THE WEEK ON WALL STREET
The stock market posted small losses last week despite a very strong showing by
corporate America. The Dow Jones Industrial Average slipped 0.36%, while the
Standard & Poor’s 500 lost 0.37%. The Nasdaq Composite index dropped 1.11%
for the week. The MSCI EAFE index, which tracks developed overseas stock markets,
jumped 1.51%.
STOCKS TAKE A BREATHER
There were plenty of excuses for stocks to retreat last week. News of a new phase in
Chinese regulators’ crackdown on large, private-sector companies, a decline in new
home sales, and concerns about the Delta variant weighed on investors. After
opening the week adding to record highs, stocks turned lower despite an earnings
season that continued to impress. Solid earnings from the mega-cap technology
companies were not enough to propel stocks higher. Instead, stocks slipped
throughout the week, fighting uncertainty over Chinese stocks, a disappointing
second-quarter Gross Domestic Product number, and a retreat in technology shares
they reset to fresh company guidance.
CHINESE CRACKDOWN
Chinese technology stocks were under pressure last week as Chinese regulators
continued their push to rein in large companies for reasons that include data
security, abusive corporate behavior, financial stability, and curtailing private-
sector power. Chinese government actions raised new levels of concerns about
which industries may next fall in the crosshairs of regulators. American investors
have plenty of exposure to Chinese companies. Substantial losses were felt by
mutual funds and hedge funds, which account for about 86% of the holdings in the
over 200 U.S.-listed Chinese companies whose aggregate market capitalization
exceeds $2 trillion.
THE WEEK AHEAD: KEY ECONOMIC DATA
Monday: ISM (Institute for Supply Management) Manufacturing Index.
Tuesday: Factory Orders.
Wednesday: ADP (Automated Data Processing) Employment Report. ISM (Institute
for Supply Management) Services Index.
Thursday: Jobless Claims.
Friday: Employment Situation Report.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Monday: Simon Property Group, Inc. (SPG)
Tuesday: Alibaba Group Holdings (BABA), Activision Blizzard, Inc. (ATVI), Amgen,
Inc. (AMGN), Eli Lilly & Company (LLY), Diageo, PLC (DEO)
Wednesday: Roku, Inc. (ROKU), Prudential Financial, Inc. (PRU), CVS Health
Corporation (CVS), General Motors, Inc. (GM), Etsy, Inc. (ETSY), Electronic Arts,
Inc. (EA), MGM Resorts International (MGM), Match Group, Inc. (MTCH),
Emerson Electric Co. (EMR), Booking Holdings (BKNG)
Thursday: Square, Inc. (SQ), Illumina, Inc. (ILMN), Duke Energy Corporation
(DUK), Albemarle Corporation (ALB), Cigna Corporation (CI), Becton, Dickinson
and Company (BDX), Regeneron Pharmaceuticals, Inc. (REGN)
Friday: Dominion Energy (D).
FINAL THOUGHTS
Earnings season is in full force and most are coming in strong as was expected. The
big headlines are related to the Covid Delta variant. The former director of the FDA
has said that people will get the Covid antibodies one of two ways. They will either
get vaccinated or they WILL catch this highly contagious Delta version of the virus
and mother nature will give them the antibodies. Based on math and the way this
has already played out in Britain and some other countries we will likely see the
infection numbers worsen dramatically over the next week or two, then crest and
start to come back down. The news and the politicians will cry wolf as loudly as they
can the next few weeks, but know this… The market is already looking through
this because it believes in math and science and not ratings hungry media and
politicians.
Per the CDC, fewer than 0.1% of vaccinated Americans are infected with Covid. Of
those, 0.004% are hospitalized and 0.001%have died. Meaning, 99.9% of the
vaccinated are not infected. Thus, this wave of sickness is largely a pandemic of
those without antibodies meaning they haven’t had the virus already or haven’t been
vaccinated. Fortunately for society, this wave will give antibodies to many
unvaccinated people and will push us closer towards some type of herd immunity
for the time being. For those who have been vaccinated, a booster shot is coming. It
is already being given to the infirm in other countries. So, the bottom line is turn
off the TV and don’t worry.
Make it a great week!
