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Stocks Give Up Early Gains, Senate Agrees to Text of Bipartisan Infrastructure Bill, Square Reports Earnings, Announces Deal With Afterpay, Manufacturing Activity Lower Than Expected in ISM Report, and Treasury Department to Start “Extraordinary Measures” as Congress Debt-Ceiling Expires.

1. Stocks Give Up Early Gains

Stocks gave up their early gains and finished slightly in the red on Monday, as the DJIA lost -0.3%, S&P 500 -0.1%, Russell 2000 -0.4%, while the Nasdaq 100 was flat. In sector performance, Utilities was the top gainer up 0.7%, while Industrials was the top loser down -1.2%. In the news, Square released earnings and announced a $29B all-stock acquisition of Australian FinTech company AfterPay, and the Senate has finalized the text of the $1.2T Infrastructure bill. 150 companies in the S&P 500 release earnings this week, including major names like Eli Lilly, Amgen, General Motors, Conoco Phillips, Activision, Marriott, and Viacom. Up to this point in the season, more than 60% of S&P 500 companies have reported results, with 88% beating EPS estimates. In economic data, ISM’s Manufacturing Purchasing Managers Index came in strong at 59.5 but lower than expectations, and Construction Spending for July increased 0.1%, also lower than expectations. On Friday, the monthly jobs report will be released from the Bureau of Labor Statistics. In other markets, Crude Oil sold off -3.4% to $71.40/Barrel, Gold was flat at $1816/Ounce, the US Dollar was flat, and Bitcoin sold off -2% to $39,000/Coin.

2. Senate Agrees to Text of Bipartisan Infrastructure Bill

On Sunday, The U.S. Senate finalized the text on its $1T bipartisan infrastructure bill. The text for the Infrastructure Investment and Jobs Act, which has been among the top priorities for President Joe Biden, includes over 2,700 pages. The bill also includes $550B in new spending over five years to build roads and electric vehicle charging stations, as well as replace lead water pipes. That’s added onto the previously approved amounts of around $450B. The draft was completed over the weekend as Senators finished the text of the bill that is set to put $110B for roads, $66B for rail, $55B for water, and $39B for public transit, to name a few of the targeted projects. The bill is expected to pass the Senate with bipartisan support, as soon as this week, according to Senator Joe Manchin. If it passes the Senate, it would then go onto the House of Representatives, before it could hit the President’s desk. If passed, it would become one of the largest bills in history and allocates much-needed funding over the next 5-10 years for traditional infrastructure projects. President Biden originally sought over $2T for an infrastructure and economic recovery package, but Republicans shot down the idea due to the cost of the plan. The text of their legislation, which on Sunday was finally agreed to, comes after months of negotiations between many groups of senators and the White House.

3. Square Reports Earnings, Announces Deal With Afterpay

Square stock is up over 11% on Monday after reporting earnings of $0.66 and revenue of $4.7B, beating the consensus earnings estimate of $0.30 EPS, but missing on the revenue estimate of $5B. However, the company did see revenue surged over 143% on a year-over-year basis based on solid growth in its Cash App and Sellers ecosystem. Cash App brought in $3.33B of revenue while delivering $546M of gross profit. Shares of the company also were on the rise due to the announcement that came on Sunday that Square plans to buy the Australian fin-tech company Afterpay for $29B. The deal is an all-stock deal and also the amount marks around a 30% premium to Afterpay’s last closing price. The deal will allow the company to further expand into the booming installment loan market. Square’s CFO Amrita Ahuja Square’s cited that the company sees the acquisition as an opportunity to create a more powerful e-commerce platform that will please growing consumer interest in transparent buying opportunities and also offer some new ways for them to serve their customers. The company’s gross profit rose 91% from a year ago, which represented a record quarterly growth rate. Net revenue excluding bitcoin came in at $1.96B for the quarter, which shows an 87% rise on a year-over-year basis. The Q2 report was originally set to be released on Wednesday, but following the big deal, the company released them late on Sunday. Square’s bitcoin revenue surged around 207% to $2.72B, while the transaction revenue of $1.23B, an 81% increase.

4. Manufacturing Activity Lower Than Expected in ISM Report

On Monday, the July Manufacturing ISM Report on Business was released showing that economic activity in the manufacturing sector increased at a slower pace in July compared to the previous report in June as labor and transportation issues continue to impact the sector’s growth. However, the overall economy grew for the 14th straight month. The Purchasing Managers’ Index (PMI) fell 1.1% to 59.5%, down from the 60.6% reading in June. The employment index did see a 3% increase, up to 52.9, while the supplier index fell to 72.5%, a 2.6% decrease. The New Orders Index came in at 64.9%, dropping 1.1% from June’s showing of 66%. The Production Index registered 58.4%, a 2.4% decrease from the 60.8% June reading. The Prices Index showed 85.7% for July, a 6.4% decrease from the 92.1% in June. Timothy Fiore, Senior Vice President of the ISM Manufacturing Business Survey Committee cited that as they enter Q3, all segments of the manufacturing economy are impacted by near record-long raw material lead times, continued shortages of critical basic materials, rising commodities prices, and difficulties in filling open positions continue to be issues limiting manufacturing growth potential. Optimistic panel sentiment remained strong, with 13 positive comments for every cautious comment.

5. Treasury Department to Start “Extraordinary Measures” as Congress Debt-Ceiling Expires

On Monday, it was announced that the Treasury Department will begin conducting emergency cash-conservation steps to help avoid busting the federal borrowing limit after a two-year suspension of the debt that expired at the end of July. This will allow the Treasury to begin paying off the government’s bills without bringing on new debt for around two to three months. After that time, Congress will need to either raise or suspend the borrowing limit or risk the U.S. backing out on its obligations. The new debt limit will include Washington’s additional borrowing since summer 2019. The Congressional Budget Office estimated in July that the new cap will likely come in just shy of $28.5T.


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