Companies are taking the lead in adopting mask and vaccine requirements as COVID Delta cases grow and equities remain resilient. A host of headlines about new policies and restrictions hit yesterday, including
New York City requiring proof of vaccination for entry to restaurants, gyms and leisure events. But again, most moves came from private companies.
Tyson Foods will require its workforce to be vaccinated, JPMorgan (
JPM) is
re-evaluating its back-to-the-office policies and Microsoft (
MSFT) is
requiring vaccinations for its returning workforce. In addition, Google parent Alphabet (
GOOG,
GOOGL) has approved 85% of employee requests to work from home or relocate once its offices open, Bloomberg reports.
Amid all those moves, Wall Street put together a rally from midday into the close, with recovery sectors leading the way. All the major averages ended higher, with the S&P 500
(NYSEARCA:SPY), Dow
(NYSEARCA:DIA) leading the Nasdaq
(NASDAQ:COMP.IND). Strength in cyclicals, which would be the hardest hit on worries about a stalled economic reopening, could indicate that investors feel the economy can weather moves to stem the spread of the Delta variant. That would be in contrast to last month, when the Delta spread was a major reason for sell-side strategists to hesitate on new allocations, according to BofA.
Looking for the peak: Thomas Lee of Fundstrat Global Advisors argues the company and locality moves will help by driving up vaccination rates. "Policymaker panic about Delta variant is triggering a vaccination resurgence = good," Lee writes in a note. "The positive upshot of a panic by policymakers is that more Americans are getting vaccinated. The rise in vaccinations is most evident in states hit hardest by this recent Delta variant. Policymakers panic = good, businesses respond by pushing/mandating masks = good, businesses respond by pushing/requiring vaccinations = good, Americans witness COVID-19 severe illness and get vaccinated = good." Fundstrat's base case is that the Delta variant surge in the U.S. will peak in August, which it says should encourage investors.
"Given August is already a poor liquidity month, a buyers' strike makes markets more turbulent," Lee says. "But if our base case plays out, August will ultimately be a 'risk on' month and we will chop higher. Thus, the July chop will continue into August, but with an upward bias."
If "the Delta variant does not peak in the next few weeks (as is somewhat expected) then the chances of lockdowns will rise, and that will potentially impact earnings," Kinsale Trading writes. They point investors to today's ISM Services numbers, out at 10 a.m. ET, where the index is expected to tick up slightly in July from June. If "the Delta variant is causing any sort of headwind on the economy, it'll show up in the service sector PMI first, as people pullback on eating out, etc," Kinsale says.
Wells Fargo says it does not think the Delta variant will be a "game changer" for the U.S. economy and sticks with its portfolio recommendation to favor cyclicals, especially Industrials
(NYSEARCA:XLI) and Materials
(NYSEARCA:XLB). (
13 comments)
EmoticonEmoticon