Barrons : This Danish Vaccine Maker Is a Leader in Monkeypox. The Stock Could Ta

This Danish Vaccine Maker Is a Leader in Monkeypox. The Stock Could Take Off.

Danish vaccine maker Bavarian Nordic is still in the trials stage with its Covid shot, making it a latecomer and dragging down its stock price.

But its smallpox vaccine, alone in having been approved for use against monkeypox, gives the Copenhagen-listed firm a virtual monopoly. This could make the shares a buying opportunity.

The stock (ticker: BAVA.Denmark) has tumbled from its March 2021 peak of 356 Danish kroner ($50.41) to a recent DKK243.

The company released midstage data at the end of last year for its Covid-19 vaccine, ABNCoV2. But it needs to surmount more research and regulatory hurdles. Bavarian Nordic also has failed to find a partner for its flu shot, which has the potential to be a blockbuster in many markets. Meanwhile, the company is raising funds for the Phase 3 study of its MVA-BN RSV vaccine candidate for respiratory syncytial virus.

On the upside, Bavarian Nordic has signed a number of deals for its Imvanex vaccine, which was originally developed to combat smallpox under the brand name Jynneos. The U.S. Biomedical Advanced Research and Development Authority (Barda) has authorized it for use in the U.S. and Canada as the only vaccine for monekypox, a viral infection endemic in some parts of the world.

The European Union’s drug regulator is now reviewing use of Imvanex for monkeypox, and the U.S. said it would expand the availability of the vaccine and broaden testing capacity.

The World Health Organization will soon decide whether monkeypox is a global health emergency. As of June 27, the Centers for Disease Control and Prevention puts the number of confirmed cases at 4,357 globally.

While Bavarian Nordic has jumped 41.3% over the past three months, the shares could have further to go. Demand has been strong—Barda has ordered 500,000 doses for 2022. The European Health Emergency Preparedness and Response Authority (HERA) has ordered 110,000 doses.

The number of new monkeypox cases “will need to be carefully monitored,” Frédéric Gomez, an analyst at Pharmium Securities, wrote in a note, adding that if cases rise and the company gets more orders for the vaccine, “it would not be surprising if Bavarian Nordic revises upwards the financial guidance provided.”

Analysts at broker Nordea estimate Bavarian Nordic shares could jump to a price target of DKK400. For the 2021 calendar year the company reported a loss before interest and tax of DKK313 million from a profit of DKK379 million in 2020. Sales were flat at DKK1.8 billion.

Chief Executive Officer Paul Chaplin said when reviewing annual results that Bavarian Nordic expects to launch its Covid vaccine in 2023, while the flu shot has a projected 2025 launch.

“At Bavarian Nordic, we are working tirelessly to make novel vaccines available to counter threats, whether big or small, thus helping to improve public health globally,” he told Barron’s in a statement.

Bavarian Nordic says it expects overall sales for the year—previously forecast for a range of DKK1.4 billion to DKK1.6 billion—to now reach DKK1.9 billion to DKK2.1 billion.

Monkeypox is less contagious than Covid, and the current global outbreak is likely to be brought under control by next year. But it’s endemic in Africa, so the need for vaccines will likely continue into the future.

There’s a good chance Bavarian Nordic will raise its fiscal year revenue guidance because “Jynneos is the best vaccine option based on its safety and efficacy profile,” Boris Peaker, an analyst at Cowen, tells Barron’s.

Barrons : Activision Stock Is a Bet on Microsoft’s Takeover. It’s One Worth Maki

Activision Stock Is a Bet on Microsoft’s Takeover. It’s One Worth Making.

With mergers getting increased scrutiny, Microsoft MSFT +1.07% picked a tough time to buy Activision Blizzard ATVI +0.91% . But the regulatory uncertainty might give investors an opportunity for some easy upside in the gaming company’s stock.

Microsoft (ticker: MSFT) announced its $69 billion all-cash deal for Activision Blizzard (ATVI) in January, and in normal times there wouldn’t be much concern about the acquisition going through. Though Activision is among the largest videogame publishers, with its Call of Duty titles regularly topping sales charts, its $8.8 billion in 2021 revenue makes up a fraction of the estimated $192.7 billion global games market, according to market research firm Newzoo. In the past, that probably would have been too small to catch the attention of the Federal Trade Commission, which traditionally focused on how deals affect consumer pricing.

Many on Wall Street are betting the Biden administration is different. Activision stock is trading at $77.86 a share, $17.14 below the $95 deal price, but up $12.47 from where the stock was trading prior to the deal. Chris Pultz, a portfolio manager at merger arbitrage shop Kellner Capital, reckons that the current price implies a 50-50 chance the deal goes through.

Blame the regulatory environment. Seven months before the deal was announced, Lina Khan, a vocal critic of big tech, took over as FTC chair, though Democrats didn’t get a majority until May. Khan has long argued that the FTC and Justice Department should consider the effect on labor and other stakeholders before approving deals.

“It’s entirely possible that this is a high-enough-profile transaction, and, now that she’s at full strength at the FTC, that this provides an opportunity,” says Brian Quinn, a professor at Boston College Law School.

Activision disclosed in March that it and Microsoft received a second request for information, which requires companies to turn over documents and answer business questions.

The antitrust concerns seem overblown. If labor was ever a concern, it might no longer be one. The Communications Workers of America initially opposed the deal. But a group of workers at Activision-owned Raven Software voted in favor of the company’s first U.S. union under the CWA. Now, after reaching a labor neutrality pact with Microsoft related to Activision that kicks in 60 days after the deal closes, CWA President Chris Shelton says the union supports the deal.

“Getting the CWA on their side is definitely a good endorsement,” says Kellner’s Pultz.

The other worry: that Microsoft will keep Activision games off rival devices, particularly Sony 6758 –2.57% ’s (SONY) PlayStation 5. Microsoft has said it plans to honor existing deals and release coming Call of Duty titles on Sony’s consoles. “We believe the deal will benefit gamers, developers, and the industry,” Rima Alaily, deputy general counsel for Microsoft’s Competition Law Group, said in a statement to Barron’s.

Cutting off competition would do little to help Microsoft attain its goals. To maximize Activision’s profits, the tech giant will want to reach gamers on Sony systems. Microsoft is also trying to bolster its Xbox Game Pass subscription service, and adding Call of Duty and World of Warcraft would help justify its cost and possibly bring new users into the Xbox ecosystem. That suggests the possibility that Microsoft could win in court, if it comes to that.

“I don’t think the FTC has a chance,” says Wedbush’s Michael Pachter. “And Microsoft knows that.” If he is right, Activision stock would trade at $95 when the deal closes, up 22% from Thursday’s close.

That doesn’t mean there aren’t risks. While Westchester Capital Management’s Roy Behren, who co-manages the Merger FundMERFX +0.12% (MERFX), with $4.3 billion in assets, believes there’s a greater likelihood that the deal goes through than the price suggests, he’s reluctant to advise investors to play it. “If you like gambling, the market is implying it’s better than a coin toss,” Behren says. “But it’s very, very difficult to recommend to a retail investor to make only a single arbitrage investment.”

If nothing else, investors need to be comfortable owning the stock if the deal falls through. Analysts expect overall bookings, a measure of sales, to dip 5.5% to $7.9 billion in 2022 after Activision delayed key games, before returning to growth, rising 20% to $9.5 billion in 2023. Earnings should fall 22% to $2.91 a share in 2022, before increasing 34% to $3.90 in 2023.

The stock is reasonably priced—it trades at 19.8 times estimated 2023 earnings, compared with a five-year average of 21.7, though above rivals Electronic Arts EA +0.89% (EA) and Take-Two Interactive Software (TTWO), which trade at 15.4 and 17 times, respectively. If the deal fell through and Activision’s multiple fell to 16.2—midway between its peers—its price would be $63.18, down 19%.

But even a failed deal could be an opportunity. Benchmark analyst Mike Hickey noted in May that the offer bought Activision time to rebuild its culture after a wave of lawsuits and a settlement over charges of sexual harassment and gender discrimination. In a statement, Activision said it has “always been committed to a safe, welcoming workplace.”

Getting back to creating top games could lift the stock toward his fiscal 2023 $100 price target, Hickey wrote.

Microsoft has said it’s confident the deal will close in the fiscal year ending in June 2023. The vast majority of 27 analysts listed by FactSet give it a $95 price target. Even Berkshire Hathaway (BRK.A) has bet the deal will close by upping its stake to 9.5% of Activision’s shares. b

Business Of Fashion : Ties Are Dead. Or Are They?

Ties Are Dead. Or Are They?
A G7 Summit photo op featuring world leaders without neckties had the internet buzzing about the decline of the go-to men’s accessory. But the story of the tie is an evolution, not an outright death.

Presidents and prime ministers from the US, Italy, Japan, France, Germany, the UK and the European Union gathered in Bavaria, Germany for the G7 Summit. (Getty Images)


Last week, when presidents and prime ministers from the US, Italy, Japan, France, Germany, the UK and the European Union gathered in Bavaria, Germany, to take a “family photo” at the annual G7 summit, there was one glaring omission: neckties.
The world’s most powerful political leaders’ casual look — a stark contrast from years past, when everyone wore a tie — ignited a global discussion. One headline: “World leaders criticised for ‘sloppy’ appearance as they forgo neckties at G7 summit.” An online critic tweeted that the group resembled “the dads and uncles at the end of a wedding who had 35 Heinekens and are accosting the photographer while their wives yell at them that their taxi is outside.”
Ties weren’t completely absent from the summit. Some politicians had worn them earlier, and the gathering also took place over the weekend, when wardrobe expectations are more relaxed. But the explicit choice to forego the necktie during this year’s photo served as a signal of the once-pervasive menswear accessory’s waning presence. “The tie is dead,” declared menswear blogger Derek Guy on Twitter.
Indeed, even years before the pandemic, men’s wardrobes experienced a mass casualisation, pushing companies like JP Morgan and Goldman Sachs to adopt a more flexible dress code for their employees in 2016 and 2019, respectively. Covid-19 solidified this trend, and along with the dip in sales of tailored suits and formal menswear, ties sales started slumping. Tie sales declined almost 6 percent in 2019, according to market analysis from Kantar, and in 2020, fell 42 percent, according to a data report from Management One.

But as menswear sales are now bouncing back, brands have conflicting opinions on where they stand on neckties. Some are distancing themselves from the accessory while others see a necktie resurgence.
Experts agree that while the necktie is not as pervasive in the corporate work setting as it once was, it’s still important in occasionwear. Plenty of shoppers are also wearing ties to the office as a form of self-expression, not because they have to.
And while casual wardrobes are here to stay in many workplaces, there are still professionals who want and need ties. Personal stylist Lauren Rothman, who works with a slew of politicians, TV anchors and restaurant groups in the Washington DC area, said she is giving varied styling advice. She said she tells news anchors to keep wearing ties, for example, since she believes TV audiences aren’t ready for such causal appearances while recommending some restaurant groups have managers switch to jackets instead.
A World With Fewer Ties
To some shoppers who are abandoning neckties, the accessory has “reverberations of stuffiness, conservatism and being buttoned-up,” said James Harris, co-host of the menswear podcast Throwing Fits. As employees return to offices, many shoppers would rather buy nice denim and invest in less formal menswear options.
To another type of fashion enthusiast who might have owned dozens of colourful ties a few years ago, the choice to experiment with jewellery or more daring footwear choices feels more exciting now, Harris added, especially given how much the style rules around masculinity have changed.
“I think we’re exploring how you can express personal style without subscribing to pre-established rules from 10 years ago,” said Harris. “Guys are not shopping for ties the way they are shopping for sneakers right now.”
Brands are responding in kind: Zegna has scaled back on its tie assortment, instead focussing on more casual categories, like knitwear and sports coats, Gildo Zegna, chairman and chief executive of Ermenegildo Zegna Group, told BoF.
“The tie is not dead 100 percent, but surely it’s not popular anymore and is being replaced more and more with other items,” Zegna said. “There’s a trend by which men want to wear a suit in a different way, with … a silk shirt or a polo, or a luxury slipper. For the tie, I don’t see a good future.”

Ditching the necktie has also become more popular in politics, said Rothman, who noted that politicians like Andrew Yang and Pete Buttigieg often adopted a no-tie look early on in their campaigns for image reasons. Rothman said the G7 leaders likely ditched their ties because of the general messaging it sent to world audiences.
“They’re trying to signal that as the world is more casual, they’re closer to the everyday folks and relate better to them,” said Rothman.
How Ties Will Survive
Fashion brands who are experiencing an uptick in tie sales say shoppers who are buying the accessory for work wardrobes are doing so as a style choice, not because of a mandated dress code. For customers like these, brands could find success with floral patterns and bold colours, which are selling well at Bonobos, fashion director George McCracken said.
“The way guys are wearing ties has shifted,” said McCracken. “It’s less about using it in a uniform and more about it being a fun accessory.”
Prada - Runway - Milan Fashion Week S/S 2023 A model walks the runway at the Prada fashion show during the Milan Fashion Week S/S 2023 on June 19, 2022 in Milan, Italy. (Daniele Venturelli/Daniele Venturelli / WireImage)
At Bonobos, the category is seeing double-digit growth this year, said McCracken, and the brand expects tie sales will soon hit pre-pandemic levels. Neiman Marcus is stocking up on its assortment of ties after attending the men’s fashion presentations in Milan this past month, where brands like Brioni, Thom Ford, Prada and Brunello Cucinelli all debuted strong menswear looks featuring ties, said Bruce Pask, men’s fashion director at Bergdorf Goodman and Neiman Marcus.
“We’re seeing brands that have mastered this luxurious, casual elegance have a real significant presence of neckties in their collection,” he said. “They are cultural indicators.”
And as more weddings and formal events that were cancelled during the pandemic resume, Pask believes the ties will continue to pick up interest. The accessory might not be an everyday item anymore, but he said shoppers still want ties for special occasions and are willing to spend more on ones that feel special.
“We’re seeing an increase in [tie sales] in events that are black-tie [or] white-tie driven because of the yearning to celebrate,” said Pask.

WSJ : Vatican Sells London Building at Center of Corruption Scandal

Vatican Sells London Building at Center of Corruption Scandal
Sale marks $140 million loss in investment that led to trial of 10 defendants on charges of embezzlement and other crimes

ROME—The Vatican sold a London commercial building at the hub of one of the biggest scandals of Pope Francis’ reign, at a loss of some $140 million.

The Vatican said Friday that it had sold 60 Sloane Avenue to Bain Capital LP for 186 million pounds, equivalent to around $225 million.

The investment in the building, a former Harrod’s auto showroom in London’s wealthy Chelsea district, has led to a trial at the Vatican of 10 defendants, including a once-powerful cardinal, on charges of embezzlement and other alleged crimes. All of the defendants deny wrongdoing.

The trial, which will soon enter its second year, is seen by many as a test of the pope’s overhauls aimed at bringing more transparency to the Vatican’s finances and of the Vatican criminal justice system’s ability to enforce accountability in its highest ranks.

Pope Francis has cited the probe as evidence that his overhauls have been effective. Defense attorneys, at times with support from the Vatican judges, have quarreled with prosecutors about whether the rights of the accused have been respected.

Prosecutors have said that the Vatican paid some 350 million euros, the equivalent of about $365 million, to acquire the London property through a series of complex transactions involving middlemen.

The scandal prompted the pope to remove hundreds of millions of dollars in assets from management by the Vatican Secretariat of State, which had acquired the property, undermining what has traditionally been considered the Vatican’s most powerful office.

The secretariat’s assets came largely from an annual collection from Catholics known as Peter’s Pence, long promoted as destined for charitable works though also available for the pope’s ministry.

Friday’s Vatican statement said that the losses incurred in the sale of the Sloane Avenue building wouldn’t affect Peter’s Pence.

The Vatican also said that the sale, which it said had been completed in recent days, was handled with the assistance of real-estate broker Savills and came after the Vatican received 16 initial bids.

WSJ : Crypto Broker Voyager Digital Suspends Withdrawals

Crypto Broker Voyager Digital Suspends Withdrawals
Firm says it is exploring strategic alternatives, after issuing notice of default to crypto hedge fund Three Arrows Capital

Crypto broker Voyager Digital VOYG -17.14%▼ said on Friday afternoon that it is temporarily suspending trading, deposits, withdrawals and loyalty rewards.

“This decision gives us additional time to continue exploring strategic alternatives with various interested parties while preserving the value of the Voyager platform we have built together. We will provide additional information at the appropriate time,” Stephen Ehrlich, chief executive of Voyager, said in a statement.

On Wednesday, Voyager issued a notice of default to crypto hedge fund Three Arrows Capital after it failed to repay a loan of 15,250 bitcoin and $350 million in USD Coin, a stablecoin whose value is pegged to the dollar. The loan is equivalent to about $646 million based on bitcoin’s current price.

Other crypto firms have been hampered by a recent plunge in prices. Crypto lender BlockFi said on Friday that it signed a definitive agreement with crypto exchange FTX for a $400 million credit facility and the option to buy the company for $240 million. BlockFi said it lost $80 million from its exposure to Three Arrows Capital.

Voyager said it intends to pursue all available remedies for recovery from Three Arrows, including through the court-ordered liquidation process in the British Virgin Islands. Crypto exchange Deribit is among the creditors that sued the hedge fund there for debts owed, The Wall Street Journal reported.

Shares of Voyager, which are traded on the Toronto Stock Exchange, are down more than 96% this year, according to FactSet data. The stock, which was trading at $25 in November, has plummeted to 58 cents, giving the company a market value of $114 million.

The crypto brokerage was midsize. In a May business update, Voyager said it had 3.5 million verified users and $5.8 billion in assets, a decline from November’s $7 billion.

In June, Voyager Digital said it secured a loan from crypto-trading firm Alameda Research that includes $200 million in cash and USD Coin and 15,000 bitcoin to meet customer liquidity needs.

On Monday, the firm said it had used $75 million from the line of credit to facilitate customer orders and withdrawals and may use more. The two lines of credit expire at the end of 2024 and carry an annual interest rate of 5% payable on maturity.

The company has hired Moelis & Co. and the Consello Group as financial advisers, and Kirkland & Ellis LLP as legal advisers.

FT : Klarna valuation crashes to $6.5bn from $46bn

Klarna valuation crashes to $6.5bn from $46bn
The Swedish fintech’s decline highlights how investors are souring on the ‘buy now, pay later’ sector

Payments fintech company Klarna is set to raise fresh capital at a valuation of about $6.5bn, a fraction of the $46bn it was valued at just a year ago, three people with direct knowledge of the matter said.

The $600mn deal, which is being finalised, will involve investors including Sequoia Capital and Abu Dhabi’s Mubadala putting money into the Swedish company, two of these people added.

The dramatic decline in the worth of what was one of Europe’s most valuable private companies highlights the extreme reversal in sentiment for cash-guzzling, growth-chasing start-ups.

It also shows how investors have soured on “buy now, pay later” companies such as Klarna, which provide a form of short-term credit.

Only a year ago, Klarna was able to double its valuation to $46bn after a $639mn funding round amid a boom in ecommerce during the coronavirus pandemic. That funding round was led by Japan’s SoftBank, the investment group behind a disastrous bet in office-sharing group WeWork.

Klarna; its adviser Goldman Sachs; and Sequoia, whose partner Michael Moritz is also the chair of Klarna, each declined to comment. Mubadala did not immediately respond to a request for comment. The Wall Street Journal first reported the new funding terms.

The company was founded in 2005 and is a pioneer of the buy now, pay later business, which allows customers to delay payments or divide them into instalments. However, 40 per cent of its transactions are now paid in full through its “Pay Now” option.

The new valuation would be Klarna’s lowest since August 2019, when it was worth $5.5bn, and follows a series of efforts to raise cash this year, according to people briefed about the matter.

In May the company was tapping investors, including institutional investment firms and family offices, for new cash at a $25bn valuation. However, it failed to get any significant traction, according to those people.

Klarna also cut 10 per cent of its more than 7,000-strong workforce, with chief executive Sebastian Siemiatkowski describing 2022 as a “tumultuous year”.

A month later, some investors were approached with the opportunity to invest at a valuation below $20bn, according to the same people.

The reduced valuation reflects a wider rout in the fintech market. Surging inflation has lead investors to take a more cautious approach, stemming the flow of easy money which helped boost the sector to staggering heights.

Buy now, pay later providers have been particularly badly affected as falling discretionary spending, the risk of rising defaults and higher interest rates squeeze already tight margins.

In its first-quarter results, Klarna reported net losses of SKr2.5bn ($254mn), quadruple the amount in the same period a year earlier, while cash flow dropped from positive SKr7.6bn to negative SKr7.3bn in a year.

Shares of the US-listed buy now, pay later provider Affirm, which has partnered with big retailers such as Amazon and Walmart, are down close to 90 per cent from their high in November. Australia’s Zip has fallen more than 95 per cent since its peak in February 2021.

They are also facing pressure from competitors such as Apple, which is launching its own Apple Pay Later product in the US, and growing regulatory scrutiny over whether adequate checks are in place to ensure that customers can afford their loans.

In June the UK government outlined its plans to strengthen rules on the sector, including requiring lenders to carry out affordability checks and allowing consumers to take complaints to the Financial Ombudsman Service.

Buy now, pay later providers have already taken some steps to allay regulatory concerns. From June, Klarna began reporting information to credit agencies, allowing other lenders to see data on customers’ payments.

FT : FTX agrees deal with option to buy BlockFi for up to $240mn

FTX agrees deal with option to buy BlockFi for up to $240mn
Exchange also extends $400mn revolving credit facility to lending platform amid turmoil in crypto markets

FTX has signed a deal with BlockFi that includes an option for the cryptocurrency exchange to buy the lending platform for up to $240mn, as digital asset firms grapple with the fallout from the crypto downturn.

BlockFi chief executive Zac Prince said on Twitter on Friday that the agreement included a $400mn revolving credit facility from FTX US, as well as an option to be bought at a “variable price . . . based on performance triggers”. 

The deal increases the scale of the aid to BlockFi from FTX, which last week extended BlockFi a $250mn loan.

“We have not drawn on this credit facility to date and have continued to operate all our products and services normally,” Prince added.

The deal represents a new step by Sam Bankman-Fried, FTX chief executive, to shore up crypto firms weakened by an acute credit crisis gripping crypto markets, which analysts have likened to a “Lehman moment” for the digital asset industry.

Through his companies, the 30-year-old billionaire has also extended loans to crypto broker Voyager Digital, totalling $485mn in cash and bitcoin. On Friday Voyager announced that it was “temporarily suspending trading, deposits, withdrawals and loyalty rewards” from 2pm Eastern Time in the US. The terms attached to the loan limit the amount Voyager can draw in any 30 day period to $75mn.

Voyager chief executive Stephen Ehrlich said the move “gives us additional time to continue exploring strategic alternatives with various interested parties while preserving the value of the Voyager platform”. The company added that it was “actively pursuing all available remedies” to recover more than $650mn it lent to struggling hedge fund Three Arrows Capital, which fell into liquidation this week.

If FTX acquires BlockFi, the deal would likely value the crypto lender at around $150mn, according to people close to the transaction.

On Thursday, CNBC had reported that FTX was expected to pay roughly $25mn for BlockFi, a figure Prince denied. The company was valued at $4bn after a $500mn funding round last summer, according to Crunchbase data.

In his Twitter thread on Friday, Prince said that as crypto asset prices had dropped, a move by lending platform Celsius last month to stop customers from withdrawing their assets led to an “uptick in client withdrawals from BlockFi’s platform despite us having no exposure to them”.

He also said that the company was hit by $80mn in losses due to its exposure to Three Arrows Capital.

Prince said he had turned down various other rescue options that would have resulted in client funds taking a haircut, adding: “As a matter of principle, we fundamentally believe in protecting client funds.”

BlockFi earlier this month announced plans to shed a fifth of its staff, as many crypto firms cut jobs to weather the downturn in crypto markets. Token prices have fallen by around 70 per cent from their peak last autumn.

>>> US Close Dow +1,05% S&P +1,06% Nasdaq +0,90% Russell +1,16%

Closing Stock Market Summary

The stock market showed resilience to selling today despite relatively bad news this morning. Each of the major indices stuck to a fairly narrow range before buyers stepped in late in the session leaving the S&P 500 above the 3,800 level. The S&P 500 closed down 2.2% week-to-date; the Nasdaq closed down 4.1% week-to-date; the Dow Jones Industrial Average closed down 1.3% week-to-date.

The market closed decidedly higher before this holiday lengthened weekend despite the following factors:

  • Micron (MU 53.65, -1.63, -3.0%) issued fiscal Q4 revenue and EPS guidance well below consensus estimates, citing a weakened demand environment from smartphones and PCs.
  • General Motors (GM 32.19, +0.43, +1.4%) reduced its Q2 net income expectations -- but left its full-year guidance unchanged -- citing supply chain disruptions that adversely impacted wholesale volumes in Q2.
  • The eurozone had a record-high inflation rate (8.6% yr/yr) in June.
  • The June ISM Manufacturing PMI saw its lowest reading since June 2020 (53.0%) and the first contraction in new orders activity in 25 months.

Buyers stepped up to the plate before the close. Early on, there was not much conviction on either side of the tape with decliners roughly in-line with advancers at both the NYSE and the Nasdaq. At the close, advancers led decliners by a greater than 3-to-1 margin at the NYSE and an 3-to-2 margin at the Nasdaq. 

The rebound accelerated in the early afternoon, shortly after the Atlanta Fed released its updated GDPNow forecast for Q2 GDP, which called for a 2.1% contraction, down from the previous forecast for a 1.0% decrease. While the forecast is now calling for a sharper contraction, it will also fuel speculation about the Fed halting its rate hike cycle sooner than previously thought.

This effort left all 11 S&P 500 sectors in the green to end the week. The leaders were utilities (+2.5%), consumer discretionary (+2.0%), real estate (+1.9%), and energy (+1.4%). At the bottom of the pack was information technology (+0.3%), materials (+0.7%), communication services (+0.7%), and industrials (+0.9%).

The late session buying mentality could not save semiconductor stocks after Micron's warning. The PHLX Semiconductor was a notable area of weakness today, closing down 3.8%, widening this week's loss to 9.6%. Many of the index components set new 52-week lows, including Micron. Other stocks that reached new lows include NVIDIA (NVDA 145.23, -6.36, -4.2%), Intel (INTC 36.34, -1.07, -2.9%), and Advanced Micro Devices (AMD 73.67, -2.80, -3.7%). This contributed to the relative weakness in the information technology sector today. 

Treasury yields fell sharply on the heels of the June ISM Manufacturing Index release but settled the session near intraday highs. The 2-yr note yield fell ten basis points to 2.83%, versus the intraday high of 2.86%. The 10-yr note yield fell eight basis points to 2.89%, versus the intraday high of 2.90%.

Reviewing today's economic data:

  • The June ISM Manufacturing Index decreased to 53.0% ( consensus 55.0%) from 56.1% in May. A number above 50.0% is indicative of expansion. June marked the 25th consecutive month of expansion in the manufacturing sector, although the June reading was the lowest reading since June 2020.
    • The key takeaway from the report is that it connotes a clear slowdown in manufacturing activity, highlighted by the first contraction in new order activity in 25 months.
  • Total construction spending declined 0.1% month-over-month in May (consensus 0.4%) following an upwardly revised 0.8% increase (from 0.2%) in April. Total private construction was flat month-over-month while total public construction decreased 0.8%. On a year-over-year basis, total construction spending was up 9.7%.
    • The key takeaway from the report is that weak levels of public construction spending were not offset by private residential spending, which was on the softer side due to the weakening housing starts activity (-14.4% month-over-month) in May.
  • The June IHS Markit Manufacturing PMI - Final reading was 52.7 versus the prior reading of 52.4.

As a reminder, bond and equity markets will be closed Monday for Independence Day. Looking ahead to Tuesday, economic data will be limited to May Factory Orders (prior 0.3%) at 10:00 a.m. ET.

  • Dow Jones Industrial Average: -14.4% YTD
  • S&P 500: -19.7% YTD
  • S&P 400: -19.3% YTD
  • Russell 2000: -23.1% YTD
  • Nasdaq Composite: -28.9% YTD