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It’s A Windy City



Chief Market Analyst

The trading winds have shifted this morning. The technology stocks, which enjoyed a tailwind yesterday, are now facing a headwind. Conversely, cyclical stocks, which dealt with a headwind yesterday, are now benefiting from a tailwind.

This windy city is evident in the futures market, which shows the Dow Jones Industrial Average futures up 95 points and trading 0.3% above fair value, and the Nasdaq 100 futures down 28 points and trading 0.2% below fair value. The S&P 500 futures are flat and trading roughly in-line with fair value.

The catalyst for the change in wind direction, which favors industrials and financials, is more corporate than macro.

  • United Airlines (UAL) said it is going to be adding 270 new planes to its fleet, starting in 2022, with 200 coming from Boeing (BA); CEO Scott Kirby also expressed confidence about a pickup in business travel
  • Many banks, including JPMorgan Chase (JPM)Bank of America (BAC)Wells Fargo (WFC)Goldman Sachs (GS), and Morgan Stanley (MS) announced sizable dividend increases after passing the Fed’s stress test
  • Goldman Sachs called General Electric (GE) a top large-cap idea and placed a $16 price target on the stock
  • Morgan Stanley upgraded Textron (TXT) to Overweight from Equal Weight, highlighting the red-hot capex cycle as a potential driver of further upside
  • Banc of America Securities added FedEx (FDX) to its US 1 List, saying it sees “significant tailwinds for FDX, led by pricing gains, margin improvement, continued ecommerce growth, and the return of B2B volumes”
  • Citigroup upgraded CSX Corp. (CSX) to Buy from Neutral, saying U.S. rails should have “multiple tailwinds into 2022,” and noting that the recent pullback presents solid value

The macro narrative still incorporates burgeoning concerns about the Delta Covid variant and its adverse impact on growth as foreign countries take lockdown steps to try to control its spread. Those concerns were reportedly the basis for the weakness seen across Asian markets on Tuesday.

European markets, however, have seen a wind shift and are mostly higher today after trading mostly lower on Monday. Some better than expected business and consumer confidence data helped drive the improvement, although it’s interesting that the euro and the British pound are down 0.3% and 0.5%, respectively, against the dollar.

The Conference Board’s Consumer Confidence Index for June ( consensus 120.0; Prior 117.2) will be released at 10:00 a.m. ET. It is expected to show improvement from May, which is understandable given the improved business conditions and job prospects in the U.S., as well as improved balance sheets for many U.S. households.

That report should hold some sway over the Treasury market, which swayed to lower yields yesterday but is now swaying from those lower yields today. The 10-yr note yield is up three basis points to 1.50%.

That’s a relatively low yield, yet directionally it is perceived as a headwind that is holding back some of the growth stocks this morning considering the drop in yield yesterday was regarded as a tailwind.

Originally Posted on June 29, 2021 – It’s A Windy City

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