity, is expected to report its second-quarter earnings of $1.0 per share, which represents year-over-year growth of over 240%, up from a loss of $0.70 per share seen in the same quarter a year ago.

The U.S. largest publicly traded oil company would post revenue growth of over 90% to around $63 billion. The company has beaten earnings per share (EPS) estimates in three of the last four quarters.

Exxon Mobil shares have surged more than 40% so far this year.

Analyst Comments

“The shares of Exxon Mobil have observed a 10% decline in the past month as benchmark prices declined due to the easing of production curtailments by OPEC. The company is committed to maintaining a strong balance sheet and returning capital to shareholders in the coming years. Despite an uncertain demand-supply environment, the company’s second-quarter results are likely to benefit from high benchmark prices, assisting deleveraging plans. The second-quarter revenues are likely to grow by around 100% (y-o-y) resulting in strong earnings expansion over last year’s depressed number,” noted analysts at Trefis.

Exxon Mobil Stock Price Forecast

Sixteen analysts who offered stock ratings for Exxon Mobil in the last three months forecast the average price in 12 months of $68.73 with a high forecast of $90.00 and a low forecast of $55.00.

The average price target represents an 18.05% change from the last price of $58.22. From those 16 analysts, seven rated “Buy”, eight rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $84 with a high of $100 under a bull scenario and $41 under the worst-case scenario. The firm gave an “Overweight” rating on the oil and gas company’s stock.

“Improving FCF outlook and dividend sustainability. With a more constructive commodity price outlook, lower capital spending, and additional cash operating cost savings, the dividend is covered in 2021 and averages >100% over the next 5-years on our estimates. Improving dividend sustainability supports yield compression for Exxon Mobil (XOM) relative to CVX,” noted Devin McDermott, equity analyst at Morgan Stanley.

“Cost cuts defend the dividend. Exxon Mobil (XOM) reduced 2022-25 spending plans to $20-25 B from $30-35 B, improving dividend sustainability while limiting further pull on the balance sheet. Additionally, XOM is targeting $6 B in structural operating cost reductions which should put upward pressure on consensus FCF estimates.”

Several other analysts have also updated their stock outlook. Piper Sandler raised the target price to $69 from $63. Independent Research upped the price objective to $56.00 from $55.00. Jefferies lifted the stock price forecast to $58 from $55.

Check out FX Empire’s earnings calendar

Stocks Move Higher As Fed Stays Dovish

Fed Chair Jerome Powell Calmed Markets

Yesterday, the Federal Reserve left the interest rate unchanged and maintained the current pace of asset purchases.

As usual, Fed Chair Jerome Powell did his best to calm markets. He has once again reiterated that higher inflation was transitory and also added that the economy learned how to live with the virus, although the Delta variant of coronavirus remained a threat.

Most likely, the Fed will provide more details during the Jackson Hole conference in late August, but traders bet that the current pace of asset purchases will remain unchanged in 2021, which is bullish for stocks and bearish for the U.S. dollar.

Initial Jobless Claims Declined To 400,000

U.S. has just released Initial Jobless Claims and Continuing Jobless Claims reports. Initial Jobless Claims report indicated that 400,000 Americans filed for unemployment benefits in a week. Analysts expected that Initial Jobless Claims would total 380,000, so the report was worse than expected.

U.S. has also provided second-quarter GDP Growth Rate report which indicated that GDP increased by 6.5% quarter-over-quarter compared to analyst consensus which called for growth of 8.5%.

It remains to be seen whether the disappointing GDP report will hurt stocks today as traders may stay focused on the dovish message from the Fed. Currently, S&P 500 futures are gaining some ground in premarket trading.

Gold Rallies As U.S. Dollar Declines

Gold has finally managed to get away from the $1800 level as U.S. dollar gained strong downside momentum after Fed’s comments. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has managed to get to the test of the support at the 92 level which was bearish for precious metals.

Silver has also enjoyed a strong rebound, and it is currently trying to settle above the resistance at $25.50.

Yesterday, gold mining stocks showed some strength, and they look ready for a strong start of today’s trading session.

For a look at all of today’s economic events, check out our economic calendar.

Chinese Officials Calm Markets

Led by a 3% recovery in the Hang Seng, the large equity markets in the Asia Pacific region advanced after the MSCI benchmark recorded the lows for the year yesterday. Europe’s Dow Jones Stoxx 600 is posting modest gains that were sufficient to lift the benchmark to new record highs. US equity futures are firm. US and European 10-year yields are little changed. The US is firm around 1.26%. European yields are also 1-2 bp higher. The biggest reaction in the capital markets is the setback in the dollar, which is softer against nearly all currencies through the European morning.

Among the majors, the New Zealand and Canadian dollars and the Norwegian krone are the strongest. The yen and Swiss franc are the laggards. Among emerging market currencies, the South African rand and Hungarian forint are the strongest. The JP Morgan Emerging Market Currency Index extended yesterday’s gains and is poised for its best two days this month.

Meanwhile, the decline in real yields and a weaker dollar appear to be helping lift gold above its 200-day moving average near $1821. Falling oil inventories in the US are helping lift crude prices. The September WTI contract is up by more than 1% for the second day as prices push above $73 a barrel. After falling on Tuesday, the CRB rose yesterday, its sixth gain in the past seven sessions.

Asia Pacific

Chinese officials moved to calm markets. They did so by the regulators meeting with banks and trying to isolate the crackdown on private education while signaling that IPOs in the US are not banned. State funds may have been deployed to support equities. The PBOC provided additional liquidity. The CNY30 bln (~$4.6 bln) via seven-day repo was the largest such operation this month. Even if Chinese officials succeed in stabilizing the market, the damage to sentiment and confidence among foreign investors will take some time to heal.

First, outside of some general narrative, it is not clear Beijing’s end game. Second, what appears to be capriciousness and clumsiness did not just begin in recent days but is part of a sequence of events that goes back to the intended Ant IPO last year. Third, the opaqueness and activist state approach does not attract foreign investment. Fourth, these recent events show why integrating China into the world’s capital markets is a gradual process that is not simply moving in one direction. The main challenge is not technology, which means that a digital yuan may not be the game-changer that some have suggested.

After buying a record among Japanese bonds in the week through July 16 (JPY2.57 trillion), foreign investors pared their holdings last week by JPY223 bln. The most interesting development last week with Japanese portfolio flows was the continued divestment of foreign bonds. Japanese investors sold JPY1.09 trillion of foreign bonds. It was the fourth liquidation in the past five weeks. Indeed, the average weekly sales over this run have been JPY544 bln, the most in a five-week period since March as the fiscal year was drawing to a close.

The dollar is hovering near this week’s lows against the yen set on Tuesday near JPY109.60. There is little support below there until last week’s low closer to JPY109. There is an option for about $380 mln at JPY109.30 that expires today. On the upside, the greenback has not been able to poke above JPY110.00 today. The Australian dollar is bid, and it is straddling the $0.7400 are near midday in Europe. It has not closed above $0.7400 since July 15.

It appears to be absorbing offers that may be related to the A$1.1 bln in options expiring today between $0.7385 and $0.7400. The $0.7425 area holds the 20-day moving average, and the Aussie has not closed above it since mid-June. The dollar had broken out of the recent range against the Chinese yuan and reached its best level in three months on Tuesday (~CNY6.5125). It has since surrendered the gains and move back to the lower end of the previous trading range (~CNY6.45). It is on track for its biggest two-day drop against the yuan in six months. The dollar’s reference rate was set at CNY6.4942, nearly spot-on the median projection (CNY6.4944) in the Bloomberg survey.

Europe

Germany reported a larger than expected decline in unemployment and what appears to be an upside surprise on inflation. The unemployment queues fell by an impressive 91k in July after a 39k decline in June. It was the largest drop since late 2006. The median forecast called for a 29k decline. The unemployment rate fell to 5.7% from 5.9%. It was at 5% before the pandemic struck.

The German states have reported their CPI figures, and the national figures will be out shortly. The states reported a monthly rise of 0.8%-1.0%, which poses an upside risk to the median forecast expected a 0.6% rise in the national calculation, which would lift the year-over-year rate to 3.2% from 2.3%. The EU harmonized measure was expected to rise by 0.4% for a 2.9% year-over-year pace (up from 2.1% in June).

Spain, the other large EMU country reporting unemployment and inflation figures today. The Q2 unemployment rate eased even if not as much as expected, falling to 15.26% from nearly 16% in Q1. The EU harmonized inflation measure fell 1.2% on the month, which due to the base effect saw the year-over-year rate rose to 2.9% from 2.5%.

Tomorrow is a big day of releases for the eurozone. It reports the June unemployment rate (seen steady at 7.9%, though the risk is on the downside), CPI (seen at 2% but the risk is on the upside), and the first estimate for Q2 GDP ( a 1.5% quarterly gain, which would be the first expansion in three quarters and only the second quarterly expansion since Q3 19 (it was stagnant in Q4 19).

The euro is extending its rally for the fourth consecutive session. It has forged a base around the $1.1750-$1.1760 area and tested it at the start of the week. Today it is pushing against $1.1880, a three-week high. It closed above the 20-day moving average yesterday for the first time since June 7, and the five-day moving average is crossing above the 20-day moving average for the first time since then as well. It has not traded above $1.19 this month, and there is an 800 mln euro option struck there that expires today. Sterling is also advancing for the fourth consecutive session.

It settled last week slightly below $1.3750 and reached $1.3970 today, its highest level since June 23. Recall that sterling peaking on June 1 is near $1.4250. It is moving above the (50%) retracement level (~$1.3910) today, and the next retracement (61.8%) is just shy of $1.40.

America

There are two main takeaways from yesterday’s FOMC statement and press conference. First, the Fed is still on track to make a formal tapering announcement in a couple of months. The actual tapering could begin before year-end, depending on the economy. Powell seemed relatively calm about the prospects that the new Delta variant will cause a major economic disruption. The Jackson Hole-September FOMC meeting timeframe still seems reasonable, especially if the upcoming employment data is as strong as anticipated, and there are several forecasts for non-farm payrolls to rise by a million when announced at the end of next week. Second, the Fed continues to argue that elevated price pressure is temporary.

Powell has argued that a relatively small basket of goods in the CPI basket accounts for the prices. We have noted that only about a third of the components are rising faster than 2%. Powell pointed to cars (new, used, and rental), airfare, and hospitality as significant contributors. The Fed Chair continued to push back against linking house price increases to its MBS purchases and seemed to suggest early tapering off those purchases did not have wide support. The minutes will shed light on this debate.

More than a month after President Biden said a deal was struck, the Senate appears to be on the verge of approving a bipartisan physical infrastructure bill. It will be around $550 bln in new spending, and almost another $500 bln is anticipated in federal money for highways that are part of the regular cycle. It will be partly paid for by reallocated unspent covid relief funds and tapping the Strategic Oil Reserves and a few other more gimmicky measures like counting revenue for future growth and boosting the reporting for crypto trades to capture more tax revenues.

The US reports its preliminary estimate for Q2 GDP. The median forecast in Bloomberg’s survey calls for an 8.5% annualized pace after 6.4% in Q1. Personal consumption is expected to have risen by double digits for the second consecutive quarter. The GDP deflator is projected to rise to 5.4% from 4.3%. We suspect the US economic growth is peaking, and the slowing will be gradual, but by H2 22, the sub-3% pace will return. Separately, the US reported weekly jobless claims. They unexpectedly rose by 50k in the previous week, which was the second increase in three weeks and the first back above the 400k-mark since mid-June. Unperturbed, economists in the Bloomberg survey are looking for 385k claims last week.

The US dollar is breaking down against the Canadian dollar. It is convincingly falling through the 20-day moving average (~CAD1.2525) for the first time since mid-June. The greenback is trading near two and a half week lows against the Canadian dollar to test CAD1.2450. Recall it peaked near CAD1.28 on July 19. The next target is near CAD1.24, the halfway mark of the US dollar’s recovery from the five-year low set on June 1 near CAD1.20.

The Mexican peso shrugged off Moody’s downgrade of Pemex deeper below investment grade (Ba3 and retained a negative outlook). Of the main rating agencies, only S&P sees Pemex as an investment-grade risk. The dollar has approached MXN19.85 to take out last week’s low. The next area of support is seen near MXN19.80. It should be capped in front of MXN19.97.

This article was written by Marc Chandler, MarctoMarket.

Fed Nothingburger, Dollar Lower, Focus on GDP, PCE

It was a rather pedestrian FOMC Statement day on Wednesday. There is GDP data incoming, and the widely Fed-followed Core PCE Price Index data comes out on Friday. What can we take away from the FOMC Statement and press conference?

Rates unchanged. No rush to raise interest rates. Inflation should persist.

No surprises here.

However, there was some notable price action in the US Dollar Index during Wednesday’s session. The US Dollar Index initially rose on the FOMC statement at 2:00 PM. During the press conference, the USD fell as Fed Chair Jerome Powell mentioned that inflation should persist for several months. It is noteworthy price action and can be a forward-looking indicator for the direction of other asset prices.

First, let’s take a look at the daily chart of the $DXY:

Figure 1 – US Dollar Index November 1, 2020 – July 28, 2021, Daily Candles Source stockcharts.com

As we know, the US Dollar has been in a longer-term downtrend. The repeating pattern has been lower daily highs. Short the dollar was a heavily crowded trade recently that we examined and discussed. After reaching oversold conditions, a quick bounce occurred. However, with no rush to raise interest rates and Fed open market operations continuing, the $DXY could try the downside once again. This downward move could impact the prices of commodities even further to the upside. There is a key Fibonacci level that was not quite reached in the index on its last downside attempt (near $88.41).

Figure 2 – US Dollar Index July 28, 2021 – July 28, 2021, 1-minute Candles Source stooq.com

I find value in this type of analysis; when you can take a daily/longer-term trend/outlook and then take an intraday peek on a day such as a Fed day. I would have guessed that the market would be factoring in further inflation already. However, based on the $DXY behavior intraday, it appears that the US Dollar may want to get set to go and retest the recent low near $89.50.

GDP Data, Core PCE

On Thursday morning, we are getting GDP (q/q), and on Friday morning we will get the Core PCE data. GDP can be a market mover, and the Fed does like to monitor the PCE data for inflation signals.

As the US Dollar may weaken some, a place to park some cash could be in the UDN – Invesco DB US Index Bearish ETF. I wouldn’t expect any home runs here; the ETF is unleveraged, but a 2 – 3% pop could be in the cards here if the $DXY wants to test its recent lows.

Figure 3 – Invesco DB US Dollar Index Bearish Fund – September 4, 2020 – July 28, 2021, Daily Candles Source stockcharts.com

UDN is doing its job rather well and is inversely tracking the US Dollar Index at an efficient rate. Other traders could use the $DXY product on ICE if their accounts are enabled for it. ICE passes through the monthly fee for its products to retail traders (somewhere in the neighborhood of $110 per month) to trade these products and receive quotes.

So, using UDN can give traders some pure exposure to a dollar decline. We will be eyeballing the $21.48 – $21.64 levels as potential TP targets for now. Levels and sentiment can change quickly, so stay tuned!

Now, for our premium subscribers, let’s review the other markets that we are covering. Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.

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For a look at all of today’s economic events, check out our economic calendar.

Rafael Zorabedian
Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

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