Did you pay less for your Pizza last quarter?

Stocks capped off the week with a mixed close as traders pondered THIS big week, ahead. The European economy is flashing warming signs, but will central bankers take heed?

Ask the folks on the front lines. If you really want to know what’s up, don’t ask a person, smart though they may be, locked up in an ivory tower. No, you have to get out to the front lines and ask the grunt with shovel in hand and ash on cheek. Don’t get me wrong, I am deeply devoted to my academic pursuits, but even I know that I must keep at least one foot in the field if I want to get an accurate read of things. Practically speaking, this means that when you hear that economists are worried about the economy, you should make a few phone calls to a few folks who are responsible for making real purchase decisions at companies… AKA purchasing managers.

Those are the guys and gals responsible for replenishing stockrooms, fulfilling orders, and hiring people. Wouldn’t you want to know whether they are stocking up on champagne or antacid tablets? Sure, you would. If you agree, you are not alone, and the good news is that there are at least two highly reputable sources for that information, and I am always happy to share that info with you… my cherished, regular readers.

S&P Global is the current custodian of a popular monthly Purchasing Managers’ Index, or PMI. They not only release it monthly, but they also provide an early flash release, mid-month. So, technically, it is released twice each month. They actually conduct a survey of purchasing managers and ask them about their views on New Orders, Output Employment, Backlogs, Input Price, Future Output, and Business Expectations, to name just a few. They are asked if they feel that conditions are the same, improving, or worsening. They then do some magical arithmetic and come up with what is referred to as a diffused index. Don’t worry, you don’t have to take notes… this won’t be on your final exam. But I will let you know that when the PMI is greater than 50, conditions are considered to be expanding, while PMIs below 50 are considered to be contracting. Even more succinctly: >50=GOOD, <50=BAD… um 50=ANYTHING GOES .

Now you have the background, and you have probably realized that the PMI can be an important leading indicator, which means that it will flash warning signals in advance of the official releases of things like the GDP, which is a lagging indicator. For instance, later this week we will get a read of GDP from the quarter that ended 3 weeks ago. What’s more, that number will be released several times before economists use permanent ink and write it in the history books. Got it? Good, because today is flash day for PMIs. Europe, because of planetary physics ☀, has already released their flash PMIs and they don’t look so hot. The Eurozone Composite PMI came in lower than expected at 48.9. Remember what I taught you in the last paragraph ⬆⬆? Sure, you do, that means that the Eurozone economy may be contracting in the near future… according to purchasing managers. France, Germany, and the UK all came in lower than estimated with France and Germany below 50 and the UK just a hair above at 50.7. What might that portend for the US? Rather than guess, you should wait until 9:45 AM Wall Street Time to find out. Economists are expecting the US Flash Composite PMI to come in at 53.0, slightly lower than last month's print of 53.2. If the release disappoints, as it did over the pond, this may be a warning sign worth noting, especially considering that the Fed is largely expected to pump rates higher by another +25 basis points later this week. Regardless of how the US PMIs come in, the Eurozone misses will have an impact on US growth if their economies stall. Things are about to get interesting.

EARLY MOVERS IN STOCK MARKETS

Domino’s Pizza Inc (DPZ) shares are lower by -4.52% in early trading after the company announced that it beat on EPS but fell short of Revenue targets by -4.38%. The company credits lower market basket pricing declines for the shortfall. You may recall that I highlighted Domino’s several days ago when it got a boost from an announcement that it will start to offer its products on the Postmates and Uber Eats platforms. Dividend yield: 1.25%. Potential average analyst target upside: -0.1%. WHY IS THIS NUMBER NEGATIVE? Because the stock is currently trading higher than median average price targets of analysts. While that can be interpreted as the stock being overpriced, it does not mean that the stock will not continue to climb as analysts potentially raise price targets.

Lam Research Corp (LRCX) shares are higher by +1.71% in the premarket after the company received an upgrade to BUY from Stifel. Stifel expects chip manufacturing equipment company to benefit from a recovery chip manufacturing off its lows. Dividend yield: 1.10%. Potential average analyst target upside: +2.0%.

FRIDAY’S MARKETS

Stocks ended the week on a mixed note as investors took profits in recently promiscuous tech shares and a reshuffle of the Nasdaq injected volatility. The S&P500 gained +0.3%, the Dow Jones Industrial Average climbed by a scant +0.01%, the Nasdaq Composite Index lost -0.22%, and the Russell 2000 Index declined by -0.35%. Bonds gained and 10-year Treasury Note yields declined by -1 basis point to 3.83%. Cryptos advanced by +0.83% and Bitcoin traded higher by +0.49%. The S&P ESG Index added +0.01%.

NEXT UP

• Chicago Fed Nation Activity Index (June) is expected to have slipped to -0.16 from -0.15.
• S&P Global US Manufacturing PMI (June) may have declined to 46.2 from 46.3, while the Services component may have slipped to 54.0 from 54.4.
• After the closing bell earnings: Whirlpool, Crown Holdings, Cadence Design Systems, Range Resources, AGNC, and Cleveland Cliffs.
• Later this week: Lots of earnings along with housing numbers, GDP, Durable Goods Orders, PCE Deflator, Consumer Confidence, University of Michigan Sentiment, and The FOMC will announce interest rate policy on Wednesday. Download the attached economics and earnings calendars for times and details.