Markets Mixed Before The Bell on Big Earnings Day 7-22-21

The dollar has traded softer amid the reflation trade redux, and the yen has also seen some of its safe-haven premium unwind. The 10-year Treasury yield is up by over 15 bp from the sub-1.15% nadir that was seen on Tuesday. Oil prices have rallied by over 9% out of the two-month low that was seen on Wednesday.

Major stock indices have recouped or more than recovered losses seen earlier in the week. Incoming corporate earnings reports have mostly been encouraging, while a study published yesterday showed that both the Pfizer and AstraZeneca vaccines are effective against the Delta variant of Covid (this has been clear in UK data for some time).

DJIA F34,782930.27%
S&P F4,360.50100.23%
NASDAQ F14,854.2526.50.18%
Gold1,795.60-7.8-0.43%
Silver25.135-0.12-0.48%
Crude Oil71.120.821.17%

There is also hope that the ECB will today deliver dovish forward guidance to accompany its raised inflation goal of 2%, which was announced earlier in the month. The central bank isn’t adopting a Fed-like average inflation targeting regime but will clarify what its “forceful or persistent” commitment to its 2% inflation goal means for interest rates and bond-buying. While, like other central banks, the ECB has been inching towards tightening, the recent bout of volatility in global markets may have strengthened the hand of the doves at the governing council.

The calendar is busy with earnings, data, and supply. The earnings calendar features Intel, Abbott Labs, AT&T, Danaher, Union Pacific, Snap, ABB, Capital One, Marsh & McLennan, Edwards Lifesciences, Twitter, Newmont, Freeport-McMoRan, Dow, American Electric Power, SVB Financial, D.R. Horton, Nucor, Wet Pharma, Fifth Third Bancorp, VeriSign, Tractor Supply, First Energy, Domino’s Pizza, Pool Corp., Genuine Parts, Cenovus Energy, Celanese, Quest Diagnostics, Citrix, American Airlines, Allegion, Snap-On, Teck Resources, Boston Beer, Cleveland-Cliffs, and the Carlisle Companies.

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Economic Data

US jobless Claims Preview

We expect a -5k decline in initial claims to 355k in the week ended July 17, which would mark a new cycle-low since the pandemic. This week’s number will take on more importance as it corresponds to the BLS survey week. Claims dropped -26k in the July 10 week to 360k, the prior cycle-low. Claims are expected to average 356k in July, down from averages of 393k in June, 428k in May, and 582k in April. The July BLS survey week reading will likely undershoot recent survey week readings of 418k in June, 444k in May, 566k in April, 765k in March, and 847k in February. We assume a 600k July payroll rise, following an 850k bounce in June.

US Existing Home Sales Preview

We expect existing home sales to hold steady at 5.800 mln in June following the -0.9% drop to that level in May. This would break a string of 4 straight months of declines. Existing home sales hit a better than 14-year high of 6.730 mln in October. Though the assumed gains for the June housing reports would be encouraging, the recovery in all the housing measures has stalled in Q2 thanks to a wide array of capacity constraints that are driving prices higher and capping sales. We peg the median sales price at $350,000 in June, slightly down from the three-month string of new all-time highs culminating in a $350,300 figure in May. We expect a dip in the y/y median price gain to 18.9% from a record-large 23.6% in May. In Q1, we saw an average sales pace of 6.303 mln, after a 6.657 mln rate in Q4, and we expect a slower 5.817 mln pace in Q2..

US Leading Index Preview

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The index should post another solid increase of 1.1% in June to 115.8, after climbing 1.3% to 114.5 in May, which was the prior peak. This would be a 4th straight monthly gain of better than 1%. The May jump was supported by a hefty jump in jobless claims (0.89%), along with strength in the ISM new orders component (0.23%).

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