Top 5 Things to Know in the Market on Tuesday, July 7th

  • Economy News
Top 5 Things to Know in the Market on Tuesday, July 7th
Credit: © Reuters.

By Geoffrey Smith -- The U.S. recovery is in danger of stalling due to the surge in new Covid-19 infections, according to Atlanta Fed President Raphael Bostic. The market appears to agree - Wall Street's indices are set to open lower, giving up most of Monday's gains.  The European Commission has also revised down its economic forecasts for the euro zone for the next two years, while a federal court struck a blow to the shale patch of North and South Dakota. Here's what you need to know in financial markets on Tuesday, July 7th.

1. Fed's Bostic warns virus is stalling economic recovery

Atlanta Federal Reserve President Raphael Bostic warned in an interview with the Financial Times that the U.S. recovery is in danger of stalling due to the surge of Covid-19 cases across the south and west in recent weeks.

The U.S.’s top doctor Anthony Fauci said separately that “the current state is not good” and that the U.S. is still “knee-deep in the first wave of this.” He argued that the baseline of cases “never really got where we wanted to go.”

The growth of new Covid-19 infections showed signs of slowing in Texas and Florida, the two states worst affected by the second wave of infections in recent days, while the national rate of new infections dropped to just over 45,000, more than 20% below last week’s daily peaks.

2. Court orders Dakota oil pipeline closed

A Federal district court in Washington ruled that the Dakota Access Pipeline, a key artery for moving shale oil from the Dakotas to markets across the U.S., must shut within 30 days, arguing that a necessary environmental impact study had not been completed.

The pipeline, which can carry 570,000 barrels of oil a day, is a key piece of transport infrastructure for the local oil industry, and the ruling underscores the regulatory risks that were cited by Dominion Energy (NYSE: D ) and Duke Energy (NYSE: DUK ) at the weekend in their decision to abandon their project for a gas pipeline along the Appalachian Trail.

Energy Transfer (NYSE: ET ), the pipeline’s owner, saw its stock fall over 12% on Monday to its lowest in over two months in response to the ruling.

3. Stocks set to open lower, but China parties on

U.S. stocks are set to open lower as concerns mount that the recent rally has gone too far.

By 6:30 AM ET (1030 GMT), Dow Futures were down 248 points, or 1.0%, while the S&P 500 Futures contract was down 0.8% and the Nasdaq 100 futures contract was down 0.4%.

Overnight, the exuberance in Chinese stock markets tempered only slightly, with the country’s main indices still rising (although the Hong Kong Hang Seng fell 1.4% on more signs of tech companies withdrawing from the city in response to the new national security law).

Among the stocks in focus later will be Levi Strauss (NYSE: LEVI ), which reports quarterly results after the closing bell. Also of interest will be Tesla (NASDAQ: TSLA ) stock, which rose another 6.5% to a new record high on an upbeat broker's note in after-hours trading on Monday.

4. Europe GDP forecasts revised lower 

The European Commission revised down its forecasts for the eurozone economy this year and next, to reflect a deeper contraction in 2020 and a weaker rebound in 2021.

The Commission now expects the eurozone economy to shrink by 8.7% this year, rather than the 7.7% it expected at its last quarterly update in April, when there were no hard data available to measure the true impact of the pandemic on output.

For next year, it says the euro zone will grow by 6.1%, rather than the 6.3% it originally forecast. The Commission noted that the heavy impact of the virus across the U.S. and key emerging export markets such as Latin America and India would crimp Europe's ability to export its way out of recession. 

German industrial production data for May, released earlier, rebounded by less than expected, as had factory orders data on Monday. There was slightly better news from Italy, where retail sales rebounded 24% in May to be down only 10.5% on the year. U.K. house prices also fell by less than expected in June.

5. Oil holds above $40 despite caution

Crude oil prices weakened but again held above the $40/barrel support level as traders reined in their optimism ahead of key updates on the market.

By 6:30 AM ET, U.S. crude futures were down 1.3% at $40.11 a barrel, while the international benchmark Brent fell 1.1% to $42.62 a barrel.

The American Petroleum Institute will release its weekly figures on U.S. oil inventories at 4:30 PM ET (2030 GMT).

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