Rollercoaster Week Puts "Fear Gauge" in Focus

Concerns over the global economy's recovery weighed on investors

Deputy Editor
Jul 9, 2021 at 3:03 PM
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It was a week of high highs and low lows on Wall Street. Investors returned from a long holiday weekend on Tuesday to a worse-than-expected purchasing managers' index (PMI) reading for June, which led the S&P 500 index (SPX) to snap its seven-day win streak and the Dow Jones Industrial Average (DJI) to shed over 200 points. The Nasdaq Composite (IXIC) just barely eked out another record close, as the 10-year Treasury yield inexplicably slid lower. While it was a mystery as to why bond yields were tumbling this week -- hitting their lowest level since late-February by Thursday -- the drop sent the Nasdaq to yet another record high by Wednesday's close, joined by the S&P 500. The Dow also reversed course after the Federal Reserve's June meeting minutes were released, with the central bank admitting that the recent rise in inflation was something of a surprise this year. 

By Thursday, markets were spiraling out of control, with anxieties over the global economic recovery surfacing yet again. The worldwide spread of the Covid-19 delta variant, which drove Japan to declare a state of emergency in Tokyo ahead of the Olympic Games, poured cold water on several key sectors, including those closely tied to  the economic reopening and semiconductor stocks. The Cboe Volatility Index (VIX) skyrocketed on Thursday, however, overtaking the psychologically significant 20 level mid-session before settling slightly beneath. Today, the Dow is looking to erase the near 500-point drop it suffered yesterday, and all three indexes are eyeing weekly wins. 

Biggest Analyst Calls of the Week

The brokerage bunch had plenty to say this week. Most recently, Levi Strauss & Co (LEVI) attracted a slew of post-earnings bull notes, while United Airlines (UAL) managed two separate price-target hikes, even as the sector came under fire on Thursday. Meanwhile, Raymond James recommended scooping up Sunnova Energy (NOVA) on the dip, and J.P. Morgan Securities called Whirlpool (WHR) a "top pick"  ahead of its earnings report. 

Government Crackdowns Put Pressure on the Tech Sector

It was a whirlwind week for the tech sector. Talks of antitrust regulations in Washington D.C. are weighing on Big Tech today, as the U.S. government attempts to crack down on anticompetitive tactics. Alphabet (GOOGL), specifically, came under pressure for some of these practices in Google's Android app store, which wound up knocking the stock off from Thursday's record peak. 

Amazon.com (AMZN) also touched a record high earlier this week, following news that the U.S. Defense Department cancelled its 10-year JEDI cloud-computing with Microsoft (MSFT), which was worth $10 billion and awarded to the company in 2019. 

New government regulations over in China sunk U.S.-listed shares of several major Chinese tech stocks, including JD.com (JD), which stumbled on news that freshly public ride sharing name DiDi Global's (DIDI) app was blocked from being downloaded as regulators conducted cybersecurity reviews.  

Earnings Season Starts With Banks on Deck

Earnings are back n focus next week, with bank names JPMorgan Chase (JPM), Bank of America (BAC), PNC (PNC), Morgan Stanley (MS), and Wells Fargo (WFC) all set to kick off the latest season. PepsiCo (PEP), Delta Air Lines (DAL), and United Health (UNH) will also release their corporate reports. Investors can also look forward to a monthly report from the Organization of Petroleum Exporting Countries (OPEC), especially after the organization has struggled to reach terms of a production increase. 

In the meantime, check out Senior Vice President of Research Todd Salamone's thoughts on a potential sector corrections in the second half of the year. Plus, Senior Quantitate Analyst Rocky White shares looks back at the healthy gains from the first half of the year, and what it might mean going forward. 

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