* Nasdaq edges green, S&P 500 just below flat, Dow off ~0.6%
* Energy weakest major S&P sector; cons disc leads gainers
* Euro STOXX 600 index up ~0.2%
* Dollar slips; gold up; crude off ~4%, bitcoin drops ~3%
* U.S. 10-Year Treasury yield slides to ~2.93%
July 21 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
MORGAN STANLEY SHOWS APPLE THE WAY BACK TO $3 TRILLION - FOCUS ON SUBSCRIPTIONS (1112 EDT/1512 GMT)
A shift to a subscription-like model could add roughly $1 trillion to Apple's current market capitalization, said analysts at Morgan Stanley.
The i-Phone maker became the first company to hit a $3 trillion stock market value in early January this year as investors bet that consumers will continue to shell out top dollar for iPhones, MacBooks and services such as Apple TV and Apple Music.
Apple's stock price has fallen more than 16% since then, leading to a nearly $500 billion loss in market capitalization.
While Apple is valued as a "traditional – albeit best-in-class – technology hardware platform," investors are more likely to gravitate towards a more "lifetime value (LTV) based valuation approach," wrote the Morgan Stanley analysts in a note.
The LTV model can unlock about $1 trillion in market capitalization for Apple and suggest long-term valuation upside to over $200 per share, according to Morgan Stanley, with a more complete shift to a subscription model and sustained installed base and spend per user growth.
The analysts argued that Apple already meets most of the five key characteristics that lead to a successful subscription business and still trades at a significant discount to most subscription models, showing the market is not underwriting long-term cash flow stability at Apple like it does with true subscription businesses.
The one subscription model characteristic that Apple doesn't fully meet, they added, is widespread subscription pricing.
Overall, Morgan Stanley rated Apple as "overweight" with a price target of $180 - implying a 2.7% downside compared to the median price target of $185.
(Bansari Mayur Kamdar)
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COOLER DAYS FORECAST: JOBLESS CLAIMS, PHILLY FED (1049 EDT/1449 GMT)
On this sweltering Thursday, with much of the Western world in the grip of a heatwave, market participants were treated to a tall, ice cold glass of indicators suggesting the U.S. economy is cooling down.
The number of U.S. workers filing first-time applications for unemployment benefits rose last week to 251,000, the highest level since last November.
The Labor Department's initial claims overshot consensus by 11,000 and showed a 2.9% increase over the previous week.
It also marked a 51.2% increase from the mid-March trough, which bottomed out at 166,000, the lowest number in generations.
Although the Labor market remains tight - there are essentially 1.9 unfilled jobs for every unemployed worker - the upward claims trend - to a level comfortably within the range associated with healthy labor market churn - suggests a decreasing reticence on the part of U.S. employers to hand out pink slips.
The report "suggests that turnover may be increasing somewhat as businesses see a slowdown or start to prepare for one," writes Thomas Simons, money market economist at Jefferies. "However, the low levels of continuing claims suggest that people who are losing their jobs are still able to find another one rather quickly."
Ongoing claims , reported on a one-week lag, increased by 3.8% to 1.384 million, still more than 18% below the 1.7 million pre-COVID level.
A separate report showed mid-Atlantic factory activity in July surprised analysts by showing the steepest contraction since pandemic shutdowns brought the economy to a screeching halt.
The Philadelphia Fed's Business Index , (alias Philly Fed) delivered a reading of -12.3, a sharp pullback from June's -3.3 print.
Excluding the COVID shock, it's the worst Philly Fed reading in a decade, and provides a mixed picture of east coast manufacturing. Last Friday the NY Fed's Empire State index bouncing back into expansion territory with a reading of 11.1.
A Philly Fed/Empire State number above zero signifies monthly expansion, below that line indicates contraction.
The bleakest aspect of the report showed the crucial new orders component plunged to -24.8. But relentlessly glass-half-full types could find a glimmer of good news in the pull-back of the prices paid subindex, which cooled down by 19% to 52.2.
Lower input costs associated with the plummeting prices paid component bodes well for the inflation picture.
"These moves are consistent with a host of other evidence signaling that supply constraints are rapidly morphing into supply gluts, which mean that the current hugely elevated level of margins across the goods distribution chain cannot possibly be sustained," says Ian Shepherdson, chief economist at Pantheon Macroeconomics. "This is the single strongest argument for expecting core inflation to fall faster than the Fed and markets expect over the next year."
Here's a look at the Philly Fed and Empire State indexes:
Wall Street is lower, having fluctuated earlier, as investors weigh generally upbeat earnings against cooler than expected data, which fueled recession worries even as it raised the possibility of Fed policy easing after Labor Day.
(Stephen Culp)
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U.S. STOCKS SOFTEN, BUT GROWTH SHOWS RELATIVE STRENGTH (1018 EDT/1418 GMT)
After a mixed, choppy start, the main U.S indexes have grown heavy in early trade.
The Dow industrials is leading declines with a loss of more than 0.5%, and energy is the weakest major S&P 500 sector. NYMEX crude futures are lower on the day.
Airline stocks are also weak after United Airlines
profit disappointed.
FANG stocks , however, are positive after electric-car maker Tesla topped Wall Street's profit target. With this, consumer discretionary is among top-performing groups.
Of note, S&P 500 growth is outperforming value for a third-straight session. In fact, growth is on pace for its best month versus value since June of last year.
Here is a snapshot of where markets stood shortly after 1000 EDT:
(Terence Gabriel)
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THURSDAY’S TIPS AUCTION TO OFFER CLUES ON INFLATION EXPECTATIONS (0945 EDT/1345 GMT)
A $17 billion sale of 10-year Treasury Inflation-Protected Securities $(TIPS)$ on Thursday will offer new clues into whether investors continue to be worried about rising inflation, and how much demand there is to hedge against it.
The sale “will offer a timely update on demand for inflation protection following last week’s CPI print and ahead of what is almost certainly going to be a 75 bp hike from Powell on Wednesday,” Ben Jeffery and Ian Lyngen, strategists at BMO Capital Markets said in a note.
TIPS have increased in popularity as investors seek protection against soaring inflation, which is rising at the fastest pace in four decades. Some investors, however, have speculated that the peak in rising price pressures may be near.
Investors may seek higher yields in order to buy the TIPS if they think inflation could be nearing a top. “If in fact peak inflation is at hand or behind us, and central banks remain committed to contain rising prices, there is certainly the argument to be made for a larger concession today.” BMO said.
Thursday’s sale, at 1 pm EDT, is the largest on record, which could also make higher yields at the auction likely. The 10-year TIPS yields were last at 0.638%. They are up from a low of minus 1.243% in November.
(Karen Brettell)
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NASDAQ COMPOSITE: TROOPS SHOW MORALE CHANGE (0900 EDT/1300 GMT)
The Nasdaq Composite ended Wednesday above a key technical hurdle for a second straight session.
Meanwhile, the Nasdaq daily advance/decline (A/D) line has cleared several of its own significant barriers:
The IXIC has now closed above its 50-day moving average $(DMA)$ for two-straight days. The tech-laden index was last above this closely watched intermediate-term moving average in early April.
With this, the A/D line has cleared a channel resistance line drawn from early November of last year, or just prior to the Composite's record highs.
Additionally, the breadth measure has also now closed above its 50-DMA. Although, the A/D line saw two separate minor closes above its 50-DMA in late March and early April, it failed at the channel barrier. So, it is now above both hurdles suggesting it is seeing a more significant upside turn.
With the great mass of Nasdaq troops showing a positive change in morale, the IXIC's charge has the potential to be more forceful. This, as another breadth/momentum measure challenges its own barriers - click here:
In terms of the Composite's next resistance hurdles, it faces congestion at its early-June high and mid-March low in the 12,320/12,555 area. The descending 100-DMA ended Wednesday within this zone at 12,455. This longer-term moving average capped IXIC strength in mid-January and again in late March and early April.
If both the Composite and the A/D line retreat back below their 50-DMA's it can suggest they are once again fleeing from the fight.
(Terence Gabriel)
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FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE:
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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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