To Bank of America global investment strategist Michael Hartnett, there have been three distinct phases to describe market action over the last eight months.
The first is what he labels the reopening rally, started on Nov. 3 by both the U.S. election and the reports of vaccine effectiveness. That boosted stocks and credit, steepened the yield curve, weakened the U.S. dollar, and led to cyclicals outperforming defensives.
The next phase was the inflation boom, started on Feb. 16 by blowout U.S. retail sales. That led to commodities rising, yields surging, cracks in the technology sector, and value stocks outperforming growth.
The third phase was what he calls “peak growth/policy,” starting on Jun. 16 by the Federal Reserve as well as easing signs from China. That led to a yield curve collapse, bonds outperforming stocks and commodities, the dollar rising, and defensives outperforming cyclicals.
So what to do now? He says own defensive quality in the second half, as it is both a hedge against peak policy, and peak profits. He advises going long defensives in what he calls the vaccinated markets of the U.S. and Europe, and long cyclicals and reopening plays in markets with vaccine upside, in Japan and emerging markets.
Intel tops estimates
Microchip giant Intel
reported better-than-forecast profit and sales, but issued an analyst-matching third-quarter forecast, as Chief Executive Pat Gelsinger said the global semiconductor shortage may stretch into 2023.
reported much stronger than expected earnings and revenue, after adding 7 million new users in three months. Rival social media platform Snap
crushed revenue estimates after adding 13 million users.
The virus-delayed, nearly fan-free Tokyo Olympics are opening.
The Wall Street Journal asks, how much will your Oreos cost, in a roundup of corporate views on their ability to test price increases.
There’s a busy slate of U.S. economic reports, including the employment cost index for the second quarter, personal income for June and flash purchasing managers index for the U.S. The flash PMI from the eurozone reached a 21-year high in July, though the U.K. reading fell to a four-month low amid what’s called the “Pingdemic,” referring to a contact tracing app that is forcing workers to stay home.
U.S. stock futures
were pointing to a solid opening, which if sustained would mark the fourth consecutive advance for the major stock market indexes.
Here is what’s billed as the most-accurate map of Earth.
The world’s first 3D-printed steel bridge has opened.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.