Morning Minutes 6/26/2020

Morning Minutes

US Bank Stress Tests, Nike Earnings and Personal Spending Weigh on US Stocks

June 26, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

The last day of school before summer vacation and the last day of trading before a holiday-shortened week finds overseas stock markets climbing and US markets starting to backslide. Asia Pacific trading saw Sydney rally 1.5%, and Tokyo climb 1.1%, while in Europe today, London is up 1.6% and Frankfurt is up 1.0%. US index futures, however, have lost some ground with Dow futures down 0.5% as investors digest yesterday’s 1.1% gain and overnight US news.

The Fed announced results of the latest round of US bank stress tests overnight. The US central bank raised concern that an extended or deeper economic shock could push the sector’s capital toward minimum levels. Because of this, The Fed has suspended share buybacks for the banks, capped dividend payments at current levels for the coming quarter, indicated that future dividend approvals will be tied to profitability and indicated that testing and oversight is likely to increase moving forward. Big US banks such as JPMorgan Chase, Citigroup, Wells Fargo and Goldman Sachs have been trading down 1-4% in premarket action this morning.

Athletic apparel producer Nike is down 3.5% in premarket trading today coming off a mixed earnings report. The company announced a $0.51 per share loss for the quarter which ended May 31 as sales fell 38% from a year ago. While online sales jumped 75% to reach 30% of total sales, higher shipping and inventory costs hurt profits in the quarter. One bright spot, however, was that China sales, who was further along in the reopening process, were only down 3% over year, compared with a 46% drop for North America which was in lockdown for much of the fiscal quarter.

US economic numbers were mixed this morning. May personal income declined less than expected, (-4.2% vs street -6.0%) but personal spending rebounded less than expected (8.2% vs street 9.0%).

Commodity trading is also reflecting sluggish sentiment in the US relative to overseas. The US WTI oil price is down 01.1% while the UK Brent Crude price is down a more moderate 0.4% and the China-sensitive copper price is up 1.1%.

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