Wall Street Breakfast: Party Goes On

Party goes on - The mother of all crashes? No bubble at all? While Michael Burry and Cathie Wood keep arguing, investors are starting to size up their portfolios as the record highs keep going. Fed taper concerns and the spread of the Delta variant don't seem to be able to weigh on sentiment for more than a day, though trading is getting choppier and warnings of a correction are getting louder. Overnight, Dow and S&P futures slipped 0.5%, while contracts linked to the Nasdaq fell back 0.4%.Things are especially getting eerie without an S&P 500 pullback of at least 5% since last October, though Q2 corporate earnings have been strong and many investors are betting on a continuing economic recovery. While the "buy the dip" crowd may also be becoming a possible force to be reckoned with on Wall Street, some are still flagging caution and say there are "clouds on the horizon."Research from Citi: "Our panic/euphoria model remains very elevated and is warning of coming losses. This is the longest period of ebullient readings without a market correction since 1999/2000 and we anticipate that something will give. The Street is too complacent."Another alert: "Against a backdrop of thin liquidity as investors take summer vacations, minor stock market corrections are to be expected in a market that is pricing in peak earnings, extended price-to-earnings ratios and elevated economic growth expectations," added Richard Saperstein, chief investment officer at Treasury Partners.

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Top News Party goes on Shutterstock The mother of all crashes? No bubble at all? While Michael Burry and Cathie Wood keep arguing, investors are starting to size up their portfolios as the record highs keep going. Fed taper concerns and the spread of the Delta variant don't seem to be able to weigh on sentiment for more than a day, though trading is getting choppier and warnings of a correction are getting louder. Overnight, Dow and S&P futures slipped 0.5%, while contracts linked to the Nasdaq fell back 0.4%. Things are especially getting eerie without an S&P 500 pullback of at least 5% since last October, though Q2 corporate earnings have been strong and many investors are betting on a continuing economic recovery. While the "buy the dip" crowd may also be becoming a possible force to be reckoned with on Wall Street, some are still flagging caution and say there are "clouds on the horizon." Research from Citi: "Our panic/euphoria model remains very elevated and is warning of coming losses. This is the longest period of ebullient readings without a market correction since 1999/2000 and we anticipate that something will give. The Street is too complacent." Another alert: "Against a backdrop of thin liquidity as investors take summer vacations, minor stock market corrections are to be expected in a market that is pricing in peak earnings, extended price-to-earnings ratios and elevated economic growth expectations," added Richard Saperstein, chief investment officer at Treasury Partners.       Outlook No sign of abating The chip shortage hobbling the auto industry is worsening, with several of world's largest automakers facing renewed shortages of silicon. The problem is being compounded by a wave of COVID cases sweeping across southeast Asia, where many of the semiconductors are made. The new disruptions could eventually factor into prices at the dealership and the used car market, as well as weighing heavily on the recovery plans of the manufacturers. Ford: One of its plants in Kansas City is pausing production of the popular F-150 pickup truck (F) due to chip-related parts shortages. General Motors: The company is halting assembly of its all-electric Chevrolet Bolt (GM) as it adds extended downtime at production lines in North America. Volkswagen: The German owner of brands including Audi and Porsche warned on the potential for another output cut, saying VW's (OTCPK:VWAGY) chip supply for Q3 would be "very volatile and tight." The biggest news: Toyota (TM) is slashing global production in September by 40%, which will affect 14 factories in Japan and overseas plants. The new plans will translate into 540K vehicles next month, down from the 900K it had originally forecast. While Toyota is keeping its previous annual sales and production targets in place for now, shares of the Japanese carmaker fell 4% on Thursday and are down another 3% premarket. (77 comments)       Sponsored By BitcoinIRA You Can Now Invest In Crypto, Tax-Free* With Your IRA or 401k Cryptocurrencies have grown from a fringe to a more established asset class over the past decade. Bitcoin's price surged over 200% in just the past year and has made many investors very wealthy. However, these profits can be dramatically reduced by capital gains taxes. Investing in cryptos with an IRA or 401K can offer tax advantages to investors so they can keep up to 37% on capital gains. In addition to tax-advantages, there are other benefits such as earning interest on your investments. Learn More. Consumer Retail sector on watch Shutterstock Kohl's (KSS) and Macy's (M) more than shook off a report yesterday that Amazon (AMZN) was planning to open several physical brick and mortar retail locations. Publishing vibrant earnings for Q2, the two department store chains ended the session up 20% and 7%, respectively. The reports also lit up the entire sector, with Nordstrom (JWN), Dillard's (DDS), Express (EXPR), Abercrombie & Fitch (ANF) and Guess (GES) all marching higher. According to the WSJ: "Amazon plans to open several large physical retail locations in the U.S. that will operate akin to department stores, a step to help the tech company extend its reach in sales of clothing, household items, electronics and other areas." Some of the first stores are expected to be located in Ohio and California. The 30,000 square foot facilities will offer consumer products from top brands, while the company's growing private-label portfolio may also be featured (previous store formats from Amazon featured books or tech gadgets). It would be an evolution of sorts for Amazon, which disrupted the retail sector as it scaled online, and took market share (and bankrupted) many big-box operators.

What they're saying: "I'm actually surprised that it's taken Amazon this long to come out with this announcement," former Macy's CEO Terry Lundgren told CNBC. "Amazon does half of the online business in America, but they recognize that the large majority of business still takes place in physical stores and they want their share of that." He also points that 40% of apparel bought online gets returned, and having brick and mortar shops could change that and be more profitable. (137 comments)

     

On The Move

Another day, another crackdown

Shares in China were under pressure again overnight after the country approved a strict data privacy law, triggering fresh concerns over the intensity of Beijing's recent regulatory onslaught. The Personal Information Protection Law was passed at a meeting in Beijing of the nation's top legislative body, the Standing Committee of the National People's Congress. Alibaba (NYSE:BABA) dropped 3% in Hong Kong on the news, while the Hang Seng TECH Index - which includes Tencent (OTCPK:TCEHY) - fell as much as 4.5%.

What's in the bill? While the full text of the final version hasn't been released, it's being aimed at online fraud, information theft and data collection by domestic technology giants. Remember that Beijing is expected to maintain broad access to data despite the sweeping legislation, which will take effect on November 1. Over the past year, China has cracked down heavily on its tech sector in areas including data security and anti-competitive practices, as well as gaming and fintech.

Analysts at Morgan Stanley are worried about the latest developments, issuing a warning about accelerating redemptions in Chinese equity funds. The recent falls for domestic tech groups could worsen if investors pick up the pace of their withdrawals, "causing additional difficulties in recapturing substantial inflows in the short term."

Crackdowns everywhere: Earlier this week China's market regulator issued fresh draft rules at stopping unfair competition on the Internet, while DiDi Global (DIDI) plunged yesterday on potential regulations that would ensure the rights of ride-hailing and trucking platform drivers. Separately, healthcare stocks tumbled on Friday after the People's Daily called for greater regulation of prescriptions filled using online platforms, while liquor makers sold off as well. Local news outlet Caijing reported on a regulatory meeting about policing the industry due to a culture of heavy post-work drinking. (47 comments)

     

Today's Markets

In Asia, Japan -1%. Hong Kong -1.8%. China -1.1%. India -0.5%.
In Europe, at midday, London -0.2%. Paris -0.3%. Frankfurt -0.5%.
Futures at 6:20, Dow -0.5%. S&P -0.5%. Nasdaq -0.4%. Crude -0.2% at $63.36. Gold flat at $1783.80. Bitcoin -5.2% at $47201.
Ten-year Treasury Yield flat at 1.23%

Today's Economic Calendar

11:00 Fed's Kaplan: "The Economic Impact of Covid-19 and How the Country Will Move Forward."
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today »

What else is happening...

Oil at lowest since May as taper talk adds to demand fears.

Tesla (NASDAQ:TSLA) pulls a humanoid robot out of its hat at AI event.

Facebook (NASDAQ:FB) faces new FTC antitrust complaint after earlier dismissal.

J&J (NYSE:JNJ) CEO plans to cede position to his deputy in 2022.

Coinbase (NASDAQ:COIN) scooping up crypto for its balance sheet.

'We couldn't be further away from a bubble' - Cathie Wood.

Jessica Alba's Honest Company (HNST) sinks to post-IPO low.

Adobe (NASDAQ:ADBE) buying video-collaboration company Frame.io for $1.3B.

Dr. Anthony Fauci doubts ongoing COVID boosters will be necessary.

Texas Supreme Court to temporarily keep school mask mandates in place.

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