Vaccination requirements, robust factory data, bitcoin softer

Wall Street gains ground on solid US data

US stocks are rallying after another wrath of mixed earnings, better-than-expected factory data eased concerns over persistent inflation, and as delta variant fears only delays some of the pent-up demand from the consumer.  The growth outlook in the US remains strong, possibly extended now that some businesses will require proof of vaccination.  Consumer spending might ease over the next month, but uncertainty over the return to the office in September will hamper business investment and that could support the Fed’s ultra-accommodative stance.

Appetite equities could have been higher if it were not for the growing concerns over the Chinese government’s crackdown.  US-listed Chinese companies are getting battered as some investors don’t have the stomach for this regulatory shakedown.

US Data

Today’s US factory order data showed significant increases across the board.  Both factory orders and durable goods posted stronger-than-expected increases, with upward prior revisions.  Given the strength in business spending and increases in inventories, this report provides hints that some supply chain issues are improving.  Manufacturing activity will remain strong given the surge in new orders, shipments, unfilled orders, and inventories.  This broad increase in factory goods suggests manufacturers are getting their hands on supplies, which could support Fed Chair Powell’s argument that inflation is transitory.

Vaccinations

With the delta variant being more infectious than the original strain corporate America is now addressing how they will address reopening.  Tyson Foods announced they are requiring its team members at U.S. office locations to be fully vaccinated by October 1^st.  Following the lead in France, New York City will require proof of vaccination for indoor dining and fitness, which could derail some consumer spending going forward.  Microsoft will require vaccinations to enter US offices.

These fresh mandates should prove key in getting the remaining Americans that were on the fence to get vaccinated.  The country will probably still see somewhere between 20-30% of Americans remain resistant to getting a COVID-19 vaccine.

Bitcoin

Cryptocurrencies are lower across the board as investors await clarity over what the US government will do with taxes and regulation.  SEC Gensler is preparing more oversight over cryptocurrencies, but he is starting to outline what is required to finally get a bitcoin ETF approved.  He noted that crypto trading, lending, and decentralized finance platforms should be top priorities for oversight.

El Salvador has not received much of a boost since the decision to make bitcoin legal tender, but it is still too early to make a true assessment.  The rating agencies are viewing that decision as speculative fervor and it comes as no surprise that Moody’s cut their rating further into junk territory.  It has been over two months since El Salvador’s decision to make bitcoin legal tender and that alone can fix their economy.  The risk of default appears to be growing and El Salvador may be pressured to abandon its bitcoin bet.

Bitcoin continues to consolidate near the upper boundaries of its tight trading range and that will probably last until Friday’s nonfarm payroll report.  Friday’s payroll report will determine when financial markets will price in a Fed tapering announcement and ultimately dictate appetite for risky assets such as bitcoin.

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