Reuters
2022.06.23 23:05

LIVE MARKETS-Play it cool: Thursday data hints at economic chill

Major U.S. indexes rise; Nasdaq up >1%

  • Major U.S. indexes rise; Nasdaq up >1%

  • Utilities lead S&P sector gainers; energy weakest group

  • Euro STOXX 600 index down ~0.6%

  • Dollar, gold ~flat; crude falls; bitcoin gains ~3%

  • U.S. 10-Year Treasury yield tumbles to ~3.02%

June 23 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

PLAY IT COOL: THURSDAY DATA HINTS AT ECONOMIC CHILL (1105 EDT/1505 GMT)

Data released on Thursday provided a freeze-frame of an economy in the process of softening, perversely raising hopes that demand is cooling on its own ahead of interest rate hike effects, which could prompt a dovish Fed pivot.

The number of U.S. workers filing first-time applications for unemployment benefits (USJOB=ECI) inched down by 2,000 last week to 229,000, according to the Labor Department, just a hair above consensus.

Initial claims continue to waffle around the lower end of a range economists associate with healthy labor market churn, and while the labor market remains tight - with near record job openings and low unemployment - the overall trend is on the rise since hitting a multi-decade low in mid-March.

The four-week moving average, which irons out weekly volatility, gained 4,500 to 223,500.

“Rather than signaling dramatic weakening, a gradual increase in unemployment filings is likely indicating supply and demand are – slowly – coming into better balance,” writes Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

Ongoing claims (USJOBN=ECI) , reported on a one-week lag, crept up to 1.315 million, still about 26% below the pre-pandemic level.

Separately, S&P Global released its Markit “flash” purchasing manager index (PMI) data for June, which showed business activity is decelerating more abruptly than expected this month.

Manufacturing (USMPMP=ECI) and services (USMPSP=ECI) PMI readings dropped to 52.4 and 51.6, respectively, edging perilously close to contraction territory.

A composite of the two landed at 51.2, the slowest expansion in five months.

A PMI reading above 50 signifies increased monthly activity.

Citing what he calls a “a remarkable drop in demand for goods and services during June,” Chris Williamson, chief business economist at S&P Global said forward-looking indicators are “setting the scene for an economic contraction in the third quarter.”

Williamson continues: “Businesses have become much more concerned about the outlook as a result of the rising cost of living and drop in demand, as well as the increasingly aggressive interest rate path outlined by the Federal Reserve and the concomitant deterioration in broader financial conditions.”

In ancient news, the Commerce Department released its first-quarter current account data (USCURA=ECI) , harkening back to the long-ago, when people wore sweaters and said words like “Omicron.”

The current account deficit, which measures all transactions in goods, services, and investments between U.S. residents their counterparts abroad, widened by 29.6% in the first three months of the year to a record $291.4 billion.

The deficit’s share of U.S. GDP ballooned to 4.8%, its biggest slice of the economic pie since the third quarter of 2008, when Lehman Brothers took a dive and “too big to fail” entered modern lexicon.

Wall Street’s main indexes are green in morning trading, with the Nasdaq (.IXIC) leading, up more than 1%.

The usual suspects, Microsoft (MSFT.O) , Apple (AAPL.O) and Amazon.com (AMZN.O) are providing the biggest boost.

(Stephen Culp)


KEEP THE PARTY GOING: BITCOIN CRASH MAY NOT HURT CRYPTO BANKS (1042 EDT/1442 GMT)

Over the past few weeks, crypto investors have been rattled by a broader hit to risk assets amid rising interest rates, the great Luna-Terra crash, Celsius halting withdrawals citing “extreme market conditions,” and bitcoin shedding about half of its value this year, among other events.

Given rising fears around crypto contagion, researchers at KBW think the impacts are “contained” across their coverage, particularly among crypto-exposed banks, with risks primarily related to banking deposit forecasts rather than direct credit risks, they state in a note.

“We have reached out to every bank we cover that is involved with the crypto space, and have found no concerning exposures across the universe at this time that would result in anything beyond some lost deposits over time,” they write.

This means that for crypto banks such as Silvergate Capital, the crypto crash isn’t likely to trigger credit losses, and the biggest risk is slower deposit growth or shrinking balances. “SI is well positioned for the volatility given significant leverage to higher interest rates.”

For crypto exchange Coinbase Global, which last week cut about 1,100 jobs, KBW states that since the platform does not lend customer crypto balances product, it therefore has no direct counterparty risk related to recent events.

“However, on the margins, we expect there may still be some customers that are spurred to move to self-custody solutions, like Coinbase Wallet, to exercise ultimate care and full discretion over their own assets.”

While stress on these banks has been at a high level due to crypto price volatility, KBW actually believes crypto banking trends could be more positive than the market expects in July when Q2 earnings come around.

“We believe that any contagion risk to these banks from some recent headlines is extremely limited – deposit only.”

(Anisha Sircar)


MAJOR U.S. INDEXES RISE, BUT WITH DEFENSIVE TILT (1000 EDT/1400 GMT)

Wall Street’s main indexes are modestly higher early on Thursday. This, as bond yields continue to ease, and S&P Global’s June flash manufacturing and services PMIs came in below estimates.

Fed Chair Powell will deliver a second day of testimony before the House Financial Services Committee at 10 a.m. EDT (1400 GMT). Money markets are pricing in 75 basis point increase in rates next month, followed by a 50 basis point rise in September. (.N)

So far on Thursday, there is a clear tilt toward defensive S&P 500 sectors. Healthcare (.SPXHC) , staples (.SPLRCS) and utilities (.SPLRCU) are posting the best gains, while energy

(.SPNY) and materials (.SPLRCM) are among weaker groups.

Semiconductors (.SOX) and banks (.SPXBK) are also trading lower, while the NYSE FANG+TM index (.NYFANG) is outperforming with a gain of more than 1%.

Meanwhile, the U.S. 10-Year Treasury yield (US10YT=RR) , after essentially hitting 3.50% late last week, is now nearing the 3.00% level.

With this, growth (.IGX) is on pace to outperform value

(.IVX) for a fourth-straight session.

Here is where markets stood around 10:00 AM EDT:

(Terence Gabriel)


S&P 500 INDEX: TIME TO SPARKLE OR DARKLE? (0900 EDT/1300 GMT)

You could say that U.S. stocks suffered through an especially long, dark, winter in 2022. That said, now that summer has officially kicked off in the Northern Hemisphere, there may be hope that the market can see brighter days ahead.

Indeed, the S&P 500 (.SPX) is in a bear market, down 21.6% from its early-January record close.

The benchmark index’s January 3, 2022 top occurred just eight trading days (tds) after last year’s winter solstice, which occurred on December 21, 2021, and marked the onset of winter.

Proponents of Gann Theory, or methods of technical analysis developed by W.D. Gann, as well as other traders with an astro-focus, may look for either acceleration of the prevailing trend, or a reversal, around the summer and winter solstices, as well as the fall and spring equinoxes.

Just looking back over the past five years or so, a number of major reversals in the S&P 500 have developed around such potential turn dates:

More recently, the 2022 spring equinox occurred on March 20. The SPX concluded what has been its largest counter-trend rally since its record high just seven tds later. It then collapsed more than 20% into last Thursday’s close and last Friday’s intraday trough.

However, the summer solstice occurred this week on Tuesday June 21, at 5:13 AM EDT. With this first day of summer, the SPX gapped up at Tuesday’s open and has gained more than 2% through Wednesday’s close.

It now remains to be seen if this week’s rally has come under the solstice’s orb of influence, perhaps kicking off a moon-shot higher, or if the strength will prove to be as fleeting as a shooting-star, leading to new lows.

(Terence Gabriel)


FOR THURSDAY’S LIVE MARKETS’ POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE:

SPX06232022

earlytrade06232022

Jobless claims

Markit PMI

Current account

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)

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