Daily Market Report | Feb. 23, 2021
Stocks Drop Ahead of Powell’s Comments – Wall Street Journal, 2/23/2021
- A retreat in technology stocks continued Tuesday as U.S. stocks slid and investors awaited Federal Reserve Chairman Jerome Powell’s testimony in Congress on the health of the economy.
- The benchmark stocks gauge on Monday fell for a fifth consecutive day, its longest losing streak since last February.
- A sharp rise in yields on U.S. government bonds in recent days has sapped investors’ appetite for riskier assets, including stocks.
- Shares in technology companies, which have powered the broader market higher for much of the past year, are seen as particularly vulnerable. That is because many tech companies’ valuations are tied to their future earnings potential.
- Those profits are less valuable in today’s terms when investors apply a higher discount rate.
- The yield on 10-year Treasury notes ticked down to 1.362%, from 1.370% Monday.
- Yields, which rise as bond prices fall, are lower than they were before the coronavirus pandemic sent markets into a tailspin last year.
- Tesla fell about 8%, after declining almost 9% on Monday.
- The move came as the price of bitcoin slid about 8% to $48,740.44, according to CoinDesk.
- Newly reported coronavirus cases in the U.S. remained below 60,000 for the second day in a row and hospitalizations continued to fall, as the nation’s death toll from Covid-19 surpassed half a million.
- More than 500,300 people in the U.S. have died from the disease, with more than 1,350 new fatalities added on Monday, according to data compiled by Johns Hopkins University. Monday’s death toll was down from the previous day’s total of 1,821.
- The U.S. reported more than 54,000 new coronavirus cases for Monday, according to Johns Hopkins data published early Tuesday Eastern time.
- The total number of Covid-19 patients requiring hospitalization fell to 55,403, the fourth day in a row the figure has been under 60,000, according to the Covid Tracking Project.
- Intensive care units also saw a decline in the number of Covid-19 patients, with 11,536 people in ICUs, the lowest level since Nov. 8.
- The U.K. Tuesday announced a way out of lockdown on the back of its swift vaccination program, but other countries in Europe continue to battle with whether to impose new curbs to halt spread of new, more contagious variants of Covid-19.
- Germany has toughened border restrictions with Austria and the Czech Republic in recent days.
- The controls are slowing trade and undermine the concept of a single market, but are necessary to stem the influx of new variants that spread more easily, said the country’s Europe minister Michael Roth.
- France is encouraging more people to work from home to prevent a resurgence of new cases.
- Labour Minister Elisabeth Borne told state radio that companies should do whatever they can to allow for remote working after the seven-day average of new cases began tracking higher this week, reaching just over 20,000 on Monday compared with 18,000 on the same day last week.
- In the U.K., British Prime Minister Boris Johnson out the roadmap toward lifting lockdown measures as the country continues with one of the world’s fastest vaccine rollout initiatives. Schools in England will reopen on March 8, before a series of other relaxation measures are phased in over the coming months.
- Home Depot logged strong sales growth year over year for the November-to-January quarter and raised its dividend, but the company’s finance chief said that the trend could flatten this year as the company faces comparisons from its robust 2020 results.
- Home Depot’s revenue in the latest quarter was $32.26 billion, a 25% increase compared with $25.78 billion in the same three-month period a year earlier. Analysts surveyed by FactSet had forecast revenue of $30.63 billion in the quarter.
- In the latest quarter, the number of Home Depot customer transactions rose 12.8% to 416.8 million, and the average transaction size grew to $75.69, from $68.29 in 2019’s fourth quarter. The company finished the quarter with 2,296 retail stores.
- Home Depot Tuesday posted fourth-quarter earnings of $2.86 billion, or $2.65 a share, compared with $2.48 billion, or $2.28 a share, a year earlier. Analysts had been forecasting earnings of $2.61 a share.
- Citing uncertainty caused by the pandemic, Home Depot declined to provide formal guidance for its 2021 results.
- Chief Financial Officer Richard McPhail estimated that if late-2020 demand levels continue into this year, comparable sales—a figure that corrects for changes in store count—will be flat or slightly positive in 2021.
- Home Depot also raised its quarterly dividend by 10% to $1.65 a share, equal to $6.60 annually.
Macy’s forecasts upbeat 2021 sales on stimulus checks, online shoppers – Reuters, 2/23/2021
- Macy’s forecast 2021 sales largely above Wall Street estimates on Tuesday as the retailer bets on its growing online business and on the COVID-19 vaccine rollouts allowing customers to return to its department stores after pandemic curbs.
- Net sales fell to $6.78 billion from $8.34 billion in the fourth quarter, but beat estimates of $6.50 billion.
- Same-store sales on an owned basis fell 17% in the fourth quarter ended Jan. 30, compared with Wall Street estimates of a 16.60% fall, according to IBES data from Refinitiv.
- Macy’s online sales jumped 21% in the quarter as it pushed for faster delivery times with stores being used to fulfill orders made on its website and app as more consumers move their shopping online.
- Macy’s expects sales between $19.75 billion and $20.75 billion for the full year, compared with analysts’ estimates of $20.13 billion, according to IBES data from Refinitiv.
- The company now expects annual online sales to reach $10 billion within the next three years.
Spirit Aero revenue halves, flies into loss as Boeing troubles weigh – Reuters, 2/23/2021
- Spirit AeroSystems Holdings was hit by troubles at top customer Boeing, driving the aircraft parts maker to report a 55% slump in quarterly revenue and a much bigger-than-expected loss on Tuesday.
- Total revenue slumped 55.3% to $876.6 million.
- Spirit’s total deliveries of shipsets, or complete sets of parts, fell 48.9% to 231 units in the fourth quarter.
- Boeing 737 MAX deliveries fell to 19 shipsets from 153 a year earlier.
- Spirit posted a loss of $295.9 million, or $2.85 per share, in the quarter ended Dec. 31, compared with a profit of $67.7 million, or 65 cents per share, a year earlier.
Occidental Petroleum posts larger quarterly loss on asset sale – Reuters, 2/23/2021
- Occidental Petroleum on Monday posted a larger-than-expected fourth-quarter loss despite higher oil and gas prices as an asset sale weighed on results.
- The company collected 5% more, or $40.77 per barrel, for its oil in the fourth quarter from the third, benefiting from a rebound in oil prices. It also collected 31% more for its natural gas during the final quarter compared with the third.
- Occidental reported a net loss of $1.3 billion, or $1.41 per share, flat with the $1.3 billion, or $1.50 per share, loss in the fourth quarter of 2019. The latest loss included a pretax charge of $820 million from the sale of oil properties in West Texas.
- Occidental forecast the current quarter’s oil and gas production would shrink about 4%, mostly due to output losses during the recent winter storm in Texas.
- For the year, Occidental forecast oil and gas output would be flat compared with the fourth quarter at about 1.14 million barrels per day.
Marathon Oil posts smaller loss on higher prices, cost cuts – Reuters, 2/22/2021
- U.S. shale producer Marathon Oil on Monday posted a smaller fourth-quarter loss compared with the third, helped by cost cuts and a recovery in commodity prices from pandemic lows on vaccine hopes.
- Marathon, which postponed its earnings last week due to the harsh winter weather in Texas, said its adjusted loss was $98 million, or 12 cents per share, in the fourth quarter ended Dec. 31, compared with a loss of $219 million, or 28 cents per share, in the third quarter.
Bitcoin plummets as doubts grow over sky-high valuation – Reuters, 2/23/2021
- Bitcoin plummeted as much as 17% on Tuesday as investors grew nervous at sky-high valuations, triggering the liquidation of leveraged bets and sparking a sell-off across cryptocurrency markets.
- The world’s biggest cryptocurrency was facing its biggest daily drop in a month, falling to as low as $45,000.
- In choppy trading, it was last down 15.6%.
- The drop took its losses to over a fifth from a record high of $58,354 hit on Sunday and underscored the volatility of the emerging asset – though it is still up around 60% this year.
- Ether, the world’s second largest cryptocurrency by market capitalization that often moves in tandem with bitcoin, also dropped more than 20% to $1,410, down over 30% from last week’s record peak.
U.S. bank profits fell 36.5% in 2020 on pandemic concerns: FDIC – Reuters, 2/23/2021
- U.S. bank profits fell 36.5% in 2020 from the year prior as banks set aside massive amounts to guard against potential losses, but the industry showed signs of strengthening in the fourth quarter as the economy begins to recover from the pandemic, a regulator reported Tuesday.
- The industry posted $147.9 billion in profits in 2020, a sharp decline from record 2019 profits, according the Federal Deposit Insurance Corporation.
- However, bank profits were up 9.1% in the fourth quarter to $59.9 billion compared to a year prior as firms shrank how much cash they set aside to guard against losses.
Facebook Reaches Deal with Australia to Restore News – Wall Street Journal, 2/23/2021
- Facebook reached a deal with the Australian government to restore news pages to the social media company’s platform, following a five-day suspension because of a disagreement over payment for content.
- Facebook removed news from its platform in Australia last week, as legislation that would effectively require Facebook and Alphabet’s Google to pay traditional media companies for content worked its way through the country’s parliament.
- Facebook got some changes to the legislation as part of the deal.
- That includes requiring an additional round of negotiation with media companies before binding arbitration kicks in, as well as more acknowledgment of any deals Facebook reaches with publishers on its own, a government statement and government officials said Tuesday.
- In return, Facebook planned to restore news pages to its platform in Australia in the coming days, the statement said.
Covid-19 Relief Bill Moves Closer to House Vote – Wall Street Journal, 2/23/2021
- The House Budget Committee approved the $1.9 trillion coronavirus relief package Monday, setting up a vote in the full House later this week.
- The Budget Committee on Monday officially fused together different portions of the legislation that had advanced earlier this month in nine different House committees. A full House vote is expected Friday or Saturday.
- The bill moving through the House would provide $400-a-week unemployment benefits through Aug. 29, send $1,400 per-person payments to most households, provide billions in funding for schools and vaccine distribution, expand the child tax credit, broaden child-care assistance and bolster tax credits for health insurance.
- It would also increase the federal minimum wage to $15 an hour over four years, a point of division among Democrats.
- Republicans have criticized the bill as wasteful and said Congress should take more time to assess where more funding is needed after lawmakers passed nearly $4 trillion in relief efforts since the pandemic began.
- But the bill has already started a messy fight in the Senate, where Democrats are divided over whether to include a provision that would gradually raise the minimum wage to $15 an hour over four years.
- Two centrist Democrats, Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, have already said they oppose including it in the relief bill. A larger group of 10 other Democrats haven’t signed on to stand-alone legislation raising the minimum wage to $15 an hour.
- Mr. Manchin has talked about supporting an increase to $11 or $12 an hour, according to activists who met with him last week.
Consumer Demand Snaps Back. Factories Can’t Keep Up. – Wall Street Journal, 2/23/2021
- U.S. manufacturers aced the shutdown of their factories and warehouses last spring in response to Covid-19. They’re botching the recovery.
- After carrying out an orderly retreat from assembly lines as the pandemic arrived in the U.S., many manufacturers pulled out the playbook they followed in past recessions, cutting costs and preserving cash. That left them unprepared for the sharp rebound in consumer demand that began just weeks later and never let up.
- Consumer spending on long-lasting goods in the U.S. rose 6.4% last year but domestic production of those goods fell 8.4%, according to federal data, leading to shortages and higher prices.
- This time, the bullwhip effect is even more pronounced because demand for consumer products has been extraordinarily high. At the same time, companies are placing supersize orders to compensate for the extra time it takes to procure supplies from factories and freight operators constrained by global efforts to contain the coronavirus.
- That’s exacerbating the strain on supply chains.
U.S. Home-Price Growth Accelerated in December – Wall Street Journal, 2/23/2021
- Home-price growth accelerated in December, as the number of homes on the market continued to decline.
- The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 10.4% in the year that ended in December, up from a 9.5% annual rate the prior month.
- The Case-Shiller 10-city index gained 9.8% over the year ended in December, compared with an 8.9% increase in November. The 20-city index rose 10.1%, after an annual gain of 9.2% in November.
- Phoenix had the fastest home-price growth in the country for the 19th straight month, at 14.4%, followed by Seattle at 13.6%.
- A separate measure of home-price growth by the Federal Housing Finance Agency also released Tuesday found an 11.4% increase in home prices in December from a year earlier.
- The supply of homes for sale has dropped, prompting buyers to compete for houses and buoying prices. There were 1.07 million homes for sale at the end of December, down 23% from December 2019, according to NAR.
U.S. consumer confidence rises in February: survey – Reuters, 2/23/2021
- U.S. consumer confidence increased in February, likely lifted by declining new COVID-19 infections and expectations for additional fiscal stimulus.
- The Conference Board said on Tuesday its consumer confidence index rose to a reading of 91.3 this month from 88.9 in January.
- Economists polled by Reuters had forecast the index nudging up to a reading of 90.
Jerome Powell Sees Easy-Money Policies Staying in Place – Wall Street Journal, 2/23/2021
- Federal Reserve Chairman Jerome Powell reaffirmed the central bank’s commitment to maintaining easy-money policies until the economy has recovered further from the effects of the coronavirus pandemic.
- “The economy is a long way from our employment and inflation goals,” Mr. Powell said in testimony to the Senate Banking Committee, a statement he has repeated in recent weeks. The Fed will therefore continue to support the economy with near-zero interest rates and large-scale asset purchases until “substantial further progress has been made,” a standard that Mr. Powell said “is likely to take some time” to achieve.
- Mr. Powell delivered the Fed’s semiannual monetary-policy report to members of the committee Tuesday and is set to do the same Wednesday at a hearing of the House Financial Services Committee.
- Mr. Powell painted a brighter picture of the economy Tuesday than the last time he appeared before lawmakers, Dec. 1. Covid-19 cases and deaths at the time were surging, parts of the country were tightening lockdowns and public vaccination campaigns had not yet begun, prompting Mr. Powell to warn that the outlook for the economy was “extraordinarily uncertain.”
EUROPE & WORLD
China Faces European Obstacles as Some Countries Heed U.S. Pressure – Wall Street Journal, 2/23/2021
- Some European countries are starting to block Chinese involvement in their economies, drawing closer to positions advocated by the U.S. amid growing anxiety in Europe over China’s increasingly aggressive geopolitical posture.
- Governments from the Baltic to the Adriatic seas have recently canceled public tenders that Chinese state-owned companies were set to win, or are moving to ban Chinese companies from investing or contracting in their countries.
- The shift is largely taking place in smaller European countries, adding to tensions within the European Union, where big countries still largely favor maintaining business links with China.
- Romania and Lithuania are taking broad measures to exclude Chinese companies from certain public procurements. Other moves are more targeted. Authorities in Slovenia, Croatia, the Czech Republic and Romania have suspended public tenders involving Chinese companies for work on nuclear-power plants, highways, rail lines, security scanners and a shipping-container terminal. Greece is debating whether to allow a Chinese shipping company to increase its majority stake in the country’s largest port.
Huawei 2020 revenue ticks up despite U.S. sanctions, chairman says – Reuters, 2/23/2021
- Huawei Technologies saw slight revenue and profit growth in 2020, in line with its expectations, its rotating chairman said on Tuesday, even as Washington toughened up sanctions against the Chinese telecom equipment maker.
- The company was put on an export blacklist by former U.S. President Donald Trump in 2019 and barred from accessing critical technology of U.S. origin, affecting its ability to design its own chips and source components from outside vendors.
- Huawei on Monday unveiled its new 5G Mate X2 foldable phone, which will use the company’s proprietary Kirin processor.
- Though with the cheapest model starting at 17,999 yuan ($2,788), the phone is not positioned to challenge the mainstream phone market.
- Earlier this month, the company’s founder and Chief Executive Ren Zhengfei said he hoped the Biden administration would “harbour an open policy” towards U.S. firms doing business with Huawei in his first comments to the media in about a year.
Factmonster – TODAY in HISTORY
- Mexican general Santa Anna began the siege of the Alamo. (1836)
- The first Axis shelling of U.S. soil took place near Santa Barbara, Calif. (1942)
- S. Marines raised the American flag on Iwo Jima. (1945)
- Scottish scientists announced the successful cloning of a sheep, Dolly. (1997)
- The Obama Administration determines that the Defense of Marriage Act is unconstitutional. (2011)
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