Friday July 9th

9-07-2021

Dow futures bounce by 200 points as markets look to rebound from Thursday’s sell-off

U.S. stock index futures were mostly higher in early morning trading Friday a day after the major indexes fell amid concerns of a slowdown in global economic growth. Futures on the Dow Jones Industrial Average rose 240 points, or 0.7%. S&P 500 futures bounced by 0.45%. Nasdaq-100 futures were flat. The yield on the 10-year Treasury rebounded 5 basis points to 1.34%, easing concerns about an economic slowdown (1 basis point is 0.01%). Falling yields have mystified investors lately, with the 10-year yield falling to 1.25% at its low on Thursday. The stocks that led the losses on Thursday led the gains in premarket trading Friday. Bank of America jumped nearly 2% in early trading, leading a bounce in financial shares. Royal Caribbean and Carnival each popped more than 2%. American Airlines and United Airlines gained more than 1%. Shares of GM gained 2% after Wedbush said the stock is a buy and could jump more than 50% as investors realize the extent of its tech and electric vehicle evolution. Big Tech stocks were a bit weak in premarket trading as President Biden was set to announce a new executive order aimed at the competitive practices by the sector’s giants. Amazon was down about 0.3% after hitting a new all-time high on Thursday. Thursday’s losses came as the proliferation of the highly infectious delta Covid variant also fueled worries about the global economic comeback. The Olympics announced a ban of spectators at Tokyo’s summer games as Japan declared a state of emergency to curb the spread of coronavirus. “Our central case has been for a choppy July” with the S&P 500 falling as low as 4,100, wrote Tom Lee, Fundstrat’s head of research, in a note to clients Thursday night. “While this is a possibility, we think there is a chance [Thursday] marked the peak of [the] ‘growth scare’ and if this is correct, equities might be shifting towards a broader risk on.” The Dow closed Thursday’s regular session lower by nearly 260 points. The S&P 500 dipped 0.86%, while the Nasdaq broke a four-day win streak by falling 0.72%. For the week, the Dow is down 1.1%, the S&P 500 is off by 0.7% and the Nasdaq Composite has shed 0.5%. “The market is solidly mid-cycle and with that typically comes a 10-15% index level correction. We expect such a correction will create buying opportunities given a still strong growth backdrop,” Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, told clients. Wilson favors financials, healthcare and materials. “Our economic growth forecasts remain positive, but bigger bulls continue to talk about ‘pent up demand’,” Wilson added. “We agree there is pent up demand for services consumption. We also think the degree of overconsumption in goods and the ensuing payback is under-appreciated as the positive effects on income from stimulus checks and the surge in asset prices fade.” The latest jobless claims report released Thursday also indicated a potential slowdown in the labor sector as first-time applicants for unemployment benefits unexpectedly jumped to 373,000 in the week ending July 3. Economists were looking to see 350,000 initial claims, according to Dow Jones. Shares in Asia-Pacific fell on Friday as Covid worries resurfaced in the region. South Korea’s Kospi dropped 1.07%% to close at 3,217.95. South Korea announced Friday that the greater Seoul area will be placed under the toughest social distancing rules of Level 4, according to local news agency Yonhap. In Japan, the Nikkei 225 fell 0.63% to close at 27,940.42 while the Topix index shed 0.41% to end the trading day at 1,912.38. Mainland Chinese stocks closed lower, with the Shanghai composite fractionally lower at 3,524.09 and the Shenzhen component declining 0.259% to 14,844.36. Hong Kong’s Hang Seng index advanced about 0.8%, as of its final hour of trading. Oil prices rose for a second day on Friday as data showed a draw in U.S. inventories but were heading for a weekly loss amid uncertainty over global supplies after an OPEC+ impasse. Brent crude oil futures were up 68 cents, or 0.9%, at $74.82 a barrel. U.S. West Texas Intermediate futures were up 91 cents, or 1.3%, at $73.86. Gold prices on Friday were set for the third straight weekly gain, as a slight pullback in the dollar made bullion less expensive for other currency holders, while a drop in U.S. Treasury yields also offered support to the safe-haven metal. Spot gold was steady at $1,800.85 per ounce, as of 0108 GMT. Prices have risen 0.8% so far this week. U.S. gold futures were steady at $1,801 per ounce.