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Morning Briefing: July 6, 2023

Market Overview

  • Stock futures are currently trading lower, primarily due to a softening in mega cap stocks. This negative movement has been further fueled by an increase in market rates, as the 10-year Treasury note yield has nearly hit 4.00% overnight. This shift is stoking some valuation concerns for the equity market.

Federal Reserve Updates

  • In the FOMC minutes released yesterday, most officials indicated the need for additional rate increases. New York Fed President Williams, an FOMC voter, stated that recent data suggests the Fed has more work ahead, signaling the potential for further tightening.

Economic Indicators

  • The weekly MBA Mortgage Applications Index fell by 4.4%, with purchase applications dropping by 5.0% and refinance applications decreasing by 4.0%.
  • Scheduled for release today are several key economic reports, including the June ADP Employment Change, Weekly Initial and Continuing Claims, May Trade Balance, June IHS Markit Services PMI – Final, June ISM Non-Manufacturing Index, May job openings, Weekly natural gas inventories, and Weekly crude oil inventories.

Corporate News

  • Meta Platforms unveiled Threads, a new app for public conversations and text updates, which garnered 10 million sign-ups in just seven hours.
  • Exxon Mobil warned of negative impacts on its Q2 earnings due to changes in gas prices, projecting an impact between $1.8-$2.2 billion.
  • Bank of America announced a 9% increase in its quarterly dividend to $0.24/share, starting in 3Q23.
  • JetBlue Airways expressed its disagreement with the court ruling against its Northeast Alliance with American Airlines, but has decided not to appeal.
  • American Express and Affirm saw downgrades from Robert W. Baird and Piper Sandler respectively.
  • Fidelity National Information Services is accelerating its split into two independent companies, with GTCR acquiring a majority stake in Worldpay at a valuation of $18.5 billion.
  • Perion Network is expecting Q2 revenues to surpass consensus.

European Markets and Bond Yields

  • Europe’s Stoxx 600 index saw significant losses, while the prospect of further Fed policy tightening increased worries about the US markets. UK 10-year government bond yields have reached levels unseen since the gilts crisis in October, and the Bank of England’s peak rate is now fully priced in at 6.5% by March, the highest in 25 years. This concern has also affected UK homebuilders, causing a slump in their shares.

Federal Reserve and Economic Forecasts

  • Continued hawkishness from central banks has dampened hopes for a soft landing for the global economy. The June Fed minutes revealed disagreement among policymakers about pausing rate hikes, with voting members likely to push rates higher this month. The FOMC is now officially forecasting a US recession, leading to heightened risk asset concerns.

Labor Market

  • This week’s US employment reports may provide important policy clues. The JOLTS report is expected to indicate a decrease in available positions, while jobless claims are predicted to rise.

International News

  • Treasury Secretary Janet Yellen is visiting Beijing today to foster stronger relations between the US and China. Chinese investors are reportedly not expecting aggressive stimulus or significant economic reforms from a key meeting scheduled for later this month.

Key Events This Week

  • Notable events include US initial jobless claims, trade, ISM services, job openings reports, Dallas Fed President Lorie Logan’s panel discussion at the CEBRA meeting, and US unemployment rate and nonfarm payrolls. ECB’s Christine Lagarde will also address an event in France.




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