Sunny days are here again, robust earnings, mixed flash PMIs, bitcoin rallies

US stocks are rising after another round of solid earnings, improving optimism that an infrastructure deal will get done next week, and mixed PMI readings that are still robust.

US equities shrug off mixed PMIs

Stocks were unfazed by the drop with the US services PMI, which could mainly be attributed to the labor shortage problem that is not showing any immediate signs of improving.  Overall, the US flash PMI reads show manufacturing is very strong as private sector activity booms.  The headline flash manufacturing index rallied to a record high at 63.1, better than the 62.0 consensus estimate, while services fell to a 5-month low at 59.8, well short of the eyed 64.5 economists’ forecast.

Global bond yields were steadily rallying following mostly strong PMI readings across Europe, except for France.  The big miss with US services helped Treasuries yields give up most of its earlier gains.  The 10-year Treasury yield rose 0.6 basis points to 1.285%, while the dollar edged higher against most of its trading peers except for the New Zealand dollar.

Despite another blockbuster earnings season, signs the consumer is not blinking at the current price increases, and likelihood the ECB and Fed won’t be raising rates anytime soon, Wall Street could be in for a choppy autumn as taper tantrum fears become a reality, US-China tensions escalate even further, and inflationary pressures show some stickiness.  Given how short-lived last week’s stock market selloff lasted, investors should not be surprised if another pullback presents itself.  The growth story is still there for the third and fourth quarter and while Wall Street could see a selloff once we get beyond peak everything (stimulus, earnings, and growth), the S&P 500 index is still likely to finish the year much higher once the dust settles.

Earnings

Social media companies are putting up strong results as ad revenues continue to impress.  Both Twitter and Snap posted strong earnings and revenue beats, and guided well ahead of estimates.  If these results are a sign of what to expect next week, many traders might start buying ahead of next week’s big tech earnings from Apple, Facebook, Alphabet, Amazon, and Microsoft.

American Express delivered solid results as Americans continue to spend and embrace their platinum card.  This is a great sign of how strong the US consumer is behaving and positioned for the rest of the year.

Bitcoin

Bitcoin is having a solid second half of the week following a strong return for risk appetite that was accompanied by crypto endorsements from Elon Musk and Jack Dorsey.  Musk’s pivot for Tesla accepting Bitcoin and that he personally owns Bitcoin and so does SpaceX helped push prices above the USD 32,000 level.  During Twitter’s post earnings call, CEO Dorsey noted that Bitcoin could play a key role for their business down the line.

Bitcoin momentum is growing now that corporate America interest is percolating and as several institutional investors expect to buy or invest in digital assets in the future.  Earlier this week, Fidelity’s Digital Assets 2021 Institutional study showed 7 in 10 institutional are still interested in getting involved with cryptos.

Bitcoin’s problem of transitioning mining out of China and into embracing renewable energy is gradually getting resolved.  Bitcoin appears to have turned a corner and could be poised to make a run towards the USD 35,000 level.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya