The Tuesday Market Minute
- Global stocks mixed as a potential crackdown on gaming companies in China clips gains in Asia, while corporate earnings trumps COVID infection growth on Wall Street.
- European stocks test all-time highs following stronger-than-expected energy and banking earnings.
- Benchmark 10-year note yields hold under 1.2% as slowing ISM data, uneven job gains and the highest new COVID infections in more than a year raise recovery concerns.
- U.S. equity futures suggest a firmer open on Wall Street ahead of second quarter earnings from Eli Lilly, Under Armour, Discovery Communications and Alibaba.
Wall Street futures traded higher Tuesday, powered in part by solid corporate earnings and another move lower in Treasury bond yields, even as investors continue to track a worrying resurgence in COVID infections that could change the pace of the U.S. economic recovery.
Even with the Centers for Disease Control and Prevention reporting that 165 million Americans have been fully-vaccinated -- and that President Joe Biden's target of having 70% of the adult population protected has been met -- the Delta variant of COIVD-19 has lifted the nation's infection rate to the highest in more than a year, with 86,000 new cases reported yesterday.
The prevalence of those infections is likely to be far weaker, given the rate of two-shot vaccinations and the number of Americans that have already developed natural immunity, but the breakthrough aspect of the new variant is raising concerns for the pace of economic growth over the second half of the year.
The ISM Manufacturing survey slowed for a second consecutive month in July, largely as a result of supply-chain constraints, while stubbornly high weekly jobless claims suggest a weaker-than-expected reading of July jobs gains later this week.
In response, benchmark 10-year Treasury note yields lurched lower yesterday, trading at 1.151%, before recovering to around 1.195% in early New York trading Tuesday.
Stocks are still able to find reasons to move higher, however, with Senate lawmakers nearing a vote on a $1 trillion infrastructure stimulus bill and second quarter corporate earnings set to rise 89.8% from last year to a share-weighted $432.4 billion.
That has U.S. equity futures on the move Tuesday, with contracts tied to the Dow Jones Industrial Average indicating a 150 point opening bell gain and those linked to the S&P 500 priced for a 14 point bump to the upside.
Tuesday's pre-market earnings slate includes Eli Lily (LLY) - Get Free Report, Under Armour (UAA) - Get Free Report, Discovery Communications (DISCA) - Get Free Report, and Alibaba (BABA) - Get Free Report.
Lower Treasury bond yields, as well as pre-market gains for Apple (AAPL) - Get Free Report and Tesla (TSLA) - Get Free Report, are providing some support for the Nasdaq, but further signs of a crackdown on gaming stocks in China capped Tuesday's advance to around 15 points.
Take-Two Interactive (TTWO) - Get Free Report was marked 4.1% lower at $166.00 each, while Activision Blizzard (ATVI) - Get Free Report fell 1.1% and Electronic Arts (EA) - Get Free Report was down 1%.
In Europe, stronger-than-expected earnings from oil giant BP Plc (BP) - Get Free Report, which followed its rival, Royal Dutch Shell (RDS.A) , in boosting dividends and share buybacks, gave energy stocks a lift and powered the Stoxx 600 to an early 0.22% gain.
Overnight in Asia, an editorial from the state-backed Economic Information Daily newspaper, which described online gaming as "spiritual opium", triggered concerns of another sector crackdown from officials in Beijing, sending shares in Tencent Holdings undefined 10% lower on the session, with ripple effects seen in stocks around the region.
Japan's Nikkei 225 closed 0.5% lower at 27,614.83 points.