Pre-Market Stocks: Key to Getting the Global Economy Back to Work

The good news is that there are some signs that the situation is starting to improve. The bad news: huge risks – from another spike in coronavirus cases to labor disputes involving American railroad workers — prevent greater confidence, clouding the outlook for the global economy.

What’s happening: The recovery from the pandemic has created a wave of demand that manufacturers and a network of players involved in moving goods around the world have been unable to cope with. But after 18 months of pain, there are some signs that the condition is starting to improve.

Cargo is running smoother and the transit of goods has largely recovered from the initial shock of the war in Ukraine, Konstantin Krebs, a managing partner at Capstan Capital, an investment banking firm that works with investors in containers and shipping, told me.

“Containers are back in service and you can feel it,” Krebs said.

Global Supply Chain Pressure Index from the Federal Reserve Bank of New York declined between April and June, although it remains “at historically high levels.”
The cost of booking a 40-foot sea container has dropped to almost $6,400. cargo platform Freightos. It was closer to $9,300 at the beginning of the year after breaking above $11,000 last September.

And the Morgan Stanley Business Conditions Index for July, released on Monday, showed “progress in improving terms of supply.” The proportion of analysts who say supply chain conditions are improving rose from 17% to 54%, with none reporting worsening conditions.

China was also able to handle large volumes containers at key ports despite restrictions aimed at completely stopping the spread of Covid-19, easing fears that President Xi Jinping’s approach to eradicating the virus will greatly exacerbate congestion.

However: the timing of full normalization is still a guess.

According to a Morgan Stanley poll, 54% of respondents believe supply disruptions will end in the first half of next year, and nearly a third believe it will take longer.

Boeing (bachelor) CEO Dave Calhoun said Monday that the aircraft manufacturer’s supply chain problems could persist for another 18 months, preventing it from producing as many aircraft as it would like.

Circumstances are still changing rapidly, making forecasting even more difficult.

An increase in infections associated with Omicron’s BA.5 sub-variant could spark a new wave of worker shortages and port clogs, Krebs said. It is also necessary to monitor the possibility of new sanctions against Russia or another round of blocking in China.

Train disruptions are also causing friction on key transportation routes such as the Port of Los Angeles. President Joe Biden last week took action to prevent a US rail strike that would bring nearly 30% of the country’s freight traffic to a halt, but the clock is ticking for the parties to find a long-term solution.

In the meantime, a global recession will sharply ease the pressure. The drop in demand will lead to a reduction in traffic in the supply chain much sooner than expected.

Taking a step back: How quickly supply chains return to normal will have major implications for inflation, which is driven in part by limited access to the supply of goods. Trends will help set the path for politicians like the Federal Reserve.

Tech companies limit hiring due to uncertainty

For much of the past decade, tech companies have showered corporate employees with lavish compensation packages and lavish quick-hire perks. Now they pulling backchoosing caution as they prepare for a possible recession.
Latest: Bloomberg reported on Monday that Apple (AAPL)most valuable US company intends to slow down hiring and rising spending next year in some divisions.

Other tech firms, including Google’s parent company Alphabet, Uber, Lyft, Snap and Twitter, have also announced plans to slow or suspend hiring.

“Moving forward, we need to be more adventurous, work with more urgency, sharper focus and more hunger than we have shown on sunnier days,” Sundar Pichai, CEO of Alphabet. staff memo says last week. “In some cases, this means consolidating where investments overlap and streamlining processes.”

Investor comment: Apple shares fell more than 2% on Monday. Since the beginning of the year, it has decreased by more than 17%. That’s slightly better than the broader S&P 500, which is down almost 20% over the same period.

The news put Wall Street on edge ahead of the big tech earnings report due next week. Apple is due to release the results on July 28th.

The big question is: are tech companies trying to get ahead of a potential drop in economic activity, or are they already seeing signs of a slowdown in their business?

In April, Apple warned that its revenue would fall between $4 billion and $8 billion due to continued supply chain disruptions. A strong dollar is also expected to be a major deterrent.

The mood on Wall Street is grim. It’s not necessarily bad

It’s no secret that investors were in a grim mood as fears of a quick withdrawal of central bank support and the growing possibility of a global recession are worrisome.

But the latest survey of global fund managers from Bank of America, released Tuesday, shows “a terrible level of investor pessimism.”

Global growth expectations are at an all-time low, while cash levels have not been this high since 9/11. The allocation of money to stocks hasn’t been this thin since the 2008 financial crisis.

What it means: For some, this may be a signal to start buying risky assets like stocks again. Investors are watching for a moment known as “surrender” when sentiment becomes so bearish that it can’t get any worse. This indicates that the bottom of the sell-off may be close.

“The sentiment is for stocks and loans to rise in the coming weeks,” said Michael Hartnett, chief investment strategist at Bank of America.

Next

Ally financial (ALLY), Halliburton (HAL), Hasbro (IT HAS), Johnson and Johnson (JNJ) as well as truist (TFK) all results reports prior to the opening of US markets. JB Hunt and Netflix (NFLKS) follow after closing.

Also today: U.S. housing permits and U.S. building permits for June came in at 8:30 AM ET.

Tomorrow: Income from Tesla (TSLA) as well as United Airlines (UAL).

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