Markets Off to Mixed Start as Delta Variant Spreads

Last Updated: Wednesday, August 11, 2021 2:53 PM | Neal Farmer

Markets are off to a mixed start this week.

We're just past the peak of earnings season. The Senate seems poised to pass the $1 trillion infrastructure bill.

The peak of earnings season may be over but some big hitters remain such as Disney (DIS), Sysco (SYY), eBay (EBAY), and others. Key inflation data is scheduled for release this week as well with July data for Consumer Price Index (CPI) and Producer Price Index (PPI) results coming out Wednesday and Thursday, respectively. Lastly, commodities and other assets fell Monday as concerns over the fast-spreading Delta variant are rising. The Delta variant lead Goldman Sachs to lower it's growth estimates for growth in the short term as a result.

Inflation Projections

Inflation remains a key concern for some investors as global shortages have pushed prices higher in many industries. Commodities prices have largely stabilized after skyrocketing earlier this year. The effect global chip shortages have had on used and new car prices have also been heavily covered and had a major impact on previous inflation reports.

However, the Fed has consistently said that many of the current inflationary pressures are short term. With many caused by shortages and shipping issues that resulted from the economy recovering faster than producers expected. These shortages will hopefully be resolved soon, most analysts are expecting things to get closer to normal by roughly the end of the year. If shortages resolve themselves in a reasonable time, then inflation data may reach points far lower than some investors expect as fears of an "overheating economy" seem pretty out of place with an unemployment rate above 5% and initial claims still averaging nearly twice the pre-pandemic rate.

Currently core CPI projections are for a 0.4% increase in July, down significantly from 0.9% the previous month. Meanwhile, core PPI is expected to come in at 0.5%, half of June’s 1.0% increase. Lastly, initial claims are estimated to stay relatively flat with 383,000 claims compared to the previous week’s 385,000.

Earnings

Earnings season is past the peak but there's still plenty on the calendar this week. The biggest name yet to report quarterly performance is Disney (DIS) which itself operates in various industries. Investors will be analyzing how each branch of Disney’s business  is performing with many looking to see how well Disney+ is growing and how the company’s theme parks have recovered from COVID-19. Disney is certainly making a move for the future pushing for its streaming service in a now very competitive industry but the established theme parks generate a large portion of the firm’s revenue. Current earnings per share (EPS) estimates for DIS are $0.55 after just barely recording a profit in its year-ago quarter with $0.08. Additionally, revenue is projected to come in at $16.76 billion compared to last year’s $12.48 billion.

Many other firms are set to report this week as well with the other biggest names being perhaps Sysco (SYY) and eBay (EBAY). Sysco is currently expected to report  EPS of $0.60 and revenue of $14.65 billion compared to its year ago results of -$0.29 and $8.87 billion. Meanwhile, eBay estimates for EPS are $0.95 and revenue of $2.99 billion after reporting an EPS of $1.08 and revenue of $2.79 billion a year ago.

Economic Events this Week

Wednesday - 8:30 a.m. - CPI - 8:30 a.m. - Core CPI - 10:30 a.m.- EIA Crude Oil Inventories

Thursday - 8:30 a.m. - Initial and Continuing Claims - 8:30 a.m. - PPI - 8:30 a.m. - Core PPI

Friday - 8:30 a.m. - Export Prices - 8:30 a.m. - Import Prices

Earnings Reports this Week

Tuesday:

Before the bell: SYY, IMOS, ARMK, TDG After the bell: COIN, DAR, SMCI, GO

Wednesday:

Before the bell: PRGO, APG, CAE After the bell: BEKE, NIO, CPNG, AVT, EBAY, CACI, OPEN, ENS

Thursday:

Before the bell: BIDU, IQ, AZUL, OGN, BR, CSIQ, MIDD After the bell: DIS, RKT, ABNB, DASH, FLO, WISH

Friday:

Before the bell: DSEY, HNST

Sector and Industry Sentiment

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