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Daily Market Report | Feb. 01, 2021

Stocks Climbed as Online Traders Send Silver Soaring – Wall Street Journal, 2/1/2021

  • U.S. stocks rose Monday, with major benchmarks recovering some ground following their worst week since October and the online day-trading crowd setting its sights on the silver market.
  • For the most part, many of those stocks were down early Monday. GameStop fell 11%, headphone manufacturer Koss was down 32%, and Bed Bath & Beyond was down 9.7%. AMC Entertainment Holdings, however, was up 15%.
  • Broader volatility appeared muted. The CBOE Volatility Index, a gauge of stress in the U.S. stock market, declined about 2.1% on Monday. But it remains elevated after gaining 45% in January.
  • Silver prices rallied, fueled by a wave of fresh enthusiasm from online traders. The move indicates that the recent bout of volatility is likely to extend into a second week in at least some pockets of the global financial market.
  • Investors are continuing to monitor the corporate earnings season, with 111 companies from the S&P 500 index reporting this week. Results from big technology companies including Amazon.com and Alphabet are due Tuesday.
  • On the data front, the Institute for Supply Management’s manufacturing index (ISM) for January came in at a lower level than in December, though it showed the economy continuing to expand.
  • The January index was 58.7, down from 60.5, and below expectations of 60.0. Numbers above 50 reflect an expanding economy.
  • Overseas, the pan-continental Stoxx Europe 600 advanced 1.1%.
  • In Asia, benchmark indexes closed higher. South Korea’s Kospi climbed 2.7% and Hong Kong’s Hang Seng advanced 2.2%. China’s Shanghai Composite gained 0.6%.

Covid-19 Live Updates: Reported Cases, Deaths, Hospitalizations Decline in U.S. – Wall Street Journal, 2/1/2021

  • Newly reported Covid-19 cases were down from a day earlier, as were hospitalizations and deaths, following a month when all three metrics hit records before abating.
  • The nation reported more than 110,000 new cases for Sunday, after Saturday’s 142,091, according to data compiled by Johns Hopkins University.
  • The number of newly reported cases tends to be lower toward the beginning of the week, as fewer people are tested on weekends. But the overall trend since Jan. 8 has been a decrease in the figure.
  • The U.S. reported more than 1,700 deaths related to Covid-19 for Sunday, down from 2,732 a day earlier and down slightly from 1,776 a week earlier, according to Johns Hopkins data. Daily reported deaths have also been trending downward since peaking on Jan. 12 at 4,466.
  • Hospitalizations were at 95,013, down from a day-earlier 97,561 and the second day in a row the number was less than 100,000 since entering six-digit territory on Dec. 2, according to the Covid Tracking Project.
  • In France, President Emmanuel Macron defended his decision to not impose a new nationwide lockdown.
  • Instead, he announced over the weekend that France would place further restrictions on international travel, barring nonessential visits from travelers outside the European Union.

Thermo Fisher sees 2021 profit above Street on COVID testing boost – Reuters, 2/1/2021

  • Thermo Fisher Scientific, the world’s largest maker of scientific instruments, on Monday forecast 2021 profit above market estimates as it continues to gain from upbeat demand for its COVID-19 tests and materials for vaccine production.
  • The company sees 2021 profit of $21.62 per share, well above analysts’ estimate of $20.74, according to Refinitv data.

Exxon, Chevron CEOs Discussed Merger – Wall Street Journal, 2/1/2021

  • The chief executives of Exxon Mobil and Chevron spoke about combining the oil giants after the pandemic shook the world last year, according to people familiar with the talks, testing the waters for what could be one of the largest corporate mergers ever.
  • Chevron Chief Executive Mike Wirth and Exxon CEO Darren Woods discussed a merger following the outbreak of the new coronavirus, which decimated oil and gas demand and put enormous financial strain on both companies, the people said.
  • The discussions were described as preliminary and aren’t ongoing but could come back in the future, the people said.
  • Such a deal would reunite the two largest descendants of John D. Rockefeller’s Standard Oil monopoly, which was broken up by U.S. regulators in 1911, and reshape the oil industry.
  • Together, they would likely form the world’s second largest oil company by market capitalization and production, producing about 7 million barrels of oil and gas a day, based on pre-pandemic levels, second only in both measures to Saudi Aramco.

Amazon Faces Familiar Opponent in Alabama Union Election – Wall Street Journal, 2/1/2021

  • Amazon.com for years has successfully fended off attempts by its U.S. employees to unionize. Now the tech company is preparing for a labor battle unlike anything in its history.
  • In the next two months, thousands of Amazon employees at an Alabama warehouse are set to cast mail-in ballots over whether to organize into a union, a vote that could reshape the relationship between workers and the nation’s second-largest employer.
  • So far, the current effort has had more success than other attempts to organize Amazon workers, according to labor experts. They note that a successful union push at the warehouse could spur similar actions at Amazon’s more than 800 facilities in the U.S.

Melvin Capital Lost 53% in January, Hurt by GameStop and Other Bets – Wall Street Journal, 2/1/2021

  • Melvin Capital Management, the hedge fund that has borne the brunt of losses from the soaring stock prices of heavily shorted stocks recently, lost 53% on its investments in January, according to people familiar with the firm.
  • Melvin’s losses are the most visible wound in an extraordinary tussle playing out between professional hedge-fund investors and amateur traders congregating on forums such as Reddit’s WallStreetBets.
  • The amateurs have made Melvin their principal enemy and have gleefully seized the upper hand. “Only 47% left to go!!” one user posted Sunday. They are exhorting one another to keep buying GameStop stock and call options.

Hedge fund body alarmed by retail investor frenzy ‘distortions’ – Reuters, 2/1/2021

  • Wall Street’s retail trading frenzy has distorted markets, global hedge funds industry body AIMA said on Monday, adding it was concerned that lawmakers were encouraging such moves.
  • “What is dangerous, amid this trading frenzy, is that retail investors have been chasing prices so far above any sane valuation and that many will end up nursing losses,” AIMA CEO Jack Inglis said in a letter to members, who manage $2 trillion.
  • Inglis said finger wagging at hedge funds was not new and short-selling is tightly regulated, requiring positions to be published, allowing others to trade against them.
  • Some hedge funds have chalked up losses and AIMA said it will help with regulatory investigations.

Covid-19 Lockdowns Spur Shift to High-End Liquor – Wall Street Journal, 2/1/2021

  • Americans are splashing out on pricier whiskey, tequila and other spirits during the pandemic, helping distillers post their strongest sales in four decades despite widespread bar closures.
  • People who can’t spend on concerts, travel and watching live sports are splurging instead on high-end spirits to drink at home, say alcohol executives.
  • That drove U.S. distillers’ revenue up 7.7% to $31.2 billion last year, according to the Distilled Spirits Council—or DISCUS—a trade body. It said the figures marked the fastest growth and highest sales for at least 40 years.
  • Spirits costing above $40 per 750 milliliters accounted for 40% of the U.S. spirits industry’s growth last year, compared with 34% in 2019, according to DISCUS.
  • Spirits volumes in nine-liter cases—a standard industry measure—climbed 5.3% last year, up from growth of 3.3% in 2019, according to DISCUS.
  • Total beverage alcohol sales by volume grew 3%, indicating Americans bought more booze overall last year.

Republicans Propose $618 Billion Covid-19 Relief Plan – Wall Street Journal, 2/1/2021

  • Senate Republicans released new details of their roughly $618 billion coronavirus-relief proposal Monday, including a round of $1,000 direct checks per adult, ahead of a meeting later in the day with President Biden.
  • The GOP proposal, roughly one-third the size of Mr. Biden’s $1.9 trillion plan, would provide $300 a week in enhanced federal unemployment benefits through June, include $20 billion each for child care and schools, $50 billion for small-business relief and $160 billion for vaccines, testing and protective equipment, according to a summary of the proposal’s spending released Monday morning.
  • The GOP plan also proposes scaling back the $1,400 per person checks sought by Democrats to $1,000 per adult and $500 per dependent adult and child.
  • The Republicans call for scaling back the size of the checks for individuals making $40,000 a year or more and phasing them out entirely when income reaches $50,000.
  • Married couples with a joint annual income of $80,000 would see smaller checks, going to zero when income reaches $100,000.

U.S. manufacturing sector slows; prices paid by factories highest since 2011 – ISM – Reuters, 2/1/2021

  • U.S. manufacturing activity slowed slightly in January, while a measure of prices paid by factories for raw materials and other inputs jumped to its highest level in nearly 10 years, strengthening expectations inflation will perk up this year.
  • The Institute for Supply Management (ISM) said on Monday its index of national factory activity fell to a reading of 58.7 last month from 60.5 in December.
  • The ISM’s forward-looking new orders sub-index fell to a reading of 61.1 last month from 67.5 in December. Factories also saw a moderation in export orders.
  • The survey’s manufacturing employment gauge rose to 52.6 from 51.7 in December.
  • The survey’s prices paid index jumped to a reading of 82.1 last month, the highest since April 2011, from 77.6 in December.

U.S. construction spending hits record high in December – Reuters, 2/1/2021

  • U.S. construction spending raced to a record high in December as historically low mortgage rates powered outlays on private projects.
  • The Commerce Department said on Monday that construction spending increased 1.0% to $1.490 trillion, the highest level since the government started tracking the series in 2002.
  • Data for November was revised higher to show construction outlays surging 1.1% instead of 0.9% as previously reported.
  • Construction spending rose 5.7% on a year-on-year basis in December.
  • Spending on public construction projects gained 0.5%. State and local government outlays rose 0.4%, while federal government spending increased 1.3%.

Pause in Corporate PAC Spending Triggers Political Pushback – Wall Street Journal, 2/1/2021

  • Lawmakers from both parties are pushing back against companies that have suspended campaign donations, saying the freeze is unfairly punishing everyone and could undermine corporate interests in Washington.
  • Democrats friendly with business have complained to companies, including Alphabet’s Google, Citigroup and Lockheed Martin, that they are being penalized for actions taken by Republicans challenging the results of the Nov. 3 election, people familiar with the discussions said.
  • Democrats have also told companies that pausing donations from their political-action committees could weaken them politically, ultimately jeopardizing business priorities in Congress, some of the people said.
  • Separately, Republicans who voted with Democrats to uphold President Biden’s win have told companies that cutting off their funding could hurt their election prospects and hinder them if they are challenged in a GOP primary by those who supported former President Donald Trump’s unfounded claim that he won re-election, some of the people said.

EUROPE & WORLD

Factories have mixed performance as pandemic impact lingers – Reuters, 2/1/2021

  • Global manufacturing activity remained resilient in January although some countries suffered amid a resurgence in coronavirus infections, underscoring the fragile and uneven nature of the economic recovery.
  • In the euro zone, IHS Markit’s final Manufacturing Purchasing Managers’ Index (PMI) fell to 54.8 in January from December’s 55.2, although that was a touch above the initial 54.7 “flash” estimate.
  • A gauge of British manufacturing growth was at its slowest in three months in January as the combined impact of COVID-19 and Brexit weighed on new export orders and there were signs of disruption of supply chains.
  • Factories in Germany, Europe’s biggest economy, had been humming along during the pandemic on higher demand from abroad but also suffered from increasing supply delays and another hard lockdown.
  • But in other parts of Europe activity accelerated, with France, Italy, the Netherlands, Switzerland and some countries in the east of the continent recording stronger numbers.
  • Factory activity quickened in major chip exporters South Korea and Taiwan, as they benefited from continued brisk demand for semiconductors crucial to work-from-home IT goods.
  • But China’s manufacturing activity expanded at the slowest pace in seven months in January, weighed down by falling export orders.
  • China’s Caixin/Markit Manufacturing PMI dropped to 51.5 in January, its lowest level since June last year and broadly aligned with Beijing’s official PMI, which showed the recovery in factory activity slowing as local COVID-19 cases rose.
  • Japan also saw factory activity slip back into contraction as a new state of emergency hit operating conditions.

Nintendo hikes Switch sales forecast after bumper year-end – Reuters, 2/1/2021

  • Japan’s Nintendo on Monday hiked its full-year forecast for Switch games console sales to 26.5 million from 24 million previously after a bumper end to 2020, buoyed by a home entertainment boom amid the COVID-19 pandemic.
  • The Kyoto-based firm said it sold 24.1 million hardware units in the first nine months of the financial year through March 2021 – more than its previous full-year forecast – comprising 16.8 million hybrid home-portable Switch consoles and 7.3 million portable-only Switch Lite devices.
  • Software sales passed 176 million units in the nine months to the end of December, with lifetime sales for island life simulator ‘Animal Crossing: New Horizons’ passing 31 million.
  • Operating profit in the nine months ended December was 521 billion yen ($4.98 billion), doubling from 263 billion yen a year earlier.
  • Full-year profit forecast was hiked 24% to 560 billion yen – implying Nintendo sees only 39 billion yen of operating profit in the fourth quarter.

Myanmar’s Coup Derails Fragile Democracy, Posing Test for Biden – Wall Street Journal, 2/1/2021

  • Myanmar’s transition to democracy, which had stalled in recent years, is in reverse after the military staged a coup and detained civilian leaders, setting the country on a tense and uncertain path and posing a challenge for the Biden administration.
  • Diplomats said the situation was tense and it was hard to predict what turn events would take. There’s “almost a surreal sense, are we really going back to something which we thought we had left behind?” said a United Nations official based in Myanmar.
  • President Biden, who was vice president under the Obama administration when the U.S. backed Myanmar’s democratic revival, faces difficult decisions about what actions to take.
  • As news of the coup emerged, the U.S. and some other foreign countries called on the military to restore democracy and free detained officials. “The military must reverse these actions immediately,” U.S. Secretary of State Antony Blinken said.
  • Sen. Bob Menendez, incoming chairman of the Senate Foreign Relations Committee, called for sanctions if the military doesn’t release those detained and remove itself from government.
  • If it doesn’t, “the United States and other countries should impose strict economic sanctions, as well as other measures” against Myanmar’s military and its leaders, he said in a statement.

Factmonster – TODAY in HISTORY

  • The Supreme Court of the United States convened for the first time, in New York City. (1790)
  • Ayatollah Ruhollah Khomeini returned to Tehran after 15 years of exile. (1979)
  • Johanna Sigurdardottir takes office as Iceland’s first female prime minister. (2009)

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