MARKET WRAPS
Watch For:
EIA Weekly Petroleum Status Report; Final 1Q Economic Growth
Figures
Opening Call:
Stock futures rose on Tuesday after the momentum from last
week's rally stalled on Monday.
Concerns on Wall Street continue to center on how aggressive the
Federal Reserve will be in raising interest rates with the risk of
recession looming large.
The week ahead holds notable economic data and meetings, while
action also could be driven by the close of the trading month and
second quarter on Thursday.
"It is the month and quarter-end this week, and that will prompt
no small amount of portfolio rebalancing by institutional investors
globally," said OANDA's Jeffrey Halley. "We should expect the
back-and-forth chop-fest to continue this week in the equity
space."
Later Tuesday, investors will parse data on home prices, as well
as consumer confidence data from The Conference Board. Economists
surveyed by The Wall Street Journal expect consumers' optimism to
further cool for June as Americans continue to assess the impact of
high inflation and rising interest rates.
In premarket trading in New York, travel and energy companies
were bright spots in the market. Occidental Petroleum and Devon
Energy each climbed more than 2%. Wynn Resorts climbed 4.9% and
cruise line Carnival rose 1.6%.
Overseas, the pan-European Stoxx 600 was up 0.4% while Asian
stocks closed broadly higher.
Chinese shares gained after authorities said they will ease
quarantine requirements for international travelers entering the
country, as part of efforts to balance their zero-Covid policy and
rising economic pressures.
Shares in airlines, restaurant chains and Macau casino operators
surged.
Read: China to Loosen Quarantine Requirements for International
Travelers
Economic Insight:
The economy is expected to grow 2.4% this year but higher prices
and interest rates will likely push it into a recession in 2023,
said S&P.
Economic momentum due to resilient consumers will likely protect
the economy this year, but persistently high prices and aggressive
interest rate increases will weigh on growth next year.
"With the Russia-Ukraine conflict and China slowdown
exacerbating supply chains and pricing pressures, it's hard to see
the economy walking out of 2023 unscathed."
S&P has forecast GDP growth to slow to 1.6% in 2023 and the
unemployment rate to climb to 4.3% by the end of next year.
---
Consumer confidence likely declined again in June as Americans'
views of both the current situation and the outlook will have
worsened due to the drop in stock prices and the surge in gasoline
prices, said Pantheon Macroeconomics.
However, the index from the Conference Board will likely remain
just slightly below its long-term average as a strong labor market
is partly offsetting concerns about inflation.
"With unemployment [rate] at only 3.6% and payrolls heading
rapidly toward the pre-Covid peaks, it is hard for people to argue
that the labor market is in poor shape."
Forex:
The dollar could weaken further because of dimming prospects of
interest-rate increases by the Fed, said ActivTrades.
"With commodity prices falling and recession fears growing, some
now believe that the Fed will not be able to go as far as
previously expected, in terms of tightening, in a dynamic that is
shifting expectations towards a slightly lower benchmark U.S. rate
than had previously been expected, creating scope for further
dollar weakness."
---
Sterling continued to show little reaction to Brexit headlines
even after the U.K. government's Northern Ireland bill cleared its
first hurdle, said ING.
The bill, which unilaterally rips up post-Brexit trading
arrangements for Northern Ireland, passed the second reading stage
in the House of Commons on Monday.
"There are surely many indications that the pound is largely
pricing in this scenario, and markets remain mostly focused on
other drivers of U.K. economic underperformance as well as assuming
Brexit is not a major input in the Bank of England's policy
decision-making process at the moment," said ING.
Bonds:
Recession fears have brought much needed two-way risk in rates
price action, said ING.
"This isn't to say that the past few months were a smooth
transition towards a world of higher interest rates, but it feels
like last week's rally has really woken up investors to the rates
downside scenario."
Growing recession fears have undoubtedly contributed to calm
long-term inflation swaps, the strategists say. "We are tempted to
say that the upside in long-term yields is more limited than a few
months ago, and that a bond market selloff would likely be felt
more acutely in the front-end," ING said, referring to short-dated
bonds.
---
High-yield corporate bonds bore the brunt of spread widening
with credit in the second quarter, with only a brief respite during
a short-lived relief rally at the end of May, said HSBC.
U.S. dollar-denominated high-yield had the worst performance and
saw the most aggressive spread widening. USD investment-grade
credit, which saw the least spread widening, outperformed
euro-demonominated investment-grade credit, HSBC said.
Energy:
Oil prices rose around 1% in Europe on concerns over a lack of
extra supplies from the world's leading producers.
The United Arab Emirates' Energy Minister said on Monday that
the major oil producer was near to producing at its maximum
capacity. The U.A.E. along with Saudi Arabia has been seen as one
of the few major OPEC members capable of making up for lost Russian
supply to help balance the market.
"A seam of tight supply news has bolstered the market," said
CBA.
Metals:
Base metals and gold pushed higher in early European action,
boosted by improving demand sentiment on signals that parts of
China will be loosening lockdown restrictions in the near term.
Beijing and Shanghai have slowly been lifting some Covid-19
lockdown restrictions this week, which should help boost buying for
metals. Data from Bloomberg on Monday showed that economic activity
in Shanghai had risen after it had lifted some restrictions.
Investors will be keeping a close eye on Thursday's release of
PMI results for the region, looking for further signs of
improvement.
TODAY'S TOP HEADLINES
JetBlue Again Raises Offer to Buy Spirit Airlines
JetBlue Airways Corp. isn't backing down in its fight to buy
Spirit Airlines Inc., raising its offer yet again in an effort to
outmaneuver rival Frontier Airlines.
JetBlue on Monday proposed a $400 million breakup fee, which it
would pay to Spirit if regulators block the merger, up from the
$350 million it had previously pledged. JetBlue also said it would
prepay $2.50 a share once investors approve the deal, up from $1.50
a share previously.
Nike Posts Flat Sales, Jump in Inventories
Nike Inc.'s quarterly sales were roughly flat and its inventory
surged, signs that the sneaker giant is still trying to balance
consumer demand with supply-chain snarls.
Executives said they were optimistic as the company starts a new
fiscal year, because production has surpassed prepandemic levels.
They forecast stronger revenue growth for the year started June 1,
but said near-term profits would be hurt by elevated shipping
costs.
Former Toys 'R' Us Directors to Face Bankruptcy Trial Over
Liquidation
A bankruptcy judge ordered former Toys "R" Us Inc. directors and
officers to face trial on allegations stemming from an attempted
chapter 11 restructuring that left suppliers with more than $600
million in unpaid bills.
Judge Keith Phillips with the U.S. Bankruptcy Court in Richmond,
Va., declined to grant summary judgment before trial to former toy
company executives in litigation alleging they misrepresented Toys
"R" Us's ability to cover the bills it was racking up while it
tried to engineer a chapter 11 restructuring.
Toshiba Shareholders Vote to Add Activist Investors to Board
TOKYO-Toshiba Corp. shareholders on Tuesday approved the
company's proposal to invite representatives from two foreign
activist funds onto its board, a move which may help speed the
transition of the troubled industrial conglomerate.
Earlier this year, Toshiba decided to put itself up for auction
and so far has received eight offers to take the company private
and two proposals for minority investment.
Goldman Sachs and Wells Fargo Boost Shareholder Payouts
The largest U.S. banks said they would increase payouts to
shareholders after the Federal Reserve said the banks are able to
keep lending in a severe hypothetical recession.
Four of the six biggest banks boosted their dividend payments on
Monday. The collective 15% increase in payouts is relatively muted
compared with last year, when the banks raised dividends by 40%.
Several banks also outlined plans to buy back their own stock.
Robinhood Shares Soar on Takeover Hopes
Robinhood Markets Inc. shares surged Monday on reports that
cryptocurrency exchange FTX is exploring a potential acquisition of
the brokerage.
Shares climbed as much as 21% and closed up 14% at $9.12. The
stock, which was briefly halted for volatility, has slumped 49%
this year and briefly traded at about $80 in August.
Grain Must Flow From Ukraine Ports to Ease Global Food Strains,
U.S. Agriculture Secretary Vilsack Says
CHICAGO--U.S. Agriculture Department Secretary Tom Vilsack
called for Ukrainian ports in the Black Sea to be opened to ship
grain out of the embattled country, to help relieve a global food
crunch.
Trading needs to resume from the ports in the Black Sea that
have been damaged or disrupted by Russia's invasion, Mr. Vilsack
said, freeing up storage space for the coming harvest in Ukraine.
The U.S. also needs to look for ways for it to increase its own
crop production to help make up the gap in global grain supplies,
he said.
German Consumer Sentiment Expected to Drop to New Record Low in
July
Consumer confidence in Germany is set to fall in July to an
all-time low, as inflation and Russia's war in Ukraine weigh
heavily on household sentiment.
Market research group GfK's forward-looking consumer sentiment
index forecasts confidence declining to minus 27.4 in July from a
revised figure of minus 26.2 in June. July's figure is below the
forecast of economists polled by The Wall Street Journal of minus
27.0.
China to Loosen Quarantine Requirements for International
Travelers
China will loosen its strict quarantine requirements for
international travelers entering the country, in a bid to balance
its zero-Covid policy and rising pressures on the world's second
largest economy.
China's National Health Commission on Tuesday said in a
statement that it will shorten the total quarantine period to 10
days from 21 days for both travelers entering the country and
people who have come into close contact with Covid-19 patients. The
government body also loosened its testing requirements for people
in quarantine.
Steelmakers Avoid Russian Components but Bargain Hunters Swoop
In
Many European steelmakers have said they would avoid
Russia-sourced raw materials after the country invaded Ukraine in
late February, but import volumes of some Russian steelmaking
ingredients into Europe are surging anyway.
Russian exporters boosted shipments of Russia-sourced
ferrotitanium, a metallic alloy used to strengthen steel, by 30% in
March from the previous month, according to import and export
documents. The alloy is key to making finished steel that goes into
cars, stainless steel and shipbuilding.
Reserve Bank of Australia's Blunt Rates Stick Has Clout
SYDNEY-Interest-rate increases in Australia are now three times
more potent than they were three decades ago, thanks largely to
higher household debt across the country, according to Shane
Oliver, chief economist at AMP Capital.
If the Reserve Bank of Australia were to raise its official cash
rate to 2.5% from 0.85% currently, a near doubling in debt interest
payments as a share of household income would result and take them
to where they were in 2013, after which economic growth was
relatively sluggish, he said in a note.
At Least 46 Found Dead in San Antonio in Suspected Migrant
Smuggling Operation
At least 46 people were found dead Monday in a tractor trailer
in San Antonio, according to city officials.
The people are believed to be migrants who were being
transported to the U.S. in a smuggling operation, according to a
statement from U.S. Immigration and Customs Enforcement.
Biden's ICE Nominee Withdraws From Consideration
WASHINGTON-President Biden's nominee to lead U.S. Immigration
and Customs Enforcement, Sheriff Ed Gonzalez, has withdrawn his
name from consideration, Mr. Gonzalez announced on Monday.
In a series of tweets, Mr. Gonzalez said that he had informed
the Biden administration of his decision on Sunday, noting that his
nomination had been pending for more than a year.
FBI Seizes Phone of John Eastman, Key Figure in Pro-Trump Bid to
Reverse 2020 Election Outcome
WASHINGTON-Federal agents have seized the phone of John Eastman,
a conservative lawyer and key figure in then-President Donald
Trump's attempts to overturn the 2020 election, according to a
Monday court filing, in the latest signal that the Justice
Department is ramping up its criminal investigation into that
effort.
Federal Bureau of Investigation agents acting on behalf of the
Justice Department's inspector general stopped Mr. Eastman and took
the iPhone as he was leaving a restaurant on Wednesday, he wrote in
a motion filed in New Mexico seeking to recover the device from the
government.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
Alimentation Couche-Tard 4Q
Economic Indicators:
None scheduled
Stocks to Watch:
Ivanhoe Electric Prices IPO of Nearly 14.4M Shrs at $11.75 Each;
Expects About $169.1M in Gross Proceeds From IPO; Sets IPO Price at
Bottom End of $11.75-$12.50/Shr Indicative Range; Underwriters Have
30-Day Option to Buy Up to Nearly 2.2M Additional Shrs;
Ivanhoe Electric Shrs to Begin Trading on NYSE American and
Toronto Stock Exchange on Tuesday; Offering Expected to Close on
Thursday; Ivanhoe Electric Plans to Use IPO Proceeds on Mineral and
Property Rights, for Metals Exploration, Other Purposes; BMO
Capital Markets, Jefferies Acting as Lead Bookrunners; JPMorgan
Acting as Joint Bookrunner
Australian Salmon Producer Tassal Rebuffs Takeover From
Cooke
Tassal Group rebuffed a takeover proposal from Canada's Cooke,
saying it undervalues the Australian salmon and prawn producer.
Tassal on Tuesday said that the non-binding indicative proposal,
which valued the ASX-listed company's equity at about $721.5
million, was the third from Cooke. Cooke confidentially proposed
A$4.67 a share and then A$4.80 a share, before raising the proposed
price to A$4.85 a share, Tassal said.
Tassal said it wouldn't engage on the latest proposal from
Cooke, which Tassal said has indicated it has approval from
Australia's foreign investment regulator.
Cooke has acquired a 5.4% stake in Tassal, according to a market
filing published Monday.
Expected Major Events for Tuesday
06:00/GER: Jul GfK consumer climate survey
06:45/FRA: Jun Consumer confidence survey
08:00/ITA: Apr Industrial turnover & orders
12:30/US: May Advance Economic Indicators Report
12:30/US: Annual U.S. International Investment Position
12:55/US: 06/25 Johnson Redbook Retail Sales Index
13:00/US: Apr U.S. Monthly House Price Index
13:00/US: Apr S&P CoreLogic Case-Shiller Indices
14:00/US: Jun Richmond Fed Business Activity Survey
14:00/US: Jun Consumer Confidence Index
16:00/US: Annual Industrial Production and Capacity Utilization
annual revision
17:00/US: May Money Stock Measures
20:30/US: 06/24 API Weekly Statistical Bulletin
23:01/UK: Jun Shop Price Index
23:50/JPN: Jun Provisional Trade Statistics for 1st 10 days of
Month
23:50/JPN: May Preliminary Retail Sales
All times in GMT. Powered by Onclusive and Dow Jones.
Expected Earnings for Tuesday
AeroVironment (AVAV) is expected to report $0.08 for 4Q.
Alimentation Couche Tard Inc (ATD.T) is expected to report $0.50
for 4Q.
Beyond Air Inc (XAIR) is expected to report for 4Q.
Blade Air Mobility Inc (BLDE) is expected to report for 2Q.
California First Leasing Corp (CFNB) is expected to report for
3Q.
Carver Bancorp Inc (CARV) is expected to report for 4Q.
Clairvest Group Inc (CVG.T) is expected to report for 4Q.
Cognyte Software Ltd (CGNT) is expected to report for 1Q.
Dakota Gold Corp (DC) is expected to report for 4Q.
Enerpac Tool Group Corp (EPAC) is expected to report for 3Q.
FTI Consulting (FCN) is expected to report $1.74 for 4Q.
Frequency Electronics (FEIM) is expected to report for 4Q.
Nemaura Medical Inc (NMRD) is expected to report for 4Q.
P3 Health Partners Inc (PIII) is expected to report for 1Q.
Progress Software Corp (PRGS) is expected to report $0.53 for
2Q.
Simply Inc (SIMP) is expected to report for 1Q.
TD SYNNEX Corp (SNX) is expected to report $1.78 for 2Q.
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ANALYST RATINGS ACTIONS
Alnylam Pharmaceuticals Cut to Neutral From Buy by
Guggenheim
Altair Engineering Cut to Sell From Neutral by Goldman Sachs
AutoZone Raised to Buy From Neutral by Goldman Sachs
Avangrid Cut to Underweight From Sector Weight by Keybanc
Bed Bath & Beyond Cut to Neutral From Buy by B. Riley
Securities
Chewy Raised to Buy From Hold by Needham
Chipotle Mexican Raised to Positive From Mixed by OTR Global
Coinbase Cut to Sell From Neutral by Goldman Sachs
Enovis Coverage Assumed by Loop Capital at Buy
Epizyme Cut to Neutral From Outperform by Wedbush
Etsy Cut to Hold From Buy by Needham
Floor & Decor Holdings Cut to Neutral From Buy by Goldman
Sachs
GitLab Raised to Buy From Neutral by Goldman Sachs
Informatica Cut to Neutral From Buy by Goldman Sachs
Mister Car Wash Cut to Sell From Neutral by Goldman Sachs
National Vision Raised to Buy From Neutral by Goldman Sachs
Old Dominion Freight Raised to Overweight From Equal-Weight by
Wells Fargo
Ollie's Bargain Outlet Raised to Neutral From Sell by Goldman
Sachs
PPG Industries Raised to Buy From Hold by Vertical Research
Robinhood Markets Raised to Neutral From Sell by Goldman
Sachs
Samsara Cut to Neutral From Buy by Goldman Sachs
Simply Good Foods Raised to Overweight From Equal-Weight by
Stephens & Co.
United Fire Group Cut to Neutral From Overweight by Piper
Sandler
Varonis Systems Cut to Equal-Weight From Overweight by Morgan
Stanley
WEC Energy Group Raised to Overweight From Sector Weight by
Keybanc
Zendesk Cut to Equal-Weight From Overweight by Barclays
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
June 28, 2022 05:26 ET (09:26 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.