Advisorpedia's The Week Ahead Podcast, Powered by Tematica Research Douglas Heikkinen

Join Tematica Research's Chief Macro Strategist, Lenore Hawkins, and Chief Investment Officer, Chris Versace, as they discuss and debate what's driving the market and the economy this week.

Markets last week

Bulls are dominating - latest Investor Intelligence poll

up to 61.2% bull from 60.8% prior week

Bears down to 15.3% from prior 15.5%

Key Economic Data and Related Events LAST WEEK

Seeing further signs of slowing in geographies that were the first to pull out of the pandemic:


China’s GDP in Q2 rose 7.9% YoY, slower than the expected 8.1% increase, and 1.3% QoQ after rising 18.3% YoY and a downwardly revised 0.4% QoQ respectively in Q1. 


Global inflation remains tame:


Italy’s Inflation Rate for June was unchanged with May’s 1.3% reading, matching expectations.


DOMESTIC INFLATION

Last week’s release of the Consumer Price Index for June found that prices rose 0.9% MoM, nearly 2x the expected 0.5% increase, and were up 5.4% YoY. Both the MoM and YoY increases were at their fastest pace since 2008. Ex-food and energy prices rose 4.5%, the fastest pace since November 1991 and well above the Fed’s 2.0% long-run target pace.

RETAIL SALES STRONGER THAN EXPECTED

Retail Sales for June came in stronger than expected for June, rising 0.6% MoM from a downwardly revised -1.7% contraction in May.

JOBLESS CLAIMS


Came in at 360k, slightly above expectations for 350k and prior week revised upward to 386k from 373k. 
Typical tight labor market has just over 200k.
If companies are having such a tough time finding talent, why 2x on firings?


Economic Data to Watch THIS WEEK


Monday - NAHB Housing market index
Tuesday - Building Permits, Housing Starts
Thursday -  Weekly jobless claims (last week hit a pandemic low, but still well above 200k (ish) we should be seeing), Chicago Fed National Activity Index, Existing Home Sales
Friday - Markit Non Manufacturing PMI (flash), Markit Services PMI (flash)


Coming up…. 

Monday, July 19: 


AutoNation (AN) - cars
JB Hunt (JBHT) - west coast port issues


Tuesday, July 20: 


Chipotle Mexican Grill (CMG:NYSE) - food and drinking places crushed it in 2Q per Retail sales but input costs vs. price increases
Netflix (NFLX) - growth in streamers esp outside the US, content spending, games
United Airlines (UAL).


Wednesday, July 21: 


Coca-Cola (KO)  - away from home and non sugar beverage demand
Las Vegas Sands (LVS) - What is Vegas like baby? 


Thursday, July 22:  


DR Horton (DHI) - housing demand
Domino’s Pizza (DPZ) - tough comps year over year - how is it navigating the return to dining out? Is it hitting its margins? forcing it to get more aggressive on deals to lure eaters?


Friday, July 23


American Express (AXP) - spending - where, how much, US vs. Europe?
Kimberly Clark (KMB) - last year was strong for paper products, but now what about the impact of lumber prices and the pricing envirnment vs. last year’s paper product shortage?
Sensient (SXT) - watching to hear what this flavoring and color company has to say about non meat protein demand in the quarter and expectations as BYND re-launched its plant based chicken with Panda Express…. 


Resources: Tematica Research | Chris Versace | Lenore Hawkins

Join Tematica Research's Chief Macro Strategist, Lenore Hawkins, and Chief Investment Officer, Chris Versace, as they discuss and debate what's driving the market and the economy this week.

Markets last week

For all the talk of a booming equity market and bust in the bond market ...

Net inflows into US bond funds outpacing those for comparable equity in 2021. 

Bond mutual funds and ETF added $372b as of June 23 v $160b for equities according to ICI

Bond funds are on track to eclipse the $446b of inflows in 2020

Lagging advance/decline lines for Nasdaq

Short-and medium-term oscillators have risen well into overbought territory.

Russell 2000 has been in a sideways trading range/consolidation since March, h. 

Short-term indicators remain under downside pressure while medium-term measures wavering around neutral.

Key Economic Data and Related Events Last Week

Last week’s ISM non-manufacturing and Markit Services PMIs both declined sequentially and came in weaker-than-expected. Both the US and global indices indicated a peaking out of the year-over-year base effects, just as we have been suggesting would happen. This fits with the corresponding rally we have been witnessing in Treasuries, which is consistent with expectations for the economy starting to roll over.

Last week the Federal Reserve released the minutes from their June meeting that rather rocked the markets. The minutes indicate that officials are pleased with the economic recovery and focused on the strong investment and increases in productivity but were dissatisfied with the progress in the labor market. When it comes to inflation half think the high current prices will end up being deflationary and half think they will be self-reinforcing high inflation. Several participants want to reduce mortgage-backed security purchases faster than Treasury bond purchases. Bottom line - this stuff is complicated and even the experts with all the data available right at their fingertips don’t agree and the market didn’t react noticeably once these minutes were released.

Possibly one of the biggest pieces of news last week came from Wells Fargo (WFC) which announced it is closing all credit lines and will no longer be offering them.

Economic Data to Watch THIS WEEK


July 13: Inflation, Monthly Federal Budget statement
July 14: Producer Price Index; Fed Beige Book
July 14-15: Fed Chair Jerome H. Powell - Semiannual Monetary Policy Report to the US House Committee on Financial Services 
July 15: Weekly jobless claims, NY Empire State Manufacturing Index, Philly Fed Manufacturing Index, Industrial Production, Import & Export Prices
July 16: Retail Sales, Michigan Consumer Sentiment, Business Inventories, Net Capital Flows, Foreign Bond Investment
JULY 31 - Debt ceiling suspension expires

Last time we had an impasse on such the S&P 500 fell 6% in a month (July 2011) and didn’t get a solid breakout until December




Earnings of note THIS WEEK

Tuesday, July 13:


Conagra (CAG) - tough YoY comps, how much is attributed to the reopening
PepsiCo (PEP): away from home consumption of its beverages


Wednesday, July 14: 


Delta Air Lines (DAL): outlook for 2H vs. 1H schedules, fares, butts in seats; international travel


Thursday, July 15:  


Taiwan Semiconductor (TSM): comments will be closely 
Alcoa (AA)


Friday, July 16: 


Ericsson (ERIC): 5G
Kansas City Southern (KSU): June rail traffic was up 19% YoY - let’s see if KSU can translate that volume growth into operating leverage; also how it sees the Biden White House’s ramped up regulatory scrutiny of the rail industry playing out


Resources: Tematica Research | Chris Versace | Lenore Hawkins

Join Tematica Research's Chief Macro Strategist, Lenore Hawkins, and Chief Investment Officer, Chris Versace, as they discuss and debate what's driving the market and the economy this week.

Markets last week

Last Thusday the Nasdaq closed up 0.7% for its 17th record high in 2021. Not to be outdone, the S&P 500 gained 0.6% to make its 30th record close for the year and the Dow added nearly 1%. The long bond remained fairly steady at 2.1% while WTI crude rose back above $73 a barrel and gold dropped lower to $1,775 an ounce as the VIX fell below 16, near to its pandemic-period lows.

Key Economic Data and Related Events LAST WEEK

Probably the biggest news was that a bipartisan group of Senators came to an agreement with the Biden administration on a roughly $1T infrastructure plan


$579b new spending
$312b transport
$10s b on water infrastructure, broadband, environmental remediation, power & electrical grid
Funding from new IRS enforcement? Ugh
$100b in public/private partnerships
$65b in 5G wireless spectrum sales
Less than 60 votes in total right now for it in the Senate


Economic Data to Watch THIS WEEK

Tuesday, June 29: 


April FHFA Housing Price Index HOUSING
April S&P Case-Shiller Home Price Index HOUSING
June Consumer Confidence


Wednesday, June 30: 


June ADP Employment Change Report + Friday’s (LABOR)
June Chicago PMI - Markit’s from last week showed slowing (SLOWING)
May Pending Home Sales HOUSING


Thursday, July 1: 


Weekly and Continuing Jobless Claims (LABOR)
May Construction Spending (SLOWING)
June ISM Manufacturing Index (SLOWING)


Friday, July 2:  


June Employment Report (LABOR)
May Factory Orders.  (SLOWING)


 

Resources: Tematica Research | Chris Versace | Lenore Hawkins

Related: The Week Ahead: Is the Market Too Confident?

Join Tematica Research's Chief Macro Strategist, Lenore Hawkins, and Chief Investment Officer, Chris Versace, as they discuss and debate what's driving the market and the economy this week.

Markets last week

So much for the inflation story - after 2 days to digest the Fed’s latest decision, if the concern is the Fed raising rates, high growth should have been hit and value preferred. The opposite happened. Thursday the tech heavy Nasdaq Composite & Nasdaq 100 closed in the green while the rest of the major indices closed in negative territory again. To really emphasize the lack of inflation fears, the 10-year Treasury yield dropped 6 basis points Thursday  to 1.509%. Long bond is now down 38 bp from recent peak on March 18 and back to the same level it was in February 2020 when Fed Funds rate was 1.6% and unemployment was 3.5%.

Big news was Fed 

Median dot plot fo 2023 move to 0.6% from basically 0 with 13 or 18 members seeing at least one hike by the end of 2023. This was 7 in March. 11 see at least 2 hikes by end of 2023.

The market really wants some sort of Oracle to tell them what's coming, but those dot plots, they aren’t it.


Go back to when these “dots”were first introduced by Ben Bernanke in January 2012 when the funds rate was also near-zero. For 2014, the “dots”called for two hikes to 0.75%. The Fed was all bulled up on growth  back then,too.  Where  did  we  finish  off  2014?  Try  the  zero-bound on the funds rate.
How about Powell and crew in September  2018? The dots said 3.375% for 2020. Where did we close the year? Try near-zero. Even at the peak, the funds rate never broke above 2.5%


Housing Boom? 


What about the recent notable downward drift in pending home sales?    
Homebuying plans from the University of Michigan Survey of Consumers are down to a 39-year low? 
S&P500 homebuilder index is in full-blown corrective mode? 
National Association of Homebuilder’s (NAHB) Market Index came in weaker than expected last week to the lowest read in ten months, driven by rising cost pressures and the low availability of lumber and other building materials. 
And now we have House Starts below consensus. Both Housing Starts and Building Permits for May came in weaker than expected for the second consecutive month. Starts haven’t fallen far from their March peak, but Building Permits are down more than 10% from their January peak and saw declines in every region of the country.
Building permits fell 3.0% to a 7-month low of 1.681 million units v consensus estimate of 1.730 m  - a  2.8% miss
Rental boom perhaps - Single-family rents rose 5.3% YoY in April, the largest 1-year gain in nearly 15 years.


May Retail Sales came in below expectations by a meaningful margin, dropping -1.3% MoM versus expectations for a decline of -0.8%. Ex-autos, the miss was by more than a full percentage point. One positive note is that April’s originally reported numbers were revised upwards, so the net is pretty much a wash.

Philly Fed last week followed the NY Empire with signs of the manufacturing sector peaking out. Survey came in at 30.7% in June, below 31% e from 31.5% in May and well below April’s 50.2%. Orders softened to 6 month low & backlogs down to 3-month low. Even delivery time index fell from 41.5% to 29.3% AND workweek subindex dropped to a 6-month low.

Economic Data to Watch THIS WEEK

Tuesday, June 22


May Existing Home Sales - (Last REPORT) Existing home sales in the US unexpectedly sank 2.7% to 5.858 million in April of 2021, compared to forecasts of a 2% rise. That’s 3 consecutive months of declines as housing supply continues to fall short of demand.


Wednesday, June 23: 


Weekly MBA Mortgage Applications Index -Last report mortgage applications in the US increased 4.2% in the week ending June 11th, the first rise in 4 weeks, data from the Mortgage Bankers Association showed. We’ll be watching because the average rate on

Join Tematica Research's Chief Macro Strategist, Lenore Hawkins, and Chief Investment Officer, Chris Versace, as they discuss and debate what's driving the market and the economy this week.

Markets last week

This week’s theme… fade the cover story. WSJ cover story, Inflation at 13-year high

Markets were unconcerned by the slightly hotter than expected inflation numbers. 


Last Thursday, after the hotter-than-expected CPI data came in, the S&P 500 rose 0.5% to close at a new all-time high
The Nasdaq Composite rose 0.8% and the Nasdaq 100 gained 1.1%, 
In a testament to 2021 word of the year, “Transitory,” in the hours after the CPI data came out, the 10-year Treasury yield dropped 5 basis points


Over the prior 5 days ending Thursday’s close


TLT up 3.3% - LT BONDS STRONGEST PERFORMERS
Nasdaq staging a comeback with Nasdaq 100 up 3.2% and Composite up 3.0%
Russell 2000 - up 1.8%
S&P 500 up 1.1%
DJIA down -0.3%
VIX down more than 10%
Bitcoin down 4%


Key Economic Data and Related Events LAST WEEK

Consumer Credit in the US rose by $18.6 billion in April after a downwardly revised $18.6 billion gain in March, well below expectations for a $22 billion increase. Revolving credit fell by $2.0 billion while non-revolving rose by $20.7 million.

Mortgage applications in the US declined 3.1% during the week ended June 4. This was the third consecutive weekly decline with refinancing down 5.1%, pushing the index to its lowest level since February 2020 while purchases rose 0.3%. 

Economic Data to Watch THIS WEEK

Tuesday, June 15: 


May Retail Sales - We’ve talked before 

Homeowners pulled out $49 billion in equity in Q1
That’s the highest level since 2007 (up nearly 80% YoY
That was A LOT of cashflow support in Q1. Now for Q2, no more stimulus and will HELOCs or refis continue at this pace for cash outs?


May Producer Price Index

Likely to be hot


May Industrial Production & Capacity Utilization

How is capacity - we suspect given supply challenges, it won’t be heating up much


June Empire State Manufacturing Index
June NAHB Housing Market Index - any cooling?
April Business Inventories - 


Wednesday, June 16: 


Weekly MBA Mortgage Applications Index

Last week mortgage applications came out for the June 4th week and fell 3.1% on top of a 4.0% turndown the prior week  and  slipping  now  in  five  of  the  past  seven  weeks.  Over  this interval, they have plunged 11% and are down at an annual rate of 41% year-to-date. And the level? Dialed all the way back to where it was when the pandemic broke back on February 14th, 2020.


May Housing Starts & Building Permits
May Import-Export Prices
June FOMC Rate Decision


Thursday, June 17: 


Weekly and Continuing Jobless Claims 
June Philly Fed Index


Earnings of NOTE THIS WEEK

Tuesday, June 15


Oracle (ORCL) - Barometer of enterprise spending and we’ll see if the cloud capacity constraints it discussed in March have abated or persisted amid unprescedented demand


Wednesday, June 16 


Lennar (LEN) - housing demand, pricepoints, comments on whether pricing is boxing potential buyers out; lumber and other pricing comments


Thursday, June 17


Kroger (KR) - trends during the quarter as well as its guidance will tell us to what degree consumers are still focused on eating at home vs. dining  out; we’ll also want an update on its private label business that has been pivoting more and more with our Cleaner Living investing theme
Adobe (ADBE) - With companies adopting a digital first mind set, which productivity tools have benefitted and which ones does the company see gaining momentum in the back half of 2021? One area of interest for us will be electronic signatures…
Smith & Wesson Brands (SWBI) - FBI NICS Firearm background checks are up 17% YoY for the 3-months ending in May; while firearm stocks may not be everyone’s cup of tea, the company is likel

Join Tematica Research's Chief Macro Strategist, Lenore Hawkins, and Chief Investment Officer, Chris Versace, as they discuss and debate what's driving the market and the economy this week.

Last week markets


Nasdaq Composite down -0.9% (YTD +5.6%)
S&P 500 flat (YTD +11.6%)
Dow up 0.7% (YTD +13%)
Russell up 0.3% (YTD +15.4%)\
Bitcoin is also hanging on to its rebound this week somewhat at $37k - $38k up 33% YTD after hitting nearly $64k in mid April
Gold can’t handle the risk-on momentum here and is down to under $1,869 an ounce as is basically flat on the year - broke $2k last August


Last Week STOCKS and EARNINGS

The meme stocks are back and no one is yawning here. Through Thursday’s close


Nokia (NOK) up 10.7%
Bed Bath & Beyond (BBBY) up 20.4%
Koss Corp (KOSS) up 48.3%
Blackberry Ltd (BB) up 68.0%
AMC Entertainment up 160.1% (Was up 95% Wednesday then down 23% Thursday)


Thursday Twitter (TWTR) unveiled Twitter Blue, its first-ever subscription offering, which is going live in Canada and Australia for its initial phase so that the company can better understand what users want.

Costco Wholesale (COST): latest monthly sales data - double digit gains across the board - consumers are still in spend mode during May

Cybersecurity stocks got a boost. Over the weekend, meat processing company JBS SA (JBSAY) determined its Australian and North American units were the target of an organized cybersecurity attack, affecting some of the servers supporting its North American and Australian IT systems. 

United Airlines (UA) looking to revive supersonic travel.

Economic Data — Last Week


Friday’s jobs # disappointed with 559k new jobs v 671k(e) but up from 266k(p)
UR fell to 5.9% from 6.1% while broader measure at 10.2%
Global food prices rose by the biggest margin in a decade according to the UN Food an Agriculture Organization’s monthly index, which jumped 40% in May.
Global housing markets in a bubble?
We’re already seeing Q2 estimates coming under the knife 


This Week

Tuesday, June


April Trade Balances - trade deficit in March widened to a new record high of $74.4b from $70.5 in Feb driven by a 6.3% increase in imports to an all-time high. Exports rose 6.6% to a 13-month high
JOLTS report - job opening rose 597k to 8.123 million in March - the highest level on record going back to Dec 2000 and well above expectations for 7.5m


Wednesday, June 9


Weekly MBA Mortgage Applications Index - Just saw 4% drop following a 4.2% decline
April Wholesale Inventories - growth has been slowing (April +08% after downwardly revised +1.1% in March)


Thursday, June 10 


Weekly and Continuing Jobless Claims
May Consumer Price Index
May Treasury Budget - does anyone even care anymore? Biden has indicated he is willing to drop his demands for an increase in the US corporate tax rate if enough Republicans agree to support his surge in infrastructure spending


Friday, June 11 


University of Michigan Consumer Sentiment Index – Preliminary


STOCKS & EARNINGS — This Week 

Monday, June 7


Marvell (MRVL) - Company is a leading supplier to Samsung, Nokia and Ericsson, so we want to know what it sees on the chip shortage front, how is it impacting its business and when does the company see it coming to an end? Also, what’s it outlook for the second half of the year, particularly on the 5G front?


Tuesday, June 8: 


Navistar (NAV) - Trucks are one of the life bloods of the economy - does the company see a rebound in new orders, and if so is it because the economy is heating up or because of growing demand for e-Trucks?
Calavo Growers (CWGW) - restaurants!


Wednesday, June 9: 


Brown Forman (BF-B:NYSE) - restaurants
RH (RH) - company recently shared in its shareholder letter that it plan on leveraging its brand to expand its business, we hope to learn more on that but also if it sees any slowdown in the housing sector…


Thursday,