Live Markets: Labor market challenges: maybe not so transitory?

American Strategic Investment Co

18/06/2021 19:30

* Major U.S. stock indexes down sharply, Dow leads declines
    * All major S&P sectors red; financials down most
    * Crude, dollar gain; gold ~flat; bitcoin down >5%
    * U.S. 10-yr note yield ~1.45%

    June 18 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
    
    LABOR MARKET CHALLENGES: MAYBE NOT SO TRANSITORY? (1408 EDT/
1808 GMT)
    
    While economic growth and inflation are roaring higher,
Wells Fargo Investment Institute sees labor market conditions
remaining tight in coming months. The issue it sees is strong
growth colliding with a limited supply of workers.
    This, even as the unemployment rate hovers more than 70%
above the pre-COVID low. 
    A chronic scarcity of skilled labor in areas such as
transportation, and retirement of older workers due to the
pandemic, are contributing to the shortage.
    While some workers may be discouraged from returning to jobs
because enhanced unemployment insurance is offering a higher
income, others are kept away due concerns about returning to
work and the pandemic's impact on childcare availability,
according to the research.
   For investors, Wells Fargo says this all suggests that strong
economic growth and labor-market supply constraints will stay in
place through the end of 2021.
   Additionally, the permanent loss of many businesses shuttered
during lockdowns, along with other pandemic-related structural
changes, Wells Fargo sees the unemployment rate finishing the
year at 4.7%, compared with the pre-pandemic low of 3.5%. 
    (Sinéad Carew)
     *****  
    
    WORK FROM WHERE? CLUES FROM NEW YORK (1320 EST/1720 GMT)
    The shift to working from home during COVID-19 was one of
the biggest pandemic-inflicted changes. As lockdowns are lifted,
it remains to be seen how permanent these changes to work will
be. 
    Surveys of firms across New York and northern New Jersey
conducted by the New York Federal Reserve could provide some
insight into how businesses plan to navigate the post-pandemic
landscape. 
    "Once the pandemic is fully behind us, service firms expect
double the amount of remote work than before the pandemic ...
while manufacturers expect the amount of remote work to return
to where it was before the pandemic," NY Fed researchers wrote
in a note https://nyfed.org/3wz8W3v.
 
    To calculate the amount of remote work done for each firm,
researchers multiplied the share of workers working remotely by
the average percentage of time they worked.
    A "hybrid" model, where workers split their week between
home and the office, seems to be the winner of the
work-from-home experiment -- at least for service jobs. 
    On average, NY Fed surveys found regional service firms
expect about a quarter of their staff to work remotely for
around three days per week. This would bring the average of work
done remotely to 16%, double its pre-pandemic share.  
    Interestingly, national surveys indicate a divergence
between the hours employees want to work from home and what
employers plan to allow. 
    The researchers also noted some evidence that remote working
numbers could be higher in New York City, especially in
Manhattan. 
    A shift away from office work could have interesting
implications for real estate investment trust (REITs),
particularly those focused on New York properties. 
    So far, shares of trusts such as New York City REIT  NYC.N ,
SL Green Realty Corp  SLG.N , and Empire State Realty Trust
 ESRT.N  have posted gains of between 27% and 61% year-to-date. 
   
    (Lisa Mattackal)
    *****
   
    
    U.S. CHIP STOCKS TUMBLE IN END TO A POOR WEEK (1226 EDT/1626
GMT)
    U.S. chip stocks are tumbling on Friday, ending the week
worse than where they began in a stark difference to a surge on
Monday that briefly elevated the Philadelphia Semiconductor
Index  .SOX  to a seven week high.
    The SOX was down over 2% at mid-day, and it's now on track
to lose more than 1% for the week. 
    Along with other growth stocks, chips have been out of favor
for much of the past two months, but they have regained some
ground in recent weeks, along with the Nasdaq  .IXIC . 
    Even after this week's poor showing, the SOX is still up 13%
in 2021, marginally better than the S&P 500's  .SPX  11% rise. 
    Weighing more than any other stock on the chip index, Intel
 INTC.O  dropped 3.2% after Jefferies cut its price target on
the company, with analyst Mark Lipacis saying in a client note
that he expects greater competition from rivals Advanced Micro
Devices  AMD.O  and ARM.  
    Advanced Micro and Nvidia  NVDA.O  were the only two SOX
components in positive territory, with Nvidia jumping 3.3% after
BofA Global Research raised its price target on the graphics
chipmaker, describing the company in a client note as a
"One-stop-shop for AI processing."  urn:newsml:reuters.com:*:nL2N2O01IT
    
   (Noel Randewich)
    *****
    
    BULLARD BUMMER PUTS WALL STREET ON TRACK FOR WEEKLY LOSS
(1205 EDT/1605 GMT)
    U.S. stock indexes were sharply lower but up from session
lows by the session's mid-day mark Friday amid a sell-off
prompted by the one-two punch of Wednesday's more hawkish than
expected Fed statement and comments by St. Louis Fed president
Bullard that suggested the central bank is preparing take a more
proactive approach to current inflationary pressures.
 urn:newsml:reuters.com:*:nW1N2FT04L
    Those concerns also prompted long-dated U.S. Treasury yields
to drop and the yield curve to flatten.  urn:newsml:reuters.com:*:nL2N2O01E3
    That, in turn, caused interest rate-sensitive financials
 .SPSY  to suffer the biggest percentage loss among the 11 major
S&P sectors, all of which were red.
    Today's sell-off puts all three major U.S. stock indexes on
track to post losses from last Friday's close, at the conclusion
of a week that had been muted and range-bound.
    Here is your mid-day snapshot:
    (Stephen Culp)
    *****
    
    BULLS AND BEARS CHASE INVESTORS FROM THE FENCE (1015
EDT/1415 GMT)
    An uptick in bullish short-term outlook among individual
investors helped pull neutral sentiment, or expectations that
stock prices will be essentially flat over the next six months,
back from recent highs. 
    The American Association of Individual Investors' (AAII)
most recent sentiment survey showed bullish sentiment increasing
by 0.9 percentage points to 41.1%, with optimism remaining well
above its 38% historical average, where it's been for 26 of the
most recent 31 weeks.
    At the same time, the bears also rebounded from what the
AAII calls "an unusually low level," jumping 5.5 percentage
points to 26.2%. But even with that increase, near-term
pessimism remains below its 30.5% historical average, where it's
been for 19 straight weeks.
    Together, the bulls and bears pulled neutral sentiment down
from its highest reading since January, shedding 6.4 percentage
points to 32.7%.
    With these changes, the bull-bear spread fell to +14.9 from
+19.5 last week:
    This week, the question AAII asked its survey respondents
how the passage of an infrastructure bill might affect their
outlook for the stock market.
    Two out of five participants said it would positively shape
their outlook, while 10% said it could be a positive "if paid
for in an effective manner and spent on the right things,"
AAII's note says.
    Those who said an infrastructure bill would have minimal to
no impact, and those who believe the inflationary effects would
be a net negative, came in at 19% and 16%, respectively.
    (Stephen Culp)
    *****
    
    EUROPE: FURTHER ROOM TO RUN? (1015 EDT/1415 GMT)
    With European equities heading into their worst day in
around one month, last falling almost 1.5%, one may start to
doubt about whether the region's stocks have further room to run
from current record high levels.
    But BofA remains upbeat and sees near-term upside driven by
cyclical outperformance. 
    "Our macro projections are consistent with a further 5%
upside for European equities by Q3, as the boost from
accelerating growth is partly offset by the drag from higher
real bond yields," strategists at the U.S. bank say.
    "Strong growth and rising bond yields should also drive
further double-digit outperformance for financials, cyclicals
versus defensives and value versus growth over the coming
months," they add.
    Regarding downside risks, BofA points to three key ones: an
earlier peak in the cycle, delayed reopening because of the
Delta variant and a bond tantrum.
    In the chart you can see the pan-European STOXX 600  .STOXX 
equity benchmark set for its worst day since May 19.
    
    (Danilo Masoni)
    *****
    
        
    A 2021 RARITY -- S&P 500 BEATING BOTH ITS BRETHREN (0943
EDT/1343 GMT)
    Nearly halfway through the year and something unusual is
shaping up in the market: the S&P 500 is beating both its rival
U.S. indexes.
    As of Thursday's close, the S&P had gained 12.4%, just
outstripping the 10.5% gain for the Dow Jones Industrial Average
 .DJI  and the 9.9% gain for the Nasdaq Composite  .IXIC . 
    While the S&P is widely used as the benchmark for the
overall stock market, it has not beaten both of those other
signature stock indexes in a year since 2005. That year, the
S&P's 3% gain was enough to top the Nasdaq (+1.4%) and the Dow
(-0.6%).
    Sector composition could be one factor behind the S&P's
relative success in 2021. 
    For example, energy  .SPNY  and real estate  .SPLRCR  were
logging the biggest year-to-date gains among the S&P's 11
sectors. Those sectors have a combined 5.5% weight in the S&P
versus only 2.1% in the Dow and 1.47% in Nasdaq, per Refinitiv
data.
    Meanwhile, the relatively sluggish year for tech and other
growth stocks have kept the Nasdaq in check, after it surged
43.6% and 35.2% the prior two years.
    
    (Lewis Krauskopf)
    *****
    
    U.S. STOCK FUTURES TURN RED AFTER BULLARD BOMB (0833
EDT/1233 GMT)
    U.S. equities futures headed south early Friday after James
Bullard, president of the St. Louis Federal Reserve, revealed he
was among the seven Fed officials who see rate hikes in the
cards next year, citing hotter-than-expected inflation.
 urn:newsml:reuters.com:*:nW1N2FT04L
    Those remarks follow the U.S. Federal Reserve's hawkish
shift at the conclusion of its two-day monetary policy meeting
on Wednesday, which Fed Chair Jerome Powell referred to as the
"talking about talking about" meeting, hinting that the central
bank could tighten its dovish policy sooner that many market
participants anticipated.
    Bullard's comments also sent the CBOE Volatility index
 .VIX  to its highest level in nearly a month.
    As of Thursday's close, the S&P 500  .SPX  and the Dow
 .DJI  were on course to post weekly losses after a run of
underwhelming economic data, and dearth of obvious market moving
catalysts, which have kept markets muted and range-bound.
    Today is also quadruple witching day, when stock
futures/options and index futures/options expire, which can
result in heightened volatility, particularly on a summer Friday
that has recently been named a federal holiday to honor
Juneteenth.
    Here's your premarket snapsnot:
    (Stephen Culp)
    *****
    
    FOR LIVE MARKET POSTS PRIOR TO 0900 EDT/1300 GMT, PLEASE
CLICK HERE:  urn:newsml:reuters.com:*:nL2N2O0130

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premarket snapshot    https://tmsnrt.rs/3q9fcMN
S&P 500 vs Dow, Nasdaq in 2021    https://tmsnrt.rs/3vEHtw7
STOXX    https://tmsnrt.rs/2U7x1A0
Investor sentiment    https://tmsnrt.rs/3gMotpS
Midday update    https://tmsnrt.rs/3zBXQNe
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