MARKET WRAPS

Watch For:

Canada Retail Sales for May; American Express Co. 2Q earnings.

Opening Call:

Stock futures rose Friday, putting major indexes on track for weekly gains with large technology stocks driving the rally.

The monthslong rally in stocks has resumed after markets skidded at the start of the week in response to concerns about the fast-spreading Delta variant.

Investors have drawn comfort from rapid earnings growth at the biggest American companies. Money managers also say governments in the U.S. and Europe are unlikely to bring in lockdowns that restrict growth, even if rising cases take the shine off the economic recovery.

"You have an earnings season that is going tremendously well," said Seema Shah, chief strategist at Principal Global Investors. The economic outlook isn't as strong as it was three months ago, but "the path ahead is not that negative and certainly there is a lot of buying the dip," she added.

Ms. Shah is keeping a close eye on what executives are saying about their ability to pass higher input costs to customers instead of taking the hit in profit margins. The flip side: If many companies succeed in feeding costs through, inflation will take longer to subside, which could prompt concerns about higher interest rates and knock the market.

American Express, oil-field services firm Schlumberger, NextEra Energy and industrial conglomerate Honeywell International are among the companies due to report earnings before the bell in New York. Of the roughly 110 companies in the S&P 500 that have posted results for the second quarter, 85% have topped analysts' profit forecasts, according to FactSet.

Snap's stock leapt 17% in premarket trading on revenue that more than doubled in the second quarter and the fastest user growth in four years.

Twitter shares rose over 5% in premarket trading after the social-media company reported a 74% increase in revenue in the second quarter compared with a year before. Intel's stock fell 1.8% after Chief Executive Pat Gelsinger said he sees the global semiconductor shortage potentially stretching into 2023.

Survey data on the manufacturing and service sectors, due at 9:45 a.m. ET, will offer fresh cues on the outlook for the economy. Economists say the U.S.'s growth spurt likely peaked in the spring, but still expect a strong expansion to continue into 2022.

Forex:

Any declines in the dollar will be limited in the near-term as global coronavirus concerns boost demand for safe havens and U.S. business and consumer confidence remain strong, ING said.

"The immediate focus remains on the breakout of the Delta variant particularly in those countries where vaccination rates are low and the only recourse to policymakers is fresh lockdowns," ING analysts said.

This issue is acute in emerging markets so it's no wonder portfolio flows into those regions have gone into reverse and provided support to the dollar, they said.

The European Central Bank's new forward guidance released on Thursday means interest rates will stay lower for longer and the euro will be seen as one of the preferred funding currencies, ING said.

"Certainly there was nothing bullish for the EUR in yesterday's ECB meeting," ING analysts said. The ECB will be pleased that its trade-weighted euro has fallen to lows seen last July, they said.

The ECB on Thursday said interest rates would remain on hold until inflation reaches its 2% target ahead of the end of its projection horizon.

Bonds:

In the bond market, the yield on 10-year Treasury notes ticked up to 1.279% from 1.264% Thursday.

Inflation-linked bonds could become more attractive with anticipated inflation-target overshoot in the eurozone in the second half of the year, said Patrick Barbe, head of European investment-grade fixed income at Neuberger Berman.

"We conclude the quarterly ECB forecasts are becoming the key driver of the negative rate policy, which raises some uncertainties as we expect inflation rate to overshoot the ECB's 2% target in 2H," he said.

This reinforces the attractiveness of inflation-linked bonds and should lead to being cautious on long-term bonds, he said. He added that the ECB's policy stability for a longer period should lead to an outperformance of short- to medium-term bonds.

Commodities:

Oil prices were lower, with both benchmarks having now erased their precipitous drops from earlier in the week.

With reports suggesting that the next OPEC policy meeting will not be until September and the market now appearing to have priced in concerns about the Delta variant, investors will likely return to taking their cues from demand data next week.

Despite worries over Covid-19, DNB Markets's Helge Andre Martinsen points to broader signs of recovery, with scheduled commercial flights continuing to rise and global petroleum inventories continuing to drop.

LME three-month copper prices rose 0.5% to $9,511 a metric ton, rising for a fourth straight day as inventories in LME warehouses continue to drop and the premium paid for the red metal at warehouses in Yangshan continue to rise, according to Marex Spectron's Anna Stablum.

Meanwhile, tin continued its climb, up 1.8% $34,650 a metric ton with "falling inventories, strong regional premiums and tight forward curves all point to a fast uptick in demand in the U.S. and Europe," Ms. Stablum added.

In the precious metals complex, London gold was up, with the U.S. dollar having softened in recent sessions.

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07-23-21 0610ET