The mixed bag of jobs data only inspired the bulls early on Friday with the hope the data will back off the Fed, however, the fact that the jobs market is beginning to reflect the slowing economy kept the bears active into the close. With the economic calendar light on data today the focus will likely turn back to earnings results for inspiration and a possible relief rally.  However, be careful with the thought we will zoom back to new highs as we have entered a sessional period when the market struggles for liquidity not to mention that the bears have now woke up and smell blood in the air. They may not give up as easily as they have most of this summer.

Overnight Asian markets traded mixed but mostly lower with Chinese inflation data on the horizon.  European markets trade decidedly bearish in a choppy morning session waiting also on inflation data.  However, here in the U.S. futures seem to have fewer worries about inflation suggesting a bullish open ahead of the next round of earnings reports.  Plan for price volatility with thoughts of CPI and PPI data later this week.

Economic Calendar

Earnings Calendar

Notable reports for Monday include BYND, BNTX, CBT, CXW, CTRA, ELAN, FRPT, GOGO, HSIC, IFF, JRVR, KKR, KD, LCID, MTW, MED, OKE, PARA, PLTR, RNG, SWKS, SRC, TSN, & TDC.

News & Technicals’

Siemens Energy, a leading global energy company, faced a major setback in its financial performance as it reported a net loss of around 4.5 billion euros for the year. The main reason for this loss was the 2.2 billion euro impairment charge related to its wind turbine subsidiary Siemens Gamesa, which suffered from quality problems and project delays. The CEO of Siemens Energy, Christian Bruch, admitted that the company had been too hasty in launching new platforms into the market, resulting in costly failures that could take years to resolve. He also said that the company was working hard to improve its quality standards and customer satisfaction. Siemens Energy’s shares dropped sharply after the announcement of the disappointing results.

Aramco, the world’s largest oil producer, saw its net profit plunge by nearly 40% in the second quarter of 2021, as the global oil demand was still recovering from the impact of the Covid-19 pandemic. The company reported a net profit of 112.81 billion riyals ($30.07 billion), down from 48.4 billion recorded in the same period last year. However, the profit was slightly higher than the analyst’s expectations of 29.8 billion riyals. Carole Nakhle, an energy expert, said that Aramco’s financial position was still strong, despite the lower results, and that it was in line with the overall industry trend. Aramco also announced that it would pay a dividend of $18.8 billion for the second quarter, in line with its commitment to pay $75 billion for the year.

Berkshire Hathaway, the diversified conglomerate led by billionaire investor Warren Buffett, reported a strong increase in its operating earnings and net income in the second quarter of 2021, as the economy rebounded from the effects of the Covid-19 pandemic. The company’s operating earnings, which reflect the performance of its core businesses, rose by 6.6% to $10.043 billion, compared with $9.42 billion in the same quarter last year. The company’s net income, which includes the changes in the value of its stock portfolio, surged to $35.91 billion, a sharp contrast to the $43.62 billion loss it suffered in the second quarter of 2020 when the stock market crashed due to the coronavirus outbreak. Berkshire also increased its cash pile to $147.377 billion at the end of June, near a record high and much higher than the $130.616 billion it had at the end of March. The company has been looking for attractive acquisition opportunities to deploy its cash but has faced stiff competition from private equity firms and other investors.

The U.S. credit-rating downgrade was the main topic of discussion for most of this week, but Friday the focus shifted back to the economy with the latest jobs data. Although the market was slightly up in early-Friday trading, investors interpret the employment figures as a mixed bag of results showing signs of slowing down. The bond market is reacting to the Fed policy implication, with 10-year yields falling near 4.1% after reaching 4.2% on Thursday. The T2122 shows it has relieved a significant amount of the short-term overbought condition however with the sharp rise in the VIX the emotion can create some big price whipsaws.  With a light day on the economic calendar, earnings reports will take center stage and a possible relief rally but be careful because we are entering a typically difficult time for the market seasonally. 

Trade Wisely,

Doug