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Daily Market Report | Feb. 12, 2021

Stocks Tick Lower After S&P 500 Closes at Record High – Wall Street Journal, 2/12/2021

  • Major U.S. stock indexes hovered just shy of record territory Friday morning, remaining on pace to end the week with muted gains.
  • Stocks have pushed higher this week as expectations for a fresh round of stimulus spending and the rollout of vaccines continue to buoy sentiment.
  • The Federal Reserve this week pledged to continue with loose monetary policy until the economy is on a stronger footing.
  • At the same time, concerns about the rich valuations of stocks, still elevated coronavirus infection levels, new variants of the virus and hurdles faced by vaccination programs in many countries is giving pause to some investors.
  • Mr. Biden said on Thursday evening that the U.S. has struck deals to buy another 200 million vaccine doses.
  • Investors have also been closely watching progress made on the president’s economic recovery plan, which White House officials have said will be rolled out in the coming weeks.
  • As the corporate earnings season slowly winds down, investors have been cheered by many companies’ results beating analysts’ expectations.
  • Overseas, the pan-continental Stoxx Europe 600 edged up 0.4%. In Asia, Japan’s Nikkei 225 slid 0.1%. Australia’s SPX/ASX 200 Index declined 0.6% as a five-day lockdown was imposed in the state of Victoria.
  • Some markets in the region including China, Hong Kong and South Korea were closed for the Lunar New Year and other holidays.

Covid-19 Live Updates: U.S. Deaths Appear to Ease – Wall Street Journal, 2/12/2021

  • The number of Covid-19 patients hospitalized in the U.S. continued to steadily decline, though newly reported cases rose above 100,000 again.
  • The U.S. reported more than 105,000 new Covid-19 cases on Thursday, according to data from Johns Hopkins University, bringing the nationwide total to 27.4 million.
  • More than 74,000 Covid-19 patients were hospitalized as of Thursday, the third straight day that figure has stayed below 80,000 and the lowest level in nearly three months, according to the Covid Tracking Project.
  • The number of patients in intensive-care units fell to 15,190, the lowest since Nov. 17, 2020.
  • There were 3,877 deaths from Covid-19 in the U.S. reported on Thursday, according to Johns Hopkins data, a slight rise from a day earlier that appeared to be influenced by Ohio adding a backlog of Covid-19 fatalities. The U.S. death toll from the pandemic now exceeds 475,000.

Disney Ekes Out a Profit Under the Weight of Pandemic Problems – Wall Street Journal, 2/12/2021

  • Walt Disney typically reports its first-quarter earnings with news of a Christmas Day blockbuster performance at the box office, or a holiday surge in theme-park attendance.
  • On Thursday, however, the company again demonstrated how Covid-19 has brutalized its bottom line.
  • Total revenue at Disney fell 22% to $16.25 billion, with revenue dropping in both the company’s media and entertainment distribution and its parks, experiences and products segments.
  • In the latter, revenue plummeted by more than half. According to FactSet, analysts were expecting total revenue of $15.9 billion.
  • The company’s flagship streaming service, Disney+, added more than 21 million new subscribers in the first quarter to hit 94.9 million subscribers as of Jan. 2, compared with 73.7 million subscribers at the end of the fourth quarter.
  • Disney registered a profit of $17 million, or one cent a share. The blow came from Disney’s legacy businesses: Two-thirds of North American movie theaters remain closed, and Disneyland is closed to anyone who isn’t showing up for a Covid-19 vaccine shot.
  • In the comparable period a year ago, before the Covid-19 pandemic started to affect the U.S., its profit was $2.11 billion, or $1.16 a share.
  • All told, the Disney division that includes its theme-park business registered a $2.6 billion hit from Covid-19 in the quarter, the company said.

Expedia’s loss bigger than feared as COVID-19 resurgence hits travel – Reuters, 2/12/2021

  • Online travel agency Expedia Group posted a bigger-than-expected quarterly loss on Thursday as bookings slumped following a global resurgence in COVID-19 infections and renewed lockdowns.
  • Revenue fell 66.5% to $920 million, missing estimates of $1.12 billion.
  • Expedia said fourth-quarter gross bookings slumped 67% to $7.57 billion.
  • Net loss attributable to the company was $412 million, or $2.89 per share, in the quarter ended Dec. 31, compared with a profit of $76 million, or 52 cents per share, a year earlier.

Affirm forecasts weaker sales volume, shares drop – Reuters, 2/12/2021

  • Affirm Holdings on Thursday forecast weaker sales volume for the current quarter, signaling a slowdown in the pandemic-induced boom in online shopping that helped it narrow its loss in its first results as a publicly-traded company.
  • Affirm’s active customers rose by 52% to 4.5 million in the second quarter ended Dec. 31.
  • It reported a net loss attributable to common stockholders of $31.6 million, or 45 cents per share, compared with a loss of $44.2 million, or 92 cents per share, a year earlier.
  • The company said it expects third-quarter gross merchandise volume between $1.80 billion and $1.85 billion, lower than the $2.1 billion it reported for the previous three months, sending its shares down 8.6% after the bell.

Bumble’s $14 billion date: Blackstone-backed dating app soars on market debut – Reuters, 2/12/2021

  • Shares of Bumble, backed by Blackstone Group, soared more than 76% in their stock market debut on Thursday, fetching a $14 billion valuation for the operator of the dating app where women make the first move.
  • Austin, Texas-based Bumble operates two major apps, Bumble and Badoo, which touts over 40 million monthly active users worldwide.
  • The company reported $376.6 million in revenue in the first nine months of 2020, according to filings. The Bumble app had 1.1 million paying users, with 1.3 million on the Badoo app and other services.

GameStop Mania Is Focus of Federal Probes into Possible Manipulation – Wall Street Journal, 2/12/2021

  • Federal prosecutors are investigating whether market manipulation or other types of criminal misconduct fueled the rapid rise last month in prices of stocks such as GameStop and AMC Entertainment, according to people familiar with the matter.
  • The Justice Department’s fraud section and the San Francisco U.S. attorney’s office have sought information about the activity from brokers and social-media companies that were hubs for the trading frenzy, the people said.
  • In addition to the probe by the Justice Department, the Commodity Futures Trading Commission is examining similar trading, the people said.
  • The CFTC has opened a preliminary investigation into whether misconduct occurred as traders, including those coordinating on Reddit, targeted silver futures and the largest exchange-traded fund tied to silver, the iShares Silver Trust, one of the people said.

Electronic-Components Maker II-VI Bids $260 a Share for Coherent – Wall Street Journal, 2/12/2021

  • Electronic-components maker II-VI made a roughly $6.5 billion bid for Coherent, setting up a seldom-seen, three-way takeover battle for the laser maker.
  • II-VI said Friday it offered $260 a share for Coherent, comprising $130 in cash and 1.3055 II-VI shares for each Coherent share.
  • Coherent already agreed to sell itself to San Jose, Calif.-based Lumentum Holdings for about $226 a share before MKS Instruments last week made a roughly $240-a-share offer of its own.
  • Santa Clara, Calif.-based Coherent makes lasers and related products used in medical and scientific equipment, industrial applications and semiconductor manufacturing. Lumentum, MKS and II-VI make similar products.

Microsoft Urges U.S. to Make Tech Giants Pay for News – Wall Street Journal, 2/12/2021

  • Microsoft said the U.S. should copy Australia’s controversial proposal that tech companies pay newspapers for content—putting it at odds with Alphabet’s Google and Facebook.
  • It isn’t the first time Microsoft has stepped into feuds involving rivals—particularly in areas where they have an edge.
  • Its Bing search engine lags behind Google in market share.
  • Microsoft has urged governments to better regulate facial-recognition technology and last year sided with a videogame developer against Apple in a dispute about app-store fees.
  • The Australian proposal, if enacted into law—it is now before a parliamentary committee—could prompt other countries to follow suit in a global transformation of the relationship between tech companies and traditional media.

U.S. Justice Department seeks to delay appeals on WeChat, TikTok restrictions – Reuters, 2/12/2021

  • The U.S. Justice Department on Thursday asked a federal appeals court to pause a government appeal of a lower court ruling blocking restrictions that the Trump administration had imposed on Tencent’s messaging app WeChat.
  • The government filed similar requests on Wednesday asking two federal appeals courts to hold off on appeals seeking to overturn rulings that had barred government restrictions on the popular Chinese-owned video-sharing app TikTok.
  • The Justice Department said on Thursday it “plans to conduct an evaluation of the underlying record justifying those prohibitions” to determine whether they are warranted by the national security threat Trump described.

U.S. House committee approves another $14 billion for pandemic-hit airlines – Reuters, 2/12/2021

  • A U.S. House committee on Thursday approved a proposal to give airlines another $14 billion in payroll assistance as part of a broader COVID-19 relief package that is working its way through Congress.
  • The House of Representatives Financial Services Committee on a 29-24 vote approved the $14 billion for airlines and $1 billion for contractors to cover payroll through September.
  • It would be the third round of support for the pandemic-hit industry. American Airlines and United Airlines have warned of some 27,000 furloughs without an extension of the current package that expires on April 1.
  • The funds will be included in the $1.9 trillion COVID-19 relief bill proposed by President Joe Biden, whose initial plan did not include new money for airlines.

New U.S. data next week to show 7.8% of workforce have multiple jobs – Reuters, 2/12/2021

  • The U.S. Commerce Department’s Census Bureau said on Thursday it will present new data next week that will show 7.8% of the country’s workforce hold multiple jobs, a trend that has been on the rise during the past 20 years.
  • In a statement, the Census Bureau said the data next Wednesday will also show that earnings from secondary jobs, on average, account for 27.8% of a multiple jobholder’s total quarterly earnings.
  • The data could contribute to the heated debate on President Joe Biden’s proposal to raise the minimum wage to $15 per hour from the current rate of $7.25 by 2025.

U.S. Debt on Track to Hit a Record 107% of GDP by 2031, CBO Says – Wall Street Journal, 2/12/2021

  • Federal deficits are projected to soar over the next decade, but not as much as officials forecast last summer, thanks to an improving economic outlook that is expected to bolster federal revenues, the Congressional Budget Office said Thursday.
  • Federal debt, which reached 100% of gross domestic product in the last fiscal year, is expected to rise to a record 107% of economic output by 2031.
  • The agency expects cumulative deficits over the next 10 years will total $12.6 trillion, 3% less than projected in September, the last time the agency released its estimates.
  • The decline stems from stronger-than-expected economic activity, higher inflation and higher interest rates, which will boost federal tax revenue more than spending, the nonpartisan agency said.

Biden’s China Tech Policy at Crossroads Over Commerce Security Pick – Wall Street Journal, 2/12/2021

  • As the Biden administration charts its course on China policy, a coming political appointment to a key Commerce Department post could offer clues to how the White House will address security risks posed by Chinese tech companies.
  • Two of the leading candidates for the post of undersecretary for industry and security represent a clear contrast in direction, according to trade groups and policy analysts following the situation.
  • One is Kevin Wolf, 54 years old, an export-control lawyer and former Obama administration official who is highly regarded for his encyclopedic knowledge of export regulations, but who has come under criticism while in private practice for assisting American companies seeking exemptions to the U.S. blacklist on technology exports.
  • The other is James Mulvenon, 50, an expert on the Chinese military and technology at SOS International LLC, a defense contractor. Mr. Mulvenon contends that the U.S. and China are locked in a war for technological dominance, and he advocates a hard line on technology exports, even if that hurts the profitability of U.S. companies.
  • The appointment, which requires Senate confirmation, isn’t expected to be made for weeks—and not until after commerce secretary-designate Gina Raimondo is confirmed for the post.

Most Capitol Riot Suspects Have No Far-Right Group Ties, a Challenge in Fight Against Extremism – Wall Street Journal, 2/12/2021

  • Most of the nearly 200 people charged in federal cases in connection with the Capitol riot have no known ties to far-right groups, underscoring the challenge of heading off violent extremism, a Wall Street Journal review found.
  • Authorities say they are ramping up efforts to counter extremism in the wake of the attack on the Capitol, but they are discovering that any charges against people affiliated with organized groups such as the Proud Boys addresses only part of the issue.
  • According to the Journal’s review, 16% of the 192 defendants charged in federal cases have a known affiliation with right-wing militias or other groups that espouse violence.
  • Researchers at the Chicago Project on Security and Threats, a University of Chicago institute that looked at a larger group of arrestees that included local charges, found that 10% had known affiliations with such groups.
  • The FBI’s Washington Field Office, which is leading the investigation, didn’t respond to a request for comment.


U.K. Economy Suffers Biggest Slump in 300 Years Amid Covid-19 Lockdowns – Wall Street Journal, 2/12/2021

  • The U.K. economy recorded its biggest contraction in more than three centuries in 2020, according to official estimates, highlighting the Covid-19 pandemic’s economic toll on a country that has also suffered one of the world’s deadliest outbreaks.
  • Gross domestic product shrank 9.9% over the year as a whole, the Office for National Statistics said Friday, the largest annual decline among the Group of Seven advanced economies.
  • France’s economy shrank 8.3% and Italy’s contracted 8.8%, according to provisional estimates.
  • German GDP declined 5%. The U.S. shrank 3.5%.
  • However, the data showed the U.K. economy grew at an annualized rate of 4% in the final quarter of the year, aided by government spending and a small uptick in business investment.
  • The decline in U.K. GDP in 2020 was the largest in more than 300 years, according to Bank of England data, though the preliminary estimate is likely to be revised.

Mario Draghi to Take Over as Italy’s Prime Minister Amid Economic, Covid-19 Crises – Wall Street Journal, 2/12/2021

  • Mario Draghi, the former head of the European Central Bank, is set to be named Italian prime minister after persuading nearly all of the country’s squabbling parties to support his government, raising hopes that he can succeed where many others have failed: in leading Italy out of its deep economic malaise.
  • Italy’s head of state, President Sergio Mattarella, is expected to appoint Mr. Draghi and his proposed ministers later Friday or Saturday, ahead of a formal swearing-in at the weekend and a parliamentary vote of confidence early next week.
  • Mr. Draghi is set to take over Italy, the European Union’s third-biggest economy after Germany and France, at a time when it is fighting with persistently high Covid-19 contagion, an agonizingly slow vaccine rollout and restrictions on daily life that are holding the economy in recession.

Factmonster – TODAY in HISTORY

  • Lady Jane Grey, queen of England for nine days (in 1553), was executed for high treason. (1554)
  • The Utah Territory granted women the right to vote (revoked in 1887). (1870)
  • The first release of American prisoners of war from the Vietnam war took place. (1973)
  • The Senate voted to acquit President Clinton on charges of perjury and obstruction of justice. (1999)

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