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Daily Market Report | Feb. 11, 2021

Stocks Edge Higher on Jobless Claims Data – Wall Street Journal, 2/11/2021

  • U.S. stocks edged higher Thursday, pushing major stock indexes toward new records, after data showed that the labor market is continuing its slow and halting recovery.
  • Continued progress toward passing a $1.9 trillion stimulus package in the U.S. is bolstering sentiment as investors expect it to further cushion the economic impact of Covid-19 lockdowns. While some data has shown signs of improvement in the labor market, investors expect the elevated jobless claims figures to support the need for more stimulus.
  • Fresh data showed that 793,000 Americans applied for first-time unemployment benefits in the week ended Feb. 6. New applications for the prior week were revised higher to 812,000.
  • Federal Reserve Chairman Jerome Powell said Wednesday that the central bank will continue to bolster the economy with low interest rates and hefty asset purchases as it focuses on the strength of the labor market.
  • The U.S. unemployment rate fell to 6.3% in January from 6.7% a month earlier. That compares with a 3.5% unemployment rate in February 2020, before the pandemic struck.
  • The corporate earnings season will continue after the closing bell, with Walt Disney among those reporting results.
  • In Asia, Hong Kong’s Hang Seng rose almost 0.5%, and Australia’s benchmark S&P/ASX 200 ticked 0.1% lower. The Japanese, Chinese and South Korean markets were closed for a holiday.

Covid-19 Live Updates: U.S. Hospitalizations at Lowest in Nearly Three Months – Wall Street Journal, 2/11/2021

  • The number of people hospitalized due to Covid-19 in the U.S. fell to the lowest level since Nov. 16 as newly reported cases remained under 100,000 for the fourth day in a row.
  • For the second consecutive day, hospitalizations due to the disease were under 80,000, totaling 76,979 as of Wednesday, according to the Covid Tracking Project. Pressure was also easing on intensive care units, with 15,788 Covid-19 patients requiring treatment in ICUs across the country, the lowest total since Nov. 19.
  • The U.S. reported more than 93,000 new coronavirus cases for Wednesday, according to data compiled by Johns Hopkins University that was published early Thursday.
  • The country reported 3,219 fatalities from Covid-19 for Wednesday and the nation’s total death toll now exceeds 471,000.
  • The spread of new variants of the virus is a growing concern. According to the Centers for Disease Control and Prevention, 34 states had reported 932 cases of the variant first identified in the U.K., while nine cases of a South African variant and three cases of the variant from Brazil had been found, as of Feb. 9. Florida remained the state with the most detected cases of the U.K. variant, at 343 identified cases.
  • On Wednesday, California Gov. Gavin Newsom said the state had identified two cases of the South African variant. Mr. Newsom said there are now 159 identified cases of the U.K. variant in the state.
  • Germany will prolong its lockdown until March 7 after Chancellor Angela Merkel warned that new variants of coronavirus could trigger a third wave of infections.
  • Ms. Merkel and state leaders decided on Wednesday to extend most of the country’s existing restrictions, including the closure of non-essential businesses. Minor easing of some measures were also announced: Schools and kindergartens will gradually reopen, depending on the individual decisions of state governments, and hairdressers will be allowed to work from March 1.
  • Ms. Merkel warned in a parliamentary speech on Thursday that authorities must remain vigilant because the new viral variants that have been identified in Britain, South Africa and Brazil could fuel a renewed surge of infections.

Uber expands food delivery further, sees ride demand pick up – Reuters, 2/10/2021

  • Uber Technologies on Wednesday said revenue at its ride-hail and delivery businesses increased on a quarterly basis and said it was well on track to reach its goal of achieving an adjusted profit by year-end.
  • Uber reported $3.17 billion in total revenue in the months from October through December.
  • Fourth-quarter mobility revenue, largely comprised of rides, declined by 52% from last year, but at $1.47 billion was up 8% on a quarterly basis despite new lockdown measures in the United States, Europe and the Middle East.
  • Delivery revenue more than tripled from last year and at around $1.36 billion, grew 19% compared with the third quarter.
  • Uber reported a loss on an adjusted basis before interest, taxes, depreciation and amortization of $454 million, significantly narrower than analysts’ average expectations for a $514 million loss, according to Refinitiv data.
  • The narrower-than-expected adjusted EBITDA loss was helped by significant cost cuts the company instituted throughout 2020, including reducing staff by nearly 30% from the beginning of the year.

Zynga forecasts strong bookings for 2021 on ‘Harry Potter’ game boost – Reuters, 2/10/2021

  • Zynga on Wednesday forecast annual net bookings above Wall Street estimates, betting on the launch of its upcoming “FarmVille” game and strong in-game spending in its existing titles such as “Harry Potter: Puzzles & Spells.”
  • Net bookings were $699 million for the fourth quarter, beating estimates of $677.2 million.
  • Zynga mainly generates revenue from the sale of virtual goods, such as currency and lives, within its free-to-play games.
  • The “Words With Friends” publisher’s average monthly active users more than doubled from a year earlier to 134 million as people spent more time online due to pandemic-induced restrictions.
  • Zynga said it expects full-year net bookings – an indicator of future revenue – to be $2.8 billion, more than the $2.75 billion analysts were anticipating, according to Refinitiv IBES data.
  • The company said it expects international expansion of its franchises to drive growth in 2021, with Europe and Asia likely to be the primary growth markets.

MGM Resorts posts quarterly loss on pandemic pain – Reuters, 2/10/2021

  • MGM Resorts International posted a quarterly loss compared with a year-ago profit on Wednesday, as COVID-19 travel restrictions dented business for the casino operator.
  • Revenue from the company’s main casino business fell 40.9% to $963.8 million. Total revenue fell 53.1% to $1.49 billion.
  • Net loss attributable to the company was $447.6 million, or 92 cents per share, in the quarter ended Dec. 31, compared with a profit of $2.01 billion, or $3.91 per share, a year earlier.
  • On an adjusted basis, the company lost 90 cents per share, while total liquidity was $8.8 billion as of Dec. 31, 2020 at MGM.
  • MGM said it expects its sports betting unit, BetMGM, to be in 20 markets by the year-end, as companies move to capitalise on an expected boom in online sports betting in the U.S.

Kellogg forecasts 2021 demand decline after lockdown snack-fest – Reuters, 2/11/2021

  • Kellogg posted a rare profit miss and forecast a decline in organic revenue growth for 2021 on Thursday as demand for its breakfast cereals and snacks falls from the strong levels seen during last year’s lockdowns.
  • Net sales rose to $3.46 billion from $3.22 billion a year earlier.
  • Analysts were expecting sales of $3.50 billion, according to IBES Refinitiv.
  • Net sales in North America, which accounts for about 60% of Kellogg’s revenue, rose by less than 1% on an organic basis, as a resurgence in coronavirus cases hurt its business that sells its cereals, snacks and frozen foods to convenience stores, universities and schools.
  • Kellogg, which also makes Pringles, Cheez-Its and Pop-Tarts, forecast organic net sales to fall by about 1% in 2021, compared with a growth of 6% in 2020.

Lockdown living helps PepsiCo through pandemic, vaccine paves path to growth – Reuters, 2/11/2021

  • PepsiCo has joined rival Coca-Cola in predicting revenue growth in 2021, saying on Thursday it expects pre-pandemic lifestyles to resume as economies reopen and COVID-19 vaccines are rolled out.
  • Pepsi said its fourth-quarter revenue rose 8.8% to $22.46 billion, topping Wall Street expectations, as people munched Tostitos and Cheetos and gulped down Gatorade while stuck at home during a second wave of coronavirus lockdowns.
  • Organic revenue for Frito-Lay North America rose 5%, while those at the North American beverage unit rose 5.5%.
  • Excluding items, it earned $1.47 per share, a cent above expectations, according Refinitiv IBES data.
  • The company expects a mid-single digit rise in annual organic revenue and a high-single digit increase in adjusted earnings.

Kraft Heinz to sell Planters, Corn Nuts brands to Hormel for $3.35 billion – Reuters, 2/11/2021

  • Kraft Heinz said on Thursday that it plans to sell its nuts business – including most Planters and Corn Nuts products – to Hormel Foods Corp for $3.35 billion.
  • Sales grew 6.2% to $6.94 billion in the three months ended Dec. 26, beating the average estimate of $6.82 billion, according to Refinitiv data.
  • Adjusted net earnings rose to 80 cents per share from 72 cents per share a year earlier, beating estimates of 74 cents per share.

Production shutdown, weak restaurant orders hit meat producer Tyson’s sales – Reuters, 2/11/2021

  • Tyson Foods missed Wall Street estimates for first-quarter sales on Thursday, squeezed by production disruptions and weak demand for its hotdogs and sausages from restaurants and hotels during the COVID-19 pandemic.
  • Overall sales fell about 3% to $10.46 billion in the quarter, missing a Refinitiv IBES estimate of $10.84 billion.
  • Pork unit sales were hit as the largest U.S. meat processor idled an Iowa plant for three weeks due to a mechanical malfunction, while volumes at its chicken and beef unit took a knock from the pandemic.
  • Net income attributable to Tyson fell nearly 8% to $467 million, or $1.28 per share, in the three months ended Jan. 2.
  • The maker of Ball Park hotdogs and Jimmy Dean sausages also said it would incur about $440 million of pandemic-related costs in fiscal 2021, warning that certain expenses could become permanent.

Ford, Volkswagen EV Battery Supplier Dealt Setback by Trade Commission – Wall Street Journal, 2/11/2021

  • A federal trade commission ruled against battery maker SK Innovation in a case that could disrupt Ford Motor and Volkswagen’s plans to build electric vehicles in the U.S.
  • The U.S. International Trade Commission, an independent government agency, affirmed Wednesday a judge’s earlier ruling in favor of rival LG Chem, which in 2019 accused SKI of stealing trade secrets related to lithium-ion battery production. SK Innovation has denied the allegations.
  • The commission’s ruling threatens two new battery plants SKI is building in Georgia to supply Ford and VW with batteries for models set to go into production in the next two years. The Korean company has said it is investing $2.6 billion on the project.
  • In the ruling, the commission prohibited SKI from importing its batteries for 10 years. However, the ruling allowed the company to import equipment necessary to make batteries for Ford and VW for four and two years, respectively, to allow the auto makers time to find another domestic battery supplier.

Oil Demand Recovery Expected to Pick Up Speed Later This Year – Wall Street Journal, 2/11/2021

  • The recovery in global oil demand will accelerate in the second half of this year as the market continues to rebalance after the turmoil brought by the pandemic, according to OPEC and the International Energy Agency.
  • Despite increasing its estimates for oil output in 2021, the IEA said in its monthly market report that a recovery in demand would outstrip production in the second half of the year, prompting “a rapid stock draw” of the glut of crude that has built up since the pandemic began.
  • The agency significantly increased its forecast for producing nations outside of the pact between the Organization of the Petroleum Exporting Countries and allies such as Russia, raising its projections for non-OPEC supply growth by 290,000 barrels a day to an increase of 830,000 barrels a day this year.
  • In its own monthly report, also released Thursday, OPEC reduced its non-OPEC production growth forecast by 200,000 barrels to 700,000 barrels a day.
  • At the same time, the IEA trimmed its forecast for global oil demand by 200,000 barrels a day to 96.4 million barrels, around 3% less than in 2019, but said part of that was because of a change to historic data. OPEC also reduced its own 2021 demand forecast, cutting it to 96.1 million barrels a day.

Mastercard to open up network to select cryptocurrencies – Reuters, 2/11/2021

  • Mastercard said on Wednesday it was planning to offer support for some cryptocurrencies on its network this year, joining a string of big-ticket firms that have pledged similar support.
  • The credit-card giant’s announcement comes days after Elon Musk’s Tesla Inc revealed it had purchased $1.5 billion of bitcoin and would soon accept it as a form of payment.
  • Mastercard already offers customers cards that allow people to transact using their cryptocurrencies, although without going through its network.
  • Mastercard specified that not all cryptocurrencies will be supported on its network, adding that many of the hundreds of digital assets in circulation still need to tighten their compliance measures.

Winter Layoffs Show Early Signs of Easing – Wall Street Journal, 2/11/2021

  • Worker filings for unemployment claims fell last week to a level well below an early January peak, a sign the labor market is mending from a steep slowdown.
  • The number of weekly claims for unemployment benefits decreased to 793,000 last week from 812,000 a week earlier, the Labor Department said on Thursday. Claims have steadily declined since early January when they exceeded 900,000.
  • About 4.6 million Americans were claiming unemployment benefits through regular state programs in the week ended Jan. 23, more than double the number claiming benefits a year ago before the pandemic.
  • About 3.6 million Americans who exhausted their regular state benefits were drawing on extended benefits through a federal program in mid-January.
  • About half of people who are currently unemployed are pessimistic about quickly finding a job, according to a new Pew Research Center survey.

Forecasters Lift Expectations for 2021 Economic Growth – Wall Street Journal, 2/11/2021

  • Forecasters are increasingly optimistic about economic growth this year, though less so about the labor market’s prospects, as it recovers from the effects of the coronavirus pandemic, a new Wall Street Journal survey shows.
  • Economists on average expected gross domestic product to expand nearly 4.9% this year, measured from the fourth quarter of the prior year, according to the business and academic economists surveyed in February, an improvement from their 4.3% forecast in January.
  • However, they were more cautious about the recovery in jobs. Economists this month on average expected employers to add 4.8 million jobs this year, down from the 5.0 million they projected in January and equal to just half of the 9.6 million jobs lost since February 2020.
  • The forecasters saw a mean unemployment rate of 5.3% by year’s end, about the same level they projected in last month’s survey.
  • Economists on average expected inflation to pick up, projecting 2.8% growth in consumer prices in June of this year from a year earlier, up from the 2.5% increase projected last month. The Labor Department said Wednesday its consumer-price index rose 1.4% in January from a year earlier.
  • Survey respondents on average saw a 17.5% chance of another downturn in the next 12 months, down from 21.2% in January. Economists cited vaccines and the prospects for new federal spending as their main reasons for optimism.

Biden, China’s Xi Hold Talks Over Human Rights, Trade, Climate – Wall Street Journal, 2/11/2021

  • President Biden spoke with Chinese President Xi Jinping for the first time since taking office in a call in which he said he raised issues of human rights, trade policy and international security that divide the two countries while also holding open the possibility of working together on climate change and nuclear proliferation.
  • A White House statement said Mr. Biden raised his “fundamental concerns about Beijing’s coercive and unfair economic practices,” as well as human rights issues and “preserving a free and open Indo-Pacific” region. But it said the leaders discussed cooperation on fighting Covid-19, climate change and other issues.
  • The Biden-Xi conversation came the same day that Mr. Biden launched a Pentagon review of the national security aspects of the administration’s China strategy, as part of a broader effort to determine its approach to countering Beijing.

Huawei’s U.S. suppliers try to reverse Trump’s late sales denials – Reuters, 2/11/2021

  • Semiconductor firms are seeking extra time to appeal last-minute Trump administration moves to block sales to Chinese telecoms company Huawei, hoping against the odds that the Biden administration will reverse course, five sources said.
  • Several company executives who declined to be identified by name said they ultimately do not think the Biden administration will significantly soften the hardline position. “Everyone is deflated,” said one company executive.
  • Among the decisions, the Trump administration denied 116 license applications worth $119 billion and approved four worth $20 million, according to a Commerce Department document dated Jan. 13 and seen by Reuters.
  • Another 300 applications with stated values of $296 billion were pending, the document said.

U.S. chip industry calls on Biden administration to fund factories – Reuters, 2/11/2021

  • A group of U.S. chip companies on Thursday sent a letter to President Joe Biden urging him to provide “substantial funding for incentives for semiconductor manufacturing” as part of his economic recovery and infrastructure plans.
  • The chief executives of major U.S. firms such as Intel, Qualcomm, Micron Technology and Advanced Micro Devices signed onto the letter.
  • It comes as a global chip shortage has idled factory lines at Ford and General Motors, with executives at the automakers predicting billions in lost profit.
  • The missing chips are mostly manufactured in countries such as Taiwan and Korea, which have come to dominate the industry. The letter, sent by the Semiconductor Industry Association, said that the U.S. share of semiconductor manufacturing dropped from 37% in 1990 to 12% today.

EUROPE & WORLD

Shell Hits Its Own Peak Oil, Plans to Reduce Output – Wall Street Journal, 2/11/2021

  • Royal Dutch Shell said it would start reducing oil production, calling an end to a decades-old strategy centered on pumping more hydrocarbons as it and other energy giants seek to capitalize on a shift to low-carbon power.
  • Shell said Thursday its oil production had already peaked and it expects output to decline 1-2% a year, including from asset sales, reducing its exposure to commodity prices over the longer term.
  • The company plans to cut its production of traditional fuels such as diesel and gasoline by 55% in the next decade. At the same time, the company said it would double the amount of electricity it sells and roll out thousands of new electric-vehicle charging points.
  • Renewables projects typically generate returns of around 10%, compared with the traditional 15% targeted on oil-and-gas projects.

Tencent Executive Held by China Over Links to Corruption Case – Wall Street Journal, 2/11/2021

  • An executive at Tencent, China’s most valuable publicly listed company, has been held by Chinese authorities, part of a probe into a high-profile corruption case involving one of the country’s former top law-enforcement officials, people familiar with the matter said.
  • Zhang Feng has been under investigation by China’s antigraft inspector since early last year for alleged unauthorized sharing of personal data collected by Tencent’s social-media app WeChat, the people said.
  • They said Mr. Zhang was suspected of turning over WeChat data to former Vice Public Security Minister Sun Lijun, who is being investigated by Beijing for undisclosed violations of Communist Party rules.
  • Hong Kong-listed Tencent, which has a market capitalization of about $900 billion, confirmed Thursday that Mr. Zhang is under investigation.

Iran Has Started Producing Uranium Metal, in Violation of 2015 Accords, IAEA Says – Wall Street Journal, 2/11/2021

  • Iran has produced a material that is banned under the 2015 nuclear accords and could be used to form the core of a nuclear weapon, as it seeks to step up pressure on the Biden administration to lift economic sanctions on Tehran.
  • A confidential report by the United Nations atomic agency, seen by The Wall Street Journal, said Iran had started producing uranium metal on Feb. 6 at a nuclear facility in Isfahan that is under the agency’s inspection.
  • The material produced was a small amount of natural uranium metal, the International Atomic Energy Agency reported, meaning it wasn’t enriched. To use uranium metal for a nuclear weapon’s core, Iran would need around half a kilogram, or slightly more than one pound, of highly enriched uranium metal, experts say.
  • The Iranian government in December warned that it would start producing uranium metal within five months, following a law passed in Iran’s Parliament on Dec. 1, a threat that alarmed Western diplomats.

Factmonster – TODAY in HISTORY

  • Robert Fulton patented the steamboat. (1809)
  • Yalta Agreement signed by President Franklin Roosevelt, British Prime Minister Winston Churchill, and Soviet leader Josef Stalin during World War II. (1945)
  • Ayatollah Khomeini’s followers seized control of the Iran government. (1979)
  • As a result of the Arab Spring protests, Egyptian president Hosni Mubarak announces his resignation and hands power of the country over to the military. (2011)

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