| | Top News  Shutterstock The S&P 500 closed the week at another record high, posting its best weekly performance since February, as investors bet that higher inflation will be temporary as the economy continues to push out of the pandemic. A parade of speakers from the Federal Reserve, including Chairman Jay Powell, eased concerns about rate tightening anytime soon, but the shallow breadth of this week's stock market rally has some observers worrying that the run higher is looking a bit tired. The S&P 500 rallied 2.7% for the week, the Dow gained 3.4% for its best week since mid-March, and the Nasdaq climbed 2.4%. Meanwhile, the bond market spent most of the week barely moving, but the long end of the Treasury curve saw some selling Friday as core PCE inflation came in at the highest rate in nearly 30 years. | | Aviation Travel is returning with a vengeance as airlines struggle to rebuild networks that were ravaged by the COVID-19 pandemic. Nearly 50M U.S. airport passengers were registered in May - up 19% from April - and so far in June, the TSA has recorded nearly 35M travelers. But that's causing some disruptions, with carriers and transportation operators struggling to keep up with the ramp up in demand, especially with the lifting of travel restrictions. Case in point: American Airlines (NASDAQ: AAL) canceled about 120 flights last Saturday and 176 on Sunday (about 6% of its mainline operation that day). While some were called off a few days in advance, about half of those were because of "unavailable flight crews." Other reasons included maintenance and other disruptions, like inclement weather. "The bad weather, combined with the labor shortages some of our vendors are contending with and the incredibly quick ramp up of customer demand, has led us to build in additional resilience and certainty to our operation by adjusting a fraction of our scheduled flying through mid-July," American Airlines spokeswoman Sarah Jantz said in a statement. "We made targeted changes with the goal of impacting the fewest number of customers by adjusting flights in markets where we have multiple options for re-accommodation." Fixing the situation: The Allied Pilots Association, which represents American's roughly 15,000 pilots, said the carrier should offer more overtime in advance to cover staffing shortages. The current situation is also daunting given that American Air has taken an aggressive approach throughout much of the pandemic to fly much more than its closest competitors - United (NASDAQ: UAL) and Delta (NYSE: DAL). All the while, it has been racing to train the aviators it furloughed after the two federal coronavirus aid packages that prohibited layoffs, as well as its pilots who are due for periodic training. ( 89 comments) | | Sponsored By Robinhood  At Robinhood, we believe the financial system should be built to work for everyone. That's why we create products that let you start investing at your own pace, on your own terms, in the companies you love, commission-free. When you sign up now and link your bank account, you will receive a surprise stock. Certain limitations apply. Open an account and claim your free stock now. | | Energy The broader solar industry is coming off a record year of installations, but the potential threat to supplies could hurt the supply chain that is already slowing projects and raising costs. The Biden administration this week passed a narrow ban barring imports of polysilicon from Xinjiang, China, which produces about 45% of the world's supply of solar-grade polysilicon. The move could also undermine Biden's aggressive goal of placing the U.S. on a path to eliminate carbon dioxide emissions from the power grid by 2035. Backdrop: Just before leaving office, the Trump administration announced an import ban on all cotton and tomatoes produced in Xinjiang over allegations that they are made with forced labor from detained Uighur Muslims. Since then, a group of bipartisan lawmakers has pushed President Biden to impose import restrictions on polysilicon, allowing Customs and Border Protection to seize at U.S. ports any imports it suspects of being made with forced labor. Western companies have also wrestled with what to do in Xinjiang, with Nike ( NKE), H&M ( OTCPK:HNNMY) and Burberry ( OTCPK:BURBY) recently facing backlash over statements they made about practices in the region. Could solar be made in America? First Solar (NASDAQ: FSLR) just committed to building a new $680M panel factory in Ohio. It's seeking to "reshore" manufacturing that has moved outside the United States, bolstered by President Biden's clean energy goals. While solar wasn't yet named as a manufacturing priority by the administration, it supports extending tax credits for solar panel purchases or to require federal contractors to purchase many solar panels from U.S. suppliers. It won't be easy: First Solar also backs tariffs to fight low-priced goods from abroad. Economists and industry specialists say hefty subsidies via tax breaks would be needed in addition to the tariffs, but even then it might be a long shot to get the sector off the ground. "China heavily subsidizes whatever strategic industry it chooses to focus on," First Solar CEO Mark Widmar declared. "How does any American company ever compete?" ( 266 comments) | | On The Move Crypto shakeout or is the HODLer dam breaking? A more than 50% plunge in the price of Bitcoin ( BTC-USD) since mid-April is having some in the cryptosphere panicking, while steadfast believers say the contraction is shaking out the "paper hands." The debate follows Bitcoin's wild ride on Tuesday, which began with a heavy drop below the $30,000 support level, before bouncing back toward the end of the week. The bulls: "Bitcoin is in a very rough patch now, and the technical picture in the current term doesn't look great, but we also have to keep in mind that Bitcoin makes most of its gains over 10 days in a single year," said Tom Lee, Head of Research at Fundstrat Global Advisors. "The idea that it's below $30K now, doesn't rule out the ability for this to create some really big gains before the year-end and potentially touch $100K or higher." The bears: "Any meaningful break below $30K is going to make a lot of momentum players to throw in the towel," said Matt Maley, chief market strategist for Miller Tabak + Co. "Therefore, even if Bitcoin is going to change the world over the long-term, it does not mean it cannot fall back into the teens over the short-term." Somewhere in between? "Bitcoin is not a payment system, and it is not a currency. In the best situation, it is a financial asset, and in the worst case, it is a pyramid scam," Bank of Israel Deputy Governor Andrew Abir said in a recent speech. Volatility could continue for quite some time... "Globally we are seeing a much more forceful crackdown on crypto by governments," wrote analysts at QCP Capital, a Singapore-based crypto trading firm. "China is now leading the charge, and this directive coming all the way from the top means it will continue reverberating throughout the lower levels for a few more weeks to come." ( 81 comments) | | Financials Bank shares marched higher in AH trading on Thursday after the Fed announced that the biggest U.S. lenders could easily withstand a severe recession. According to the Dodd-Frank Act Stress Test results, the 23 financial institutions that participated "would experience substantial losses under the severely adverse scenario but would remain well above their minimum risk-based requirements and could continue lending to businesses and households." That means big payouts like dividends and stock buybacks could be on their way, with announcements coming as soon as Monday. Bigger picture: Massive support from the Fed last year helped U.S. lenders fare far better than feared at the start of the coronavirus pandemic. The sector also amassed its biggest loan loss reserves since the financial crisis in 2008 as most of those losses didn't pan out. Meanwhile, the capital cushions kept growing larger as banks were forced to suspend buybacks and freeze dividends. In a report titled Save Your ( CCAR) Fears for Another Day, Evercore ISI analysts led by Glenn Schorr expect trust banks to have the highest payouts, followed by universal banks, regionals & brokers, and cards/consumers. Leading their respective subsectors: Bank of New York Mellon ( BK) (127%), Bank of America ( BAC) (138%), Wells Fargo ( WFC) (167%), Goldman Sachs ( GS) (112%), and Discover Financial ( DFS) (100%). Evercore sees total payout ratios rising across all subsectors with the group average at ~2x that of last year to 109%. Go deeper: The supplementary leverage ratio may also constrain some banks like JPMorgan Chase ( JPM) and Morgan Stanley ( MS), points out Wolfe Research's Steven Chubak. Even with the SLR constraint, Morgan Stanley, as well as Goldman Sachs and BofA screen best for capital return capacity. Jefferies' Ken Usdin and other analysts additionally calculated banks' share repurchase capacity. By total amount, JPMorgan comes out on top with $7.5B, and by percentage of market cap, Santander Consumer USA's ( SC) $347M buyback capacity amounts to 2.9% of its valuation. ( 53 comments) | | Legislation Cyclical stocks like Caterpillar ( CAT) and Vulcan Materials ( VMC) got a boost after President Biden announced a bipartisan deal on infrastructure spending. "We have deal," he told reporters outside the White House. "I clearly didn't get all I wanted. They gave more than, I think, maybe they were inclined to give in the first place. But this reminds me of the days we used to get an awful lot done up in the United States Congress." Breakdown: The agreement features $579B of spending above expected federal levels and a total $973B of investment over five years - $1.2T if continued over eight years. By sector: Transportation ($312B); Other Infrastructure ($266B); Roads, bridges, major projects ($109B); Power infrastructure ($73B); Passenger and Freight Rail ($66B); Broadband infrastructure ($65B); Water infrastructure ($55B); Public transit ($49B); Resilience ($47B); Airports ($25B); Environmental remediation ($21B); Infrastructure Financing ($20B); Ports & Waterways ($16B); Safety ($11B); Electric buses / transit ($7.5B); EV infrastructure ($7.5B); Western Water Storage ($5B); Reconnecting communities ($1B). The plan wouldn't raise taxes on middle-income Americans, nor reverse the business tax cuts passed during the Trump administration. Funding would be secured by repurposing existing federal funds, public-private partnerships and revenue collected from enhanced enforcement at the IRS. Other revenue raisers include sales from the strategic petroleum reserve and wireless-spectrum auction sales. Passage is by no means assured: The bill excludes spending on education, health care and poverty issues, which Democrats will try to push through in a separate budget maneuver later this summer. Passing two complex measures through different procedures at the same time will present a difficult challenge and the current bill was only reached between moderate senators from each party. Biden has also repeatedly stated he won't sign any physical infrastructure legislation without a human infrastructure bill like the American Families Plan. Don't forget threats of tight supplies for some materials, and the companies that pave roads and build bridges appear to have made few plans to meet those needs. ( 100 comments) | | U.S. Indices
Dow +3.4% to 34,434. S&P 500 +2.7% to 4,281. Nasdaq +2.4% to 14,360. Russell 2000 +4.6% to 2,341. CBOE Volatility Index -24.5% to 15.62.
S&P 500 Sectors
Consumer Staples +1.9%. Utilities +0.7%. Financials +5.3%. Telecom +2.4%. Healthcare +2.%. Industrials +3.%. Information Technology +2.4%. Materials +2.1%. Energy +6.7%. Consumer Discretionary +2.6%.
World Indices
London +1.7% to 7,136. France +0.8% to 6,623. Germany +1.% to 15,608. Japan +0.4% to 29,066. China +2.3% to 3,608. Hong Kong +1.7% to 29,292. India +1.1% to 52,925.
Commodities and Bonds
Crude Oil WTI +3.3% to $74./bbl. Gold +0.7% to $1,781.7/oz. Natural Gas +9.1% to 3.506. Ten-Year Treasury Yield -0.9% to 131.95.
Forex and Cryptos
EUR/USD +0.63%. USD/JPY +0.54%. GBP/USD +0.55%. Bitcoin -11.%. Litecoin -18.3%. Ethereum -16.5%. Ripple -19.6%.
Top Stock Gainers
Marin Software Incorporated (NASDAQ:MRIN) +132%. Alfi (NASDAQ:ALF) +115%. Lydall (NYSE:LDL) +81%. IKONICS (NASDAQ:IKNX) +78%. Moxian (NASDAQ:MOXC) +74%.
Top Stock Losers
Gemini Therapeutics (NASDAQ:GMTX) -40%. Portage Biotech (NASDAQ:PRTG) -37%. Biomea Fusion (NASDAQ:BMEA) -32%. Oasis Midstream Partners (NASDAQ:OMP) -32%. Intec Pharma Ltd (NASDAQ:NTEC) -28%.
Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section. | | | | |
EmoticonEmoticon