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Daily Market Report | Feb. 18, 2021

Stocks Fall, Weighed Down by Tech Losses and Jobless Claims – Wall Street Journal, 2/18/2021

  • U.S. stocks dropped Thursday, weighed down by losses among technology companies.
  • Stocks have taken a breather in recent sessions after powering higher for much of 2021. Some investors have been caught off guard by a quick rise in government-bond yields, which appeared to knock down shares of fast-growing companies that have benefited from years of low interest rates.
  • In the government-bond market, yields on 10-year Treasury notes edged up to 1.312% from 1.297% Wednesday.
  • Yields rise as bond prices fall.
  • Money managers are also concerned about lofty valuations and the pace of the economy’s recovery.
  • Data Thursday showed jobless claims—a proxy for layoffs—remained above the pre-coronavirus pandemic peak of 695,000. New applications for unemployment benefits rose to 861,000 last week, halting a downward trend that had pointed to an improving labor market. Economists had expected a decline in the claims.
  • Of the 400 constituents of the S&P 500 that had reported by early Thursday, 80% had beaten analysts’ expectations, according to FactSet.
  • Walmart shares dropped 5.8% after the retailer posted results for the holiday quarter and said it would raise wages for about 425,000 employees.
  •  Palantir Technologies continued to slide lower, shedding 7.7%.
  • The data-mining company this week reported a loss for the fourth quarter, and signaled Tuesday that sales could grow at a slower pace.

Covid-19 Live Updates: Newly Reported Cases in U.S. Stay Below 80,000 – Wall Street Journal, 2/18/2021

  • Newly reported coronavirus cases in the U.S. remained under 80,000 for the fourth day in a row, while hospitalizations fell to their lowest level since Nov. 10.
  • The U.S. reported more than 68,000 new cases for Wednesday, according to data compiled by Johns Hopkins University that was published early Thursday.
  • Hospitalizations due to Covid-19 in the U.S. continued to decline. As of Wednesday, there were 63,398 people in hospitals because of the disease, according to the Covid Tracking Project.
  • The number of Covid-19 patients requiring treatment in intensive care units also fell, to 13,103, the sixth consecutive day the total has been below 15,000, according to the Covid Tracking Project.
  • The nation’s death toll topped 490,000, with more than 2,300 Covid-19 fatalities reported for Wednesday, according to Johns Hopkins data.
  • About 12% of the U.S. population has now been vaccinated. Some 55.2 million doses have been administered, with about 1.5 million shots given Tuesday, according to the Centers for Disease Control and Prevention.
  • Over seven days, an average 1.7 million doses were administered daily.
  • Research published Wednesday on the New England Journal of Medicine website showed that the Covid-19 vaccine from Pfizer and BioNTech generated protection against a variant first identified in South Africa in laboratory testing.
  • The results suggest the vaccine generated a slightly lower immune response against the variant’s mutations than the original strain circulating in the U.S. but was still effective at neutralizing the variant virus, according to the research.
  • The finding is consistent with earlier research of Pfizer’s vaccine against emerging variants.

Walmart Promises Raises for 425,000 Workers After Strong Holiday Sales – Wall Street Journal, 2/18/2021

  • Walmart reported strong holiday sales and said it would raise wages for about 425,000 of its employees after a year in which the Covid-19 pandemic boosted its business.
  • Walmart’s total revenue reached a record $152.1 billion in the fourth quarter, an increase of 10.3% from a year ago, and its operating income rose 3% to $5.5 billion.
  • U.S. comparable sales, or those from stores and digital channels operating for at least 12 months, rose 8.6% in the quarter ended Jan. 29, an acceleration from the third quarter, when sales climbed 6.4%, and higher than most analysts’ forecasts.
  • U.S. e-commerce sales, which include online grocery orders, increased 69% from a year earlier.
  • During the most recent quarter, U.S. visits declined 10.9%, while the average amount spent went up 21.9%.
  • Adjusted per-share earnings hit $1.39 during the quarter, lower than the $1.51 analysts expected, according to FactSet. Walmart spent around $1.1 billion in the quarter on Covid-19-related expenses such as increased pay and benefits.
  • The country’s largest private employer said it would raise pay for hourly U.S. workers to an average above $15 an hour, up from an average above $14 in January 2020. Its minimum starting wage for U.S. workers will remain at $11 an hour.
  • The pay raises will be for store workers in digital and stocking roles, said Walmart U.S. Chief Executive John Furner.
  • That targets roles that have been especially important during the pandemic, including workers that gather products from store shelves for online orders picked up in parking lots or delivered to homes.

Facebook Surprises Australians With News Blackout – Wall Street Journal, 2/18/2021

  • Facebook overnight had followed through on a threat to bar users in Australia from posting news.
  • The move also cut off access to information such as the national weather service and some local health sites, though Facebook said that had been done inadvertently.
  • Facebook opposes legislation by the Australian government that would effectively require big tech companies to pay the country’s media outlets for content. The legislation, which is being watched globally and could offer a model for other governments to follow, is working its way through the country’s parliament.
  • Facebook argues that the Australian government misunderstands the relationship between publishers and the company’s social-media platforms, and it flagged last year it could ban news if the government followed through on its plan.
  • Facebook and Alphabet’s Google, which would also be subject to the law, have argued that publishers benefit because links on Google and Facebook send users directly to news websites.

Google to Pay News Corp for Access to Its Publications’ Content – Wall Street Journal, 2/18/2021

  • News reached a three-year deal with Alphabet’s Google to license content from its publications and produce new audio and video products for Google platforms, News Corp said Wednesday.
  • Google is paying the media company tens of millions of dollars over the course of the deal, according to a person familiar with the matter.
  • The agreement will have “a positive impact on journalism around the globe as we have firmly established that there should be a premium for premium journalism,” News Corp Chief Executive Officer Robert Thomson said in a statement.

Texas Winter Storm Strikes Chip Makers, Compounding Supply Woes – Wall Street Journal, 2/18/2021

  • Severe weather conditions hitting much of the U.S. have caused some semiconductor companies to idle production capacity, threatening to exacerbate a chip shortage that has already prompted car makers to curtail output at some plants.
  • South Korea’s Samsung Electronics, one of the world’s biggest chip makers, operates two factories in Austin, Texas, and was asked by local authorities to shut those down on Tuesday, said a company spokeswoman.
  • Samsung expects to resume production as soon as possible and, the spokeswoman said, was waiting for electricity provider Austin Energy to advise when the chip maker’s operations could start up again.
  • The Austin facilities represent about 28% of Samsung’s overall production capacity, according to Citi analysts.
  • Dutch chip company NXP Semiconductors said Wednesday that it had to scale back work at two facilities in Austin. “Affected customers are being notified directly by NXP of the potential for supply disruptions,” the company said.
  • NXP’s Austin facilities represented about 30% of the company’s total factory square footage as of 2019, according to a regulatory filing.

Tesla cuts prices of base variants of Model 3, Model Y – Reuters, 2/18/2021

  • Tesla has reduced the price of its cheaper variants of the Model 3 sedan and the Model Y sports utility vehicle (SUV), while raising prices for their performance variants, the electric-car maker’s website showed.
  • The price of its Model 3 Standard Range Plus has been lowered to $36,990 from $37,990, while the Model Y Standard Range’s price came down to $39,990 from $41,990, according to the website.
  • The prices for the Performance variant of the Model 3 rose to $55,990 from $54,990 and Model Y to $60,990 from $59,990, the website showed.

Apple lobbies for India incentives as it plans iPad assembly – sources – Reuters, 2/18/2021

  • Apple is angling to participate in a new scheme to boost India’s exports of computer products, part of what government and industry sources say are plans to bring iPad tablet manufacturing to the South Asian country.
  • India launched a $6.7 billion plan to boost smartphone exports last year, as Prime Minister Narendra Modi stepped up efforts to promote electronics manufacturing and create jobs.
  • Apple, which has steadily raised production of iPhones in India to lessen its dependence on Chinese manufacturing, took part in that scheme via its contract manufacturers.
  • Now the government is preparing to unveil another incentive to drive local manufacturing of IT products including tablets, laptops and servers, three sources closely involved in the drafting of the plan told Reuters.
  • The new performance-linked incentive (PLI) scheme, which offers cash-back to manufacturers for exports, will have a budget of up to 70 billion rupees ($964.5 million) over five years, the sources said. It’s expected to be launched by the end of February.

Delta Taps IBM to Move More Applications to the Cloud – Wall Street Journal, 2/18/2021

  • Delta Air Lines on Thursday said it signed a multiyear contract with International Business Machines to help the carrier move most of its data and applications to the cloud.
  • The companies declined to disclose the value of the contract, which runs through at least 2024. The agreement calls for IBM to help the airline migrate applications to—or, in some cases, help rebuild applications for—cloud-based servers run by tech providers of Delta’s choosing.
  • The deal also calls for IBM to train more than 1,000 Delta IT workers in how to operate in cloud environments, including helping them develop skills related to application development, data management and security.

Robinhood, Citadel, Others Prepare for the GameStop Spotlight in Washington – Wall Street Journal, 2/18/2021

  • Top executives of Robinhood Markets Inc. and other firms that played a role in the GameStop Corp. saga will face questions from lawmakers Thursday after a group of online traders helped send shares of the videogame retailer surging earlier this year before the firm’s stock then crashed.
  • The House Financial Services Committee is holding the hearing on GameStop’s stock action, which raised questions about the integrity of the U.S. stock market and the pitfalls faced by individual investors in the age of social media and smartphone trading apps. The Securities and Exchange Commission and other authorities are investigating whether the episode calls for policy changes or was fueled by criminal misconduct such as market manipulation.
  • Among those set to testify are Vladimir Tenev, chief executive of Robinhood, whose commission-free brokerage platform facilitated some of the viral trades; Kenneth Griffin, CEO of Chicago hedge-fund Citadel LLC and market maker Citadel Securities, which pays Robinhood to execute its users’ trades; and Gabriel Plotkin, CEO of a hedge fund that lost money during the episode.
  • Also scheduled to appear are Reddit CEO Steve Huffman and Keith Gill, whose posts about GameStop helped fuel the rally.

GameStop Frenzy Prompts SEC to Weigh More Short Sale Transparency – Wall Street Journal, 2/18/2021

  • Wall Street’s main regulator is weighing whether to require more transparency of short selling and the opaque network of stock lending and borrowing that facilitates it, according to people familiar with the matter.
  • The Securities and Exchange Commission was ordered 11 years ago to impose such rules but never did it.
  • Now, dealing with the fallout from frenetic trading in GameStop shares, the agency under new leadership is considering using its authority to shine more light on the mechanics of the bearish trades.
  • The 2010 Dodd-Frank financial overhaul law required the SEC to collect information about how much of each public company’s stock has been sold short. The SEC doesn’t gather or disseminate data on such bets by specific investors.
  • It isn’t clear what specific disclosures the SEC would propose. Any new requirements would have to be issued first for public comment before commissioners could vote to adopt them.

U.S. weekly jobless claims unexpectedly rise – Reuters, 2/18/2021

  • The number of Americans filing first-time applications for unemployment benefits unexpectedly rose last week, but the labor market is steadily recovering as additional fiscal stimulus and falling COVID-19 cases allow more services businesses to reopen.
  • Initial claims for state unemployment benefits totaled a seasonally adjusted 861,000 for the week ended Feb. 13, compared to 848,000 in the prior week, the Labor Department said on Thursday.
  • Part of the increase in claims could be related to the temporary closure of automobile plants beginning last week due to a global semiconductor chip shortage. General Motors announced it would take down production entirely at its Fairfax plant in Kansas City during the week of Feb. 8.
  • Though they are stuck above their 665,000 peak during the 2007-09 Great Recession, there is reason to be cautiously optimistic that the labor market recovery will gain traction in the spring.

Share of U.S. workers holding multiple jobs is rising, new Census report shows – Reuters, 2/17/2021

  • The share of Americans working more than one job to make ends meet has been growing over the past two decades, and the pay from second jobs make up a substantial share of workers’ earnings, according to a paper published by the U.S. Commerce Department on Wednesday.
  • An estimated 7.8% of U.S. workers had more than one job as of the first quarter of 2018, up from 6.8% in 1996, according to new data unveiled by the Census bureau, which provides a more detailed analysis of multiple job holders than was previously available. The findings were based on data from 18 states.
  • The earnings from the workers’ second jobs make up an average 28% of their total earnings, showing that workers are likely relying on that pay, researchers said.
  • In general, women were more likely to have multiple jobs than men, with 9.1% of women holding multiple jobs as of 2018, compared with 6.6% of men.

U.S. housing starts fall in January; permits soar – Reuters, 2/18/2021

  • U.S. homebuilding fell more than expected in January amid soaring lumber prices, though a surge in permits for future construction suggested the housing market remains supported by lean inventories and historically low mortgage rates.
  • Housing starts decreased 6.0% to a seasonally adjusted annual rate of 1.580 million units last month, the Commerce Department said on Thursday. Homebuilding fell 2.3% on a year-on-year basis.
  • Permits for future homebuilding shot up 10.4% to a rate of 1.881 million units in January.
  • Permits typically lead starts by one to two months.
  • Single-family homebuilding, the largest share of the housing market, tumbled 12.2% to a seasonally adjusted annual rate of 1.162 million units. Single-family building permits rose 3.8% to a rate of 1.269 million units in January.
  • Starts for the volatile multi-family segment surged 17.1% to a pace of 418,000 units. Building permits for multi-family housing projects soared 27.2% to a pace of 612,000 units.

U.S. import prices post biggest gain since 2012 – Reuters, 2/18/2021

  • U.S. import prices increased by the most in nearly nine years in January, lifted by higher prices for energy products and a weak dollar, supporting expectations for an acceleration in inflation in the coming months.
  • The Labor Department said on Thursday import prices jumped 1.4% last month, the biggest gain since March 2012, after increasing 1.0% in December.
  • In the 12 months through January, import prices rebounded 0.9% after slipping 0.3% in December.
  • Imported fuel prices increased 7.4% last month after soaring 8.1% in December. Imported food prices surged 2.1%.
  • Excluding fuels and foods, import prices accelerated 0.8% after gaining 0.4% in December.

Democrats Face Intraparty Fight on Minimum Wage – Wall Street Journal, 2/17/2021

  • Democrats are bracing for an internal battle over raising the minimum wage to $15 an hour, as they grappled with the political and procedural constraints on reaching a long-held goal of the party’s progressive wing.
  • Raising the minimum wage to $15 an hour, which President Biden’s $1.9 trillion coronavirus relief plan proposes to do by 2025, faces opposition from some Democratic lawmakers and parliamentary hurdles.
  • Democrats cannot afford to lose a single vote in the 50-50 Senate on the relief package, which also calls for sending many Americans a $1,400 direct check, bolstering federal unemployment aid, and offering funds for vaccine distribution and testing.
  • At a CNN town hall event on Tuesday, Mr. Biden floated the possibility of raising the minimum wage to $12 or $13 an hour by 2025, rather than $15.  “I do support a $15 minimum wage,” Mr. Biden said. “But that’s a debatable issue.”
  • While many Republicans have assailed the proposed wage increase, arguing that it would hurt small businesses and cost jobs, Sens. Mitt Romney of Utah and Tom Cotton of Arkansas said Tuesday they would soon introduce their own legislation to raise the minimum wage.
  • The two Republicans said they would pair the gradual wage increase with a requirement that employers verify the immigration status of their employees—likely a nonstarter with Democrats.

U.S. Prosecutors Investigating How Cuomo Administration Handled Covid-19 in Nursing Homes – Wall Street Journal, 2/17/2021

  • Federal prosecutors have begun an investigation of how the administration of New York Gov. Andrew Cuomo handled the Covid-19 pandemic in the state’s nursing homes, people familiar with the matter said.
  • The new inquiry, led by the U.S. attorney’s office for the Eastern District of New York, in Brooklyn, is in addition to an August request for records from the U.S. Department of Justice’s civil-rights division about state-run nursing homes.
  • State records released last week show that the death toll for long-term-care facilities is more than 15,000. That is about 50% higher than earlier reports, which didn’t include more than 5,600 facility residents who died in hospitals.
  •  Melissa DeRosa, Mr. Cuomo’s top aide, told state lawmakers last week that the state Health Department held back the fuller tally because of its fear that it would be politicized by the administration of then-President Donald Trump.
  • Democrats who control both the state Assembly and Senate have said they were frustrated with the way Mr. Cuomo delayed releasing the data and are discussing whether to repeal a March law that gave the governor expanded power to manage the pandemic.

EUROPE & WORLD

Chinese Consumers Were Big Spenders During the Lunar New Year Holiday – Wall Street Journal, 2/18/2021

  • Chinese consumers opened up their wallets over the weeklong Lunar New Year holiday, energizing a domestic retail and service sector that has proved a stubborn laggard in China’s economic recovery.
  • Consumption at major retailers and restaurants over the seven-day holiday, from Feb. 11 to Feb. 17, hit 821 billion yuan, China’s Commerce Ministry said Wednesday. That figure, equivalent to about $127 billion, represented a 29% jump from last year’s pandemic-disrupted holiday, and a 4.9% increase from the same period in 2019, long before the coronavirus swept across China.
  • This time around, authorities in various Chinese cities offered cash handouts and other incentives to remain in place after a resurgence of coronavirus cases began sweeping across northern China last month.
  • As a result of the admonitions from authorities, travel by rail, air, road and other modes of transport fell 77% from pre-coronavirus levels and economists began adjusting forecasts for consumption to take a hit more broadly.

China’s Baidu beats revenue estimates on strong cloud, AI demand – Reuters, 2/17/2021

  • China’s Baidu reported quarterly revenue above Wall Street expectations on Wednesday, helped by a recovery in advertising and an uptick in demand for its cloud services and artificial intelligence platforms.
  • Its total revenue rose 5% to 30.26 billion yuan ($4.69 billion) in the fourth quarter, topping analysts’ average estimate of 30.06 billion yuan, according to IBES data from Refinitiv.
  • However, Baidu’s streaming affiliate, iQIYI, saw subscribers fall by 3.1 million to 101.7 million by December, when compared with the third quarter.
  • Excluding items, Baidu earned 20.08 yuan per ADS, beating estimates of 16.89 yuan.
  • Baidu said it expects current-quarter revenue between 26 billion yuan and 28.5 billion yuan, above expectations of 25.79 billion yuan.

Cautious Airbus forecast disappoints after 2020 loss – Reuters, 2/18/2021

  • European planemaker Airbus axed its dividend for a second year and forecast flat deliveries in 2021 as it braces for more coronavirus uncertainty in the wake of an annual loss.
  • On a widely watched adjusted basis, operating profit fell 75% to 1.7 billion euros as revenue slumped by 29% to 49.9 billion euros.
  • Airbus posted a 2020 operating loss of 510 million euros, weighed down by charges booked in previous quarters, notably for restructuring and the closure of the loss-making A380 program.
  • Chief Executive Guillaume Faury said the forecast for “at least” 566 jet deliveries, unchanged from last year when production had fallen 40%, gave investors some visibility. The actual level will depend on demand from airlines, he added.
  • In a sign of the strain on airline finances, Airbus sliced 100 billion euros ($120.5 billion), or 20%, off the value of its order book to 373 billion euros.
  • For 2021, Airbus predicted adjusted operating profit of 2 billion euros.

Factmonster – TODAY in HISTORY

  • The Adventures of Huckleberry Finn by Mark Twain was published. (1885)
  • Pluto, the ninth planet in the solar system, was discovered by American astronomer Clyde Tombaugh. (1930)
  • FBI agent Robert Philip Hanssen was arrested and charged with spying for Russia. (2001)

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