>>> Stoxx 600 Pre-Market Indications

  • Nel (D7G TH) +1.8%
    • Nel Signs Frame Pact With Howden for Hydrogen Compressors Supply
  • BP (BPE5 TH) +1.1%
  • Glaxo (GS7 TH) +0.9%
    • Glaxo Raised to Hold at Deutsche Bank; PT 1,350 pence
  • Hannover Re (HNR1 TH) +0.8%
  • Christian Dior (DIO TH) -1.2%
  • Ericsson (ERCB TH) -1.7%
  • Red Electrica (RE21 TH) -1.9%

>>> TradeGate Pre-Market Indications

DAX:
  • Covestro (1COV TH) +0.9%
MDAX:
  • Wacker Chemie (WCH TH) +1.9%
    • Watch Solar Stocks With U.S. to Block Some Xinjiang Products
  • Nordex (NDX1 TH) +1.1%
    • Statement: AES Brasil awards Nordex Group a 314 MW contract in Brazil
  • Varta (VAR1 TH) +1%
    • Morgan Stanley Raises Varta Voting Rights to 5.36%
  • Telefonica Deutschland (O2D TH) +0.8%
SDAX:
  • SGL (SGL TH) -1%
    • NOTE: Stock rose 15% on Wednesday

>>> Europe : Brokers Upgrades & Downgrades - 24th of June 2021

>>> Up
* Campari Raised to Neutral at Citi; PT 11.50 euros
* Credit Suisse Raised to Buy at Berenberg; PT 11 Swiss francs
* Glaxo Raised to Hold at Deutsche Bank; PT 1,350 pence
* Pernod Ricard PT Raised to 220 euros at Deutsche Bank
* Thyssenkrupp Raised to Hold at LBBW; PT 9 euros

>>> Down
* BP Cut to Hold at HSBC; PT 360 pence
* Europris Cut to Hold at SEB Equities; PT 52 kroner
* Pirelli Cut to Sell at Goldman; PT 4.70 euros

>>> Initiation
* Alphawave IP Rated New Overweight at JPMorgan; PT 450 pence
* Coface Rated New Buy at Berenberg; PT 12.40 euros
* Conduit Rated New Buy at Berenberg; PT 620 pence
* Cora Gold Rated New Buy at Fundamental Research; PT 18 pence
* Ebro Foods Rated New Outperform at Oddo BHF; PT 22.70 euros
* Helvetia Rated New Hold at Berenberg; PT 98 Swiss francs
* LDA SM Rated New Buy at Berenberg; PT 2.08 euros
* NOS Reinstated Overweight at JPMorgan; PT 4 euros
* Phoenix Group Rated New Hold at Berenberg; PT 790 pence
* Square Rated New Buy at DA Davidson; PT $275
* Talanx Rated New Buy at Berenberg; PT 44.50 euros
* Viscofan Rated New Outperform at Oddo BHF; PT 66.85 euros

>>> Call
* Credit Suisse Can Deal With Issues, Berenberg Upgrades to Buy

>>> What to look at today - 24th of June 2021

Asian stocks were steady Thursday after U.S. shares moved in narrow ranges as traders digested commentary from Federal Reserve officials on the outlook for stimulus. Treasuries retreated.
Stocks were little changed in Japan and edged lower in China, where the central bank boosted its short-term cash injection for the first time since March. U.S. futures advanced, following a modest drop in the S&P 500 despite gains among firms that benefit from economic reopening. A rally in Tesla Inc.helped the Nasdaq Composite eke out another record.
Dallas Fed President Robert Kaplan, who’s penciled in a rate hike next year, said the economy will likely meet the Fed’s threshold for tapering asset purchases sooner than people think. His Atlanta counterpart Raphael Bostic said the central bank could decide to slow such purchases in the next few months.
The yen held a slump in part as the rebound from the pandemic dents the allure of haven currencies. South Korea’s won rose after central bank Governor Lee Ju-yeol gave his clearest signal yet that interest-rate increases are in the pipeline. The nation’s stock index is at an all-time high.
US After Hours  Pretty quiet after hours; Solar stocks in focus as US may block some products, according to Bloomberg; SCS +5.8% higher on earnings while KBH -3.8% falls on earnings

Nikkei -0.08% Hang Seng +0.13% CSI -0.04% Shanghai -0.07% Shenzen -0.52%

Eur$ 1.1923 CNH 6.4833 CNY 6.4811 JPY 110.88 GBP 1.3956 CHF 0.9194 RUB 72.6345 TRY 8.6642 WTI$ 73.19 +0.15% GOLD 1,774.16 -0.24% BTC 32,800 -915 ETH 1,925 -62

S&P +0.18% Nasdaq +0.24% EuroStoxx +0.20% FTSE +0.06% Dax +0.06% SMI +0.18%

Macro :
- Italy Mulls 2040 Ban on Gas, Diesel Cars: Minister in Repubblica
- Investors Are Flocking Back to Gold ETFs as Prices Languish
- U.S. to Block Some Solar Goods Made in Xinjiang Region
- London West End Landlord Expects Retail Crisis to Get Even Worse
- Fed’s Kaplan Says U.S. Oil Production May Lag Demand
- From ABN to UniCredit, ECB Lifting of Payout Cap Is Now Catalyst

Spacs :
- Perella Weinberg-Linked SPAC FinTech Jumps After Merger Approval
- Ackman Has Engaged With Another Target for Blank-Check Company
- Carlyle-Backed Syniverse Said in M3-Brigade SPAC Merger Talks

Keep an eye on :
- 888 LN : Sports Illustrated Brand Comes to Online Betting in License Deal
- AGFB BB : Agfa to Increase Offset Printing Plate Prices by Up to 10%
- AAPL US : France Sues Apple on Developer Contracts Tied to App Store: Rtrs
- BATS LN : FDA Chief Ties E-Cigarette Maker to Youth Vaping Epidemic
- BYG LN : Big Yellow Group Seeks GBP100m From Share Sale to Fund M&A
- IAG LN : Watch Travel Stocks With Latest U.K. Decision on Curbs Ahead
- BTG GY : Bertelsmann Said to Explore Options for Call Center Unit Majorel
- EDF FP : U.K. Regulations on Nuclear Financing Could Come in Autumn: EDF
- EURCAR FP : Europcar Rejects EU0.44/Share Approach
- FLTR LN : Florida May Vote on Mobile Sports Betting in 2022: Sports Handle
- FSKRS FH : Fiskars Boosts FY Adjusted Ebita Forecast
- HCM LN : Hutchmed (China) Prices Global Offering at HK$40.10/Share
- ICAD FP : Icade Sante Buys 4 More French Healthcare Sites for About EU47m
- ICEAIR LN : Bain Capital to Subscribe to a 16.6% Stake in Icelandair Group
- KAHOT NO : Kahoot Says Haudemann-Andersen Trims Stake to 8.5%
- KER FP : Kering Invests in British Bag Rental Business Cocoon: Statement
- OR FP : L’Oreal Forms New Europe Zone Led by Vianney Derville
- RAT LN : Rathbone Buys Saunderson House for GBP150m; Plans GBP50m Placing
- RYA LN : Watch Travel Stocks With Latest U.K. Decision on Curbs Ahead
- STLA IM : Italy Mulls 2040 Ban on Gas, Diesel Cars: Minister in Repubblica
- STLA IM : Gefco Is Up for Sale In Deal Possibly Worth Over EU2b: Rtrs
- SKB GY : Koenig & Bauer Sees Extraordinary Income of Around EU20m
- LHA GY : Lufthansa Consulting Signs Deal to Help Revive Sudan Airways
- SHL GY : Siemens Healthineers to Buyback Shares up to EU170m
- STM FP : STMicro Partners With Tower To Speed-Up Italy Plant Production
- STM FP : Patent Case Against STMicro Over Sensors to Be Probed at ITC
- TECN SW : Tecan to Buy Paramit
- TSLA US : Electrek.Co: Fleet of 50 Tesla taxis gets shut down in NYC for some sketchy reasons https://t.co/gxbi5JRn1U by @fredericlambert
- VIV FP : Ackman Has Engaged With Another Target for Blank-Check Company
- VIFN SW : Vifor Pharma Revises Diamond Trial, Expects Readout in 2H

FT : Wirecard: a record of deception, disarray and mismanagement

Wirecard: a record of deception, disarray and mismanagement
Documents reveal that the German payments processing company was a chaotic, byzantine and often ineffective organisation

Jan Marsalek’s man in Manila was so shocked that, for a split second, he let down his guard. It was mid-May last year and within a few weeks payment processor Wirecard would crash spectacularly into insolvency and Marsalek, its chief operating officer, was on the run.

Based in the Philippines, Christopher Bauer was a former Wirecard employee who had gone on to lead one of the German company’s partner firms that would prove to be fraudulent. He had just been informed that auditors combing through Wirecard’s books wanted to see an interbank transfer of €440m to test whether the company had access to the €1.9bn of cash it claimed on its balance sheet. Neither the bank accounts in the Philippines nor the cash in them ever existed.

“Tell me, have you guys now completely lost your mind?” Bauer scolded in a blunt email to Marsalek.

The exchange between the two men is just one nugget in internal communications that offer a unique insight into the inner workings of the once high-flying start up that in its heyday was worth €24bn but which became one of the most spectacular cases of white collar crime in Europe.

The Financial Times has reviewed emails, internal chats, minutes of supervisory board meetings and other documents, as well as hundreds of hours of witness hearings by Germany’s parliamentary inquiry commission into the scandal.

The picture they paint is striking. In the aftermath of Wirecard’s collapse, it quickly became clear that the company’s top echelon had spent years deceiving investors, regulators, auditors and large parts of its own staff. But what the internal communications also show is that the confused and disorderly scenes of its past few weeks were anything but an isolated incident.

The documents and testimony reveal a company shaped by persistent mismanagement. Wirecard had presented itself as one of Germany’s rare technological success stories; but on the inside, it was a chaotic, byzantine and often ineffective organisation.

In one of the most striking examples of the weakness of Wirecard’s business, many of the operations that actually existed had been lossmaking for years, and some were heavily cash-burning.

Even Alexander von Knoop, the company’s chief financial officer, was not fully aware of the extent of the losses. In one instance, he was outraged when he learned in July 2019 — some 18 months after his appointment — that Wirecard’s relationship with Aldi, the supermarket chain it had boasted about being one of its clients, had generated close to €5m in losses over the previous three years.

“With all due respect for flagship clients, what is the plan to become profitable with Aldi in future?”, he asked his underlings by email. He never received a convincing answer.

‘Phew! Not cool’
The documents are full of insights into the chaotic last days. Bauer, the former Wirecard employee, was in charge of Manila-based PayEasy, one of three of Wirecard’s Asian outsourcing partners that, in theory, accounted for half of the payment group’s revenue and all of its profits.

On paper, these “third party acquiring” operations had generated €1.9bn in cash held in escrow accounts at banks in Asia, Wirecard had told its auditor EY. In previous years, the Big Four firm had accepted documents that were provided by Wirecard’s trustee, who the company said was overseeing the accounts on behalf of Wirecard and its business partners.

However, in May 2020 — after a devastating special audit by rival Big Four firm KPMG had cast doubt over the TPA business — EY demanded additional proof and asked Wirecard to transfer €440m of the cash from Asia to Germany.

When Bauer learned about this request, he wrote his sarcastic email to Marsalek. One month later, EY realised that the escrow accounts, and the €1.9bn purportedly deposited there, were a sham. Within a week, the German payments group collapsed into insolvency, and chief executive Markus Braun was arrested. Bauer was reported dead in the Philippines in July 2020.

But the air of disarray goes well beyond the efforts to deceive auditors. Braun loved to tout Wirecard’s state-of-the-art technology and algorithms to investors — part of the pitch that won the company such a high valuation. But the documents show that, in reality, the IT was clunky and heavily fragmented.

In 2014, after Wirecard lost German carrier Air Berlin as a client, a senior employee explained to Marsalek that poor client support, inefficient IT and incorrect payment settlements were the reasons for Air Berlin’s move. “The requirements of such a big client were simply not dealt with properly [by us]”, the employee pointed out, warning other large clients may jump ship “if we do not manage to set up efficient support and development processes.” Marsalek’s response: “Phew . . . Not cool!”

Five years later, the same flaws remained. In 2019, Wirecard paid penalties to no-frills airline Wizz Air for several months in a row after payments were repeatedly mishandled. “Besides the penalty, it makes me very, very nervous seeing heavy (!) complaints from the merchants on this recurring error. Seems we have a serious problem that we can’t fix,” a senior employee wrote to colleagues.

A month later, Wirecard lost a pitch at Check24, a leading price comparison website which turned to a rival instead. “Honestly speaking, I was bitten once because our current relationship with Wirecard is not satisfactory,” a Check24 executive told Wirecard, adding that Wirecard’s offer during the pitch “was the most expensive one”. A senior employee subsequently remarked drily: “This highlights our biggest weaknesses.”

Deals not sealed
Braun, who held a 7 per cent stake in the company, rarely involved himself in such problems. He was more focused on boosting Wirecard’s share price with a continuous stream of upbeat press releases.

This led to situations verging on the absurd. In July 2014, negotiations over a partnership with an Indian payments firm were still ongoing, but Braun demanded that it was announced nonetheless. “The approval of the release is extremely important,” Wirecard’s head of communications Iris Stöckl informed Marsalek, who was leading the negotiations. “[Markus Braun] demands that it will be sent out tomorrow morning even without [our partner’s] consent. Normally that would not be possible but unfortunately our share price is rather weak at the moment,” she added.

Marsalek’s annoyed response: “Please hang on a few minutes!” The press release was then published on the subsequent day.

Braun had little, if any, tolerance for dissenting views. Rainer Wexeler, the longtime boss of Wirecard Bank, told MPs how he was summoned to the CEO’s office after opposing a highly questionable loan to a Wirecard business partner. “He took off his jacket, and told me: I am the owner, and only the owner can reject [a loan],” Wexeler recalled, adding that Braun accused him of hampering Wirecard’s growth and harming its business, which “pays my salary too”.

Braun even scolded fellow management board members with dissenting views. In November 2018, chief product officer Susanne Steidl took issue in an email with a draft press release which stated that new products launched by Wirecard would soon generate an additional €100m in revenue. “I don’t want to be the party pooper but this simply seems to be too high by a factor of 10,” Steidl argued, pointing out that the new products at that point generated “almost no revenue”.

Braun immediately sent Steidl a terse text message: “I would be very grateful for not pursuing such discussions by mail with a large distribution list!!” One day later, the press release with the highly ambitious revenue target was published.

Braun, one of three Wirecard executives who have been in police custody since last summer, is accused by Munich prosecutors of being the mastermind of a criminal racket. He denies any wrongdoing and argues he is a fraud victim, too.

While the emails do not provide evidence that Braun was informed about balance sheet manipulations, they reveal a cavalier relationship with facts. In an analyst call in early February 2019, he touted Wirecard’s “compliance department”. In reality, Wirecard’s compliance department was only established in the summer of that year, the company’s former head of compliance told MPs.

In early 2019, Braun was also taken to task by Singapore law firm Rajah & Tann for misleading statements over an ongoing investigation into whistleblower allegations that were uncovered by the FT. He repeatedly stated that the probe did not deliver “any conclusive findings of criminal misconduct on the part of any officer or employee of the company”.

Rajah & Tann informed him in a curt letter that his view was incorrect and ordered him not to repeat the argument: “We regret that we are unable to agree with the views publicly expressed by Wirecard AG and/or its CEO,” adding that “many of the initial suspicions [raised by the whistleblower] appear substantiated.”

Wirecard’s concern was not how to set the record straight but that the letter might leak. “Your statement that you disagree with our publicly expressed views does [ . . .] put us in a very difficult situation,” Von Knoop, the CFO, wrote to the law firm, adding that “hostile and most likely criminal forces are currently actively looking for opportunities to damage the reputation of Wirecard! Your letter could be misused for this.”

Hiring investigators
Another example of Wirecard’s ambiguous relationship with facts arises from its surveillance of external critics.

When the FT reported in 2019 that short sellers were targeted in a sophisticated spy operation, the company denied any involvement.

It acknowledged that private investigators in 2016 surveilled critics but stressed that this happened without its knowledge and claimed that the surveillance was stopped immediately after senior management learned about it.

In fact, however, the emails show that Braun, Stöckl and then-chief financial officer Burkhard Ley were made aware in August 2016 that Kroll, a London-based investigations firm hired by Wirecard, was surveilling London-based short sellers. Kroll was mandated by Wirecard to track down the authors of the anonymous Zatarra report, which accused Wirecard of money laundering and sent its share price down.

In August, Kroll shared surveillance pictures of the two authors Matthew Earl and Fraser Perring. Two months later, it stated in a dossier that they established Perring’s identity through “targeted source enquiries, open source research and surveillance” and “identified [Perring] by comparing a surveillance photo of him with his Facebook page”. The emails do not show any objection by Wirecard to the surveillance.

Wirecard’s London-based lawyers at Jones Day gathered information from Lincolnshire Police about a criminal complaint filed by Perring over alleged harassment by Wirecard. A Jones Day employee informally approached a police officer working on Perring’s complaint and sounded him out.

“At the onset of the call, [the officer] was fairly careful in what he said but he opened up as the call progressed,” Jones Day partner Sion Richards informed Wirecard’s top echelon in an email in January 2017.

After detailing the police’s assessment on the complaints, Richards stressed in bold: “It was made very clear by [the officer] that the information was provided on a confidential basis. Nothing that was said in the course of the conversation can be fed back to Perring or his solicitors or any third party.” On the next day, Braun told Richards: “Well done”. Kroll declined to comment.

Jones Day told the FT that none of its employees engaged “in any inappropriate conduct vis-à-vis the Lincolnshire police (including, for the avoidance of doubt, the provision of any financial benefits)” and declined to comment further. Lincolnshire Police did not respond to an FT request for comment.

‘Proactive defence steps’
When FT investigative journalist Dan McCrum contacted various Wirecard executives for the first time in October 2014, requesting to discuss “a story that I’m working on”, he was ridiculed. “A real nutcase,” Marsalek told Manila-based Bauer, who responded: “Yes, he needs to tell us what he is smoking in the evening.”

A year later, after McCrum’s “House of Wirecard” series was published on FT Alphaville, UK-based law firm Schillings compiled a 19-page “investigative report” about McCrum for Wirecard, noting that his articles about the company were “all negative in tone” and claiming that there was a “question mark over McCrum’s interest” in the company as he gave “no explanation” for it.

While Schillings acknowledged that it might be possible that the articles were triggered by “genuine interest”, they also suggested to Wirecard that he might have been bribed to write them, concluding that this appeared “unlikely” as he would “risk his job and journalistic integrity”. Moreover, Schillings noted they could not “identify any evidence in McCrum’s personal life to suggest he has become more affluent recently”.

The report offered a series of recommendations: Wirecard could do nothing, Schillings could dig deeper, or together the law firm and Wirecard could take “proactive defence steps.”

It also said that depending on circumstances, there may be other options for dissuading McCrum or the FT from publishing further articles of a similar type. Schillings has said it acted entirely properly throughout, in compliance with its legal and regulatory obligations. 

Four years on, when Marsalek was discussing how to respond to a McCrum inquiry, a colleague based at Wirecard’s Aschheim HQ suggested in a text message that “his Russians” should deal with “the problem” by “providing silence for us”.

Braun, on the other hand, played down the FT’s reporting until the very end. Last June, McCrum co-authored an article that cited EY saying it had “not formed an audit opinion [about Wirecard] and cannot confirm any conclusions”. Braun responded: “I doubt that anyone did actually talk to him. [ . . .] As it is coming from McDrum [sic], it is obviously not true.”

Nine days later, EY pulled the plug.

FT : Unsolved murder of ‘diligent’ financier chills Lebanese bankers

Unsolved murder of ‘diligent’ financier chills Lebanese bankers
Those working in the once prestigious sector are now blamed by many for the country’s financial crisis

At about 7am on a June day last year, veteran banker Antoine Dagher left home for one of Lebanon’s biggest banks, his employer for the past 20 years. But the head of Byblos Bank’s ethics and anti-fraud department never arrived.

A few hours later, Dagher’s wife found his body on the ground by his grey Honda near their home in Hazmiyeh, an exclusive suburb minutes from downtown Beirut. He had been stabbed five times.

A year on, the unsolved murder of the father of two hangs over Lebanon’s once prestigious banking industry. In a police report seen by the Financial Times, investigators said nothing had been stolen, but identified no motive and have charged no one.

With no clear answers available, many bankers have drawn what they see as an inevitable conclusion: his murder relates to his work. Lebanon’s banks are under attack from protesters angry at their role in the country’s financial crisis and from customers unable to withdraw their cash. “It was terrifying and shocking,” said one of Dagher’s former colleagues. “And until now, we don’t understand anything.”


Before running the bank’s ethics and anti-fraud department, Dagher was head of Byblos Bank’s compliance unit for a decade.

The job of compliance bankers is to ensure their employers abide by local and international rules on money laundering and terror financing. In Lebanon, “compliance is a risky business, if you do it properly”, said one former regulator. The stakes are high: “You have Hizbollah [a paramilitary and political party designated a terrorist organisation by the US], you have [politicians and their families], and you have corrupt banks’ management.”

An already difficult job has been complicated by the country’s financial crisis, which erupted amid mass protests and a two-week banking shutdown in October 2019. Lebanon’s problems, worsened by the pandemic and a massive explosion at the port in Beirut last year, have their roots in decades of state mismanagement and political corruption.

About 40 banks serve Lebanon’s 7m residents and many of them had invested heavily in government debt as well as the central bank. About 70 per cent of total banking assets are exposed to the Lebanese sovereign, according to the World Bank. The state defaulted on its debt last year and banks have since been forced to sell overseas operations and lay off staff in sweeping restructurings.

Lebanon’s gross domestic product has shrunk by more than a fifth since the crisis began and its economy has largely shifted to cash. “It’s not normal banking,” said a senior banker. “We’re dealing with crisis and craziness.” The sector’s reputation has been ruined. “A Lebanese banker was a precious commodity,” the senior banker said, citing the financiers’ successes at top banks abroad. But two years into the meltdown, now “your name is trash”.

Disillusionment within Lebanon’s banking sector is common. While there is no law on capital controls, individual banks have severely limited withdrawals and transfers. The client-facing banker said they have to reject what they consider valid requests to access funds, such as medical bills, while delivering some services, such as new accounts or withdrawals, only for VIP clients or bank managers.

With financiers vilified for their role in the crisis, and depositors cut off from their money, enraged clients and protesters have torched bank branches and abused staff. The client-facing banker said customers have pulled guns on managers, demanding to withdraw their own cash.

Their work is now “very dirty”, the client-facing banker said. But employees have no choice in order to keep their job and preserve their safety: “We are afraid, we are living in a country where there is no security, they can kill us.”

Their fear stems from Lebanon’s culture of impunity. Dagher’s murder is not unique in remaining unsolved. Dozens of political assassinations have gone unpunished in recent years. “The judiciary and security forces’ inability to solve murders . . . has really led to the public losing faith in [their] ability . . . to protect them,” said Aya Majzoub, Lebanon researcher at Human Rights Watch.

Pressure has also come from outside Lebanon. More banks were sanctioned in the run-up to the crisis. In 2019, the US Treasury imposed sanctions on the Jammal Trust Bank for allegedly helping Hizbollah — it is now in liquidation. Lebanon’s central bank governor is the subject of two European money-laundering and embezzlement investigations. He denies wrongdoing.

A severe dollar shortage has made it easier for criminals to launder money through banks, desperate for cash. “It is very hard to trace and verify the real source” of cash, a compliance specialist said. Since the crisis began, “compliance is not first priority, surviving is first priority”, the specialist said.

Byblos Bank said it had co-operated with the official investigation into Dagher’s death, but declined to answer other questions. Four bankers said Dagher was popular, known for decency and diligence. “He was the most ethical person at the bank,” said a former colleague, adding: “If he could see what is happening now [in the sector], I’m sure he would have resigned.”

Dagher “was everybody’s favourite”, said his daughter, Michèle. But Elie, his son, added: “We never realised how dangerous his job is.”

>>> US Close Dow -0.21% S&P -0.11% Nasdaq +0.13% Russell +0.00%

Closing Stock Market Summary

The S&P 500 decreased 0.1% on Wednesday, and came within one point of its all-time high (4257.16), while the Nasdaq Composite (+0.1%) eked out intraday and closing record highs. The Russell 2000 (+0.3%) sided with the Nasdaq in positive territory while the Dow Jones Industrial Average (-0.2%) closed slightly lower. 

Overall price action was tight ranged, and trading volume was relatively light at the NYSE on this slow summer day. Eight of the 11 S&P 500 sectors closed lower, although advancing issues did outnumber declining issues at both the NYSE and Nasdaq. 

The utilities sector (-1.1%) lagged with a 1% decline while the consumer discretionary (+0.6%), energy (+0.3%), and financials (+0.3%) sectors padded their weekly gains. Tesla (TSLA 656.57, +32.86, +5.3%) was a driving force behind the consumer discretionary sector on no specific news catalyst.

As for the broader market, there might have a lingering appreciation that Fed Chair Powell told lawmakers yesterday that the Fed isn't going to raise rates preemptively in response to fears of inflation. On a related note, Treasury Secretary Yellen and Atlanta Fed President Bostic (FOMC voter) separately echoed Fed Chair Powell's view that factors contributing to increased levels of inflation are temporary. 

Economic data was mixed, providing fodder for the bulls and bears on Wall Street. Briefly, preliminary data for June out of IHS Markit showed slower growth in the services sector while manufacturing activity increased modestly. New home sales declined 5.9% m/m in May to a seasonally adjusted annual rate of 769,000 (consensus 873,000).

Shares of Comcast (CMCSA 55.48, -2.15, -3.7%) fell nearly 4.0% after The Wall Street Journal published a report speculating the company could potentially be interested in merging with ViacomCBS (VIAC 41.84, +1.09, +2.7%) or acquiring Roku (ROKU 421.70, +18.20, +4.5%). 

U.S. Treasury yields settled slightly higher. The 2-yr yield increased one basis point to 0.24%, and the 10-yr yield increased two basis points to 1.49%. The U.S. Dollar Index increased 0.1% to 91.83. WTI crude futures settled unchanged at $73.09/bbl after briefly topping $74/bbl intraday. 

Reviewing Wednesday's economic data:

  • New home sales declined 5.9% month-over-month in May to a seasonally adjusted annual rate of 769,000 ( consensus 873,000) from a downwardly revised 817,000 (from 975,000) in April. On a yr/yr basis, new home sales were up 9.2%.
    • The key takeaway from the report is that new home sales, which are counted when contracts are signed, are being squeezed by high costs for builders and high prices for buyers. This connection is showing up in the reduced percentage of sales for homes priced under $399,999 and the increased percentage of sales for homes priced over $500,000.
  • The current account deficit for the first quarter totaled $195.7 billion (consensus -$207.1 billion). The fourth quarter deficit was downwardly revised to $175.1 billion from $188.5 billion.
  • The preliminary IHS Markit Manufacturing PMI for June increased to 62.6 from 62.1 in May. The preliminary IHS Markit Services PMI for June decreased to 64.8 from 70.4 in May.
  • The weekly MBA Mortgage Applications Index increased 2.1% following a 4.2% increase in the prior week. 

Looking ahead, investors will receive the weekly Initial and Continuing Claims report, Durable Goods Orders for May, the third estimate for Q1 GDP, and advance May readings for Intl Trade in Goods, Retail Inventories, and Wholesale Inventories on Thursday. 

  • Russell 2000 +16.6% YTD
  • S&P 500 +12.9% YTD
  • Nasdaq Composite +10.7% YTD
  • Dow Jones Industrial Average +10.7% YTD