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Daily Market Report | Feb. 24, 2021

U.S. Stocks Tick Lower Ahead of Powell Testimony – Wall Street Journal, 2/24/2021

  • U.S. stocks edged lower Wednesday as investors awaited comments from Jerome Powell, a day after the Federal Reserve chairman soothed unsettled markets.
  • The Dow Jones Industrial Average fell 9 points, or less than 0.1%, shortly after the opening bell.
  • The S&P 500 dropped 0.1% and the Nasdaq Composite lost 0.50%.
  • Investors said a rise in government-bond yields, driven by improving growth prospects and rising inflation expectations, has accelerated a rotation out of the tech stocks that led markets higher during the pandemic, and into the stocks best placed to benefit from an end to lockdowns.
  • The yield on the benchmark 10-year Treasury notes, which moves inversely to its price, has risen to its highest level in a year this week. On Wednesday, it rose to 1.418%, from 1.363% Tuesday.
  • Mr. Powell reaffirmed Tuesday his commitment to keeping easy-monetary policies unchanged for the foreseeable future, which helped stem heavy losses among tech companies.
  • The latest batch of earnings reports will be in focus Wednesday.
  • Nvidia, Booking Holdings and L Brands will release their reports after markets close.
  • Square fell 5% after the payments company reported a lower fourth-quarter profit late Tuesday.
  • Bitcoin rose 3.9% to $49,889.73 Wednesday after falling 13% Tuesday.
  • Tesla shares rose 3%. The company’s share price has fluctuated along with bitcoin in recent days after the electric-vehicle maker said it had bought $1.5 billion of the cryptocurrency.

Coronavirus Live Updates: New Reported Cases Down as U.S. Death Toll Passes Half a Million – Wall Street Journal, 2/24/2021

  • The FDA said J&J’s one-shot Covid-19 vaccine is safe and effective.
  • The first shipment of free vaccines from Covax arrived in Ghana, marking the start of the biggest vaccination drive aimed at developing countries.
  • The U.S. reported more than 69,000 new cases for Tuesday, according to data compiled by Johns Hopkins University.
  • The nation’s death toll climbed by more than 2,200 Tuesday and is approaching 502,700, according to Johns Hopkins data.
  • Hospitalizations due to Covid-19 have more than halved from a month earlier. As of Tuesday, there were 55,058 Covid-19 patients in hospitals in the U.S., the fifth day in a row the figure has been under 60,000, according to the Covid Tracking Project.
  • The burden on intensive care units also eased, with 11,272 coronavirus patients in ICUs across the country, compared with more than 22,000 a month earlier.
  • Vaccination rollouts, which were delayed in some areas because of recent winter storms, continued to make headway.
  • As of early Wednesday, 13.4% of the U.S. population has been given at least one dose of a Covid-19 vaccine.
  • Vaccination levels vary by state, with 21.1% of Alaska residents having received one dose, while 11.1% of Utah residents have received a single dose.

J&J’s Covid-19 Vaccine Is Safe and Effective, FDA Says, Paving Way for Approval – The Wall Street Journal, 2/24/2021

  • The U.S. Food and Drug Administration found that a Johnson & Johnson Covid-19 single-dose vaccine was 66.1% effective in preventing moderate to severe virus disease, and that it had a “favorable safety profile.”
  • In the company’s clinical study of about 44,000 patients in the U.S., South Africa and other countries, the agency said, there were seven Covid-19 deaths among patients getting a placebo, and none among those who got the vaccine.
  • The advisory committee is expected to recommend the FDA authorize the J&J vaccine, and the agency is expected to make its decision soon after.
  • J&J has said it would deliver about 20 million doses for U.S. use by the end of March, which may be enough to boost the countrywide capacity for completed vaccinations by about 20%.

Square puts “skin in the game” with $170 million more in bitcoin buy – Reuters, 2/24/2021

  • Square raised the bets on bitcoin by investing $170 million more and Chief Executive Jack Dorsey promised on Tuesday to “double down” on the payment firm’s commitment to the world’s biggest cryptocurrency.
  • “The Internet needs a native currency, and we believe bitcoin is it,” the longtime bitcoin enthusiast and chief executive of social media firm Twitter said.
  • Square bought 3,318 bitcoins in the fourth quarter, adding to the mainstream acceptance of the digital currency that has been winning support from several big investors.
  • Square has been involved with the currency for years and its Cash App, a payments service, has allowed users to trade it since 2018.
  • The app had three million active bitcoin customers in 2020, with a million new users buying the currency for the first time in January, the company said.
  • Square’s revenue in the quarter more than doubled to $3.16 billion, which the company said was helped by bitcoin purchases on Cash App. Analysts, on average, estimated $3.22 billion, according to data compiled by Bloomberg.
  • Square’s gross profit on bitcoin trading rose 13 times in the fourth quarter, but it was still just 2% of its revenue from the cryptocurrency.
  • Its bitcoin holdings are now worth about 5% of its $4.4 billion cash pile.
  • The company posted adjusted earnings of 32 cents per share, beating market expectation of 24 cents.
  • Net income declined to $294 million from $391 million in the quarter a year earlier, the company said Tuesday in a statement.
  • Gross Payment Volume (GPV), or the cost of goods and services processed by retailers using Square’s sales products, increased 12% to $32 billion.

Lowe’s scores home run as quarterly sales hold above $20 billion – Reuters, 2/24/2021

  • Lowe’s rode a sustained boom in demand from people sprucing up their homes as a result of the COVID-19 pandemic, exceeding analyst estimates with quarterly sales of $20.31 billion.
  • However, the home-improvement chain, like larger rival Home Depot, stayed away from providing a specific forecast for 2021, given the uncertainties in the market due to the health crisis.
  • Same-store sales for Lowe’s rose 28.1% in the fourth quarter ended Jan. 29, beating analysts’ estimates for a 21.2% increase, according to IBES data from Refinitiv. Larger rival Home Depot reported a 24.5% gain on Tuesday.
  • Lowe’s total net sales rose to $20.31 billion from $16.03 billion in the fourth quarter, beating estimates of $19.48 billion.
  • Excluding items, the company earned $1.33 per share, beating estimates of $1.21.

T.J. Maxx parent misses estimates as lockdowns cut sales by $1 billion – Reuters, 2/24/2021

  • TJX, which operates more than 1,200 stores under various banners such as HomeSense and T.K. Maxx in Canada and Europe, estimated that temporary store closures cut its fourth-quarter sales by about $950 million to $1.05 billion.
  • TJX said about 690 stores were temporarily closed as of Wednesday due to government mandates and that it expected European stores to be shuttered for two-thirds of the current quarter.
  • Net sales fell to $10.94 billion in the quarter ended Jan. 30, from $12.21 billion a year earlier.
  • Analysts had expected sales of $11.48 billion, according to IBES data from Refinitiv.
  • Net income slumped to $325.5 million, or 27 cents per share, from $984.8 million, or 81 cents per share, a year earlier.

Foxconn to Build Cars for Electric-Vehicle Startup Fisker – The Wall Street Journal, 2/24/2021

  • Foxconn, the world’s biggest electronics contract manufacturer, has agreed to assemble cars for electric-vehicle startup Fisker, the latest deal for the Apple iPhone assembler in its eager expansion into the automotive sector over the past year.
  • Taipei-based Foxconn and Los Angeles-based Fisker have signed a memorandum of understanding to jointly produce more than 250,000 vehicles a year, the companies said in a statement Wednesday.
  • The Foxconn collaboration is for Fisker’s second model—a higher-volume electric car that the car maker aims to start building in the fourth quarter of 2023, the companies said.

Snap Drops a Bombshell Filter – The Wall Street Journal, 2/24/2021

  • Company says it reaches more than 70% of 13 to 24-year-olds in countries that generate more than half of the world’s digital ad spend.
  • Snap’s director of product Peter Sellis teased that, thanks to the company’s self-service ad platform, it is in a position to deliver multiple years of 50%-plus revenue growth.
  • That is significantly higher than the average 35.5% growth analysts are forecasting Snap will deliver over the next five years, according to FactSet.

Covid-19 Shopping Makes Card Fees a Bigger Burden for Merchants – The Wall Street Journal, 2/24/2021

  • Visa and Mastercard are planning to raise swipe fees for some types of credit-card purchases in April, adding to the squeeze felt by restaurants, retailers and other merchants already struggling through the Covid-19 pandemic.
  • The swipe fees, known as interchange fees in industry parlance, are a perpetual source of contention between merchants and card companies.
  • Though invisible to consumers, they are glaring to merchants, which often end up paying fees of about 2% of their customers’ credit-card purchases.
  • The fees are set by the card networks, such as Visa and Mastercard. Merchants pay them to the banks that issue the cards.

Facebook to invest $1 billion in news industry after Australia row – Reuters, 2/24/2021

  • Facebook on Wednesday pledged to invest at least $1 billion in the news industry over the next three years, days after a high-profile stand-off with the Australian government over paying news outlets for content.
  • The social network’s commitment to the news industry follows Google’s $1 billion investment last year, as technology giants come under scrutiny over their business model as well as the proliferation of misinformation on their platform.
  • Facebook on Tuesday restored Australian news pages, ending an unprecedented week-long blackout after wringing concessions from the government over a proposed law that will require tech giants to pay traditional media companies for their content.

Rising Rates Damp Mortgage Applications Ahead of Spring Selling Season – The Wall Street Journal, 2/24/2021

  • The average rate on the 30-year fixed-rate mortgage rose to 2.81% in the week ended Feb. 18, the highest since the second week of November, according to mortgage-finance giant Freddie Mac.
  • A measure of mortgage applications fell 11.4% over the same week, according to the Mortgage Bankers Association.
  • Improving Covid-19 vaccination rates in the U.S. and expectations of a large federal stimulus package in the coming weeks drove benchmark 10-year Treasury note yields, which are closely tied to mortgage rates, to their largest weekly gains in more than a month last week.
  • Demand in safe-haven assets such as government bonds weakens when investors feel optimistic about the economy.
  • Measures of purchase and refinance activity fell 11.6% and 11.3%, respectively, in the week ended Feb. 19, according to MBA data.
  • If mortgage rates begin to increase at a faster pace, some borrowers could be discouraged from attempting to buy a home during the crucial home-selling months of March through June.
  • In a typical year, more than 40% of annual home sales are made during this period, according to the National Association of Realtors.
  • Mortgage lenders originated a record $3.6 trillion worth of mortgages last year, according to the Mortgage Bankers Association, an increase of more than 50% from 2019.
  • Refinances accounted for about 59% of that volume. With the 30-year rate near 2.81%, between 16.7 million and 18.1 million Americans could lower their monthly mortgage payments through a refinance, according to mortgage-data firm Black Knight Inc.

U.S. new home sales exceed expectations in January – Reuters, 2/24/2021

  • Sales of new U.S. single-family homes increased more than expected in January, boosted by historically low mortgage rates and an acute shortage of previously owned houses on the market.
  • New home sales rose 4.3% to a seasonally adjusted annual rate of 923,000 units last month, the Commerce Department said on Wednesday. December’s sales pace was revised higher to 885,000 units from the previously reported 842,000 units.
  • Economists polled by Reuters had forecast new home sales increasing 2.1% to a rate of 855,000 units in January.

Senate Committees Postpone Votes on Biden OMB Nominee Neera Tanden – The Wall Street Journal, 2/24/2021

  • Homeland Security Committee and Budget Committee were scheduled to vote Wednesday.
  • Two Senate committees postponed scheduled votes on Neera Tanden’s nomination to lead the Office of Management and Budget, raising further doubts that she can garner enough support to be confirmed by the chamber.
  • To clear the full Senate, Ms. Tanden would need to win the support of at least one Republican after Democratic Sen. Joe Manchin of West Virginia announced his intention to oppose her confirmation.
  • The Senate is divided evenly between Republicans and Democrats, and Vice President Kamala Harris can break a tie.
  • Ms. Tanden has faced criticism from some lawmakers for her past statements on social media, which included jabs at senators. She compared Mr. McConnell to Voldemort, the Harry Potter villain; she referred to Sen. Susan Collins (R., Maine) as “the worst;” and asserted that “vampires have more heart” than Sen. Ted Cruz (R., Texas).

Democrats’ Minimum-Wage Push Hinges on Senate Ruling – The Wall Street Journal, 2/24/2021

  • A decision on whether raising the minimum wage as part of President Biden’s $1.9 trillion relief package is acceptable under the Senate’s rules is expected as soon as Wednesday, kicking off what could be a fraught negotiation among Democrats on the provision.
  • Staff for both Senate Democrats and Senate Republicans are set to meet Wednesday morning with Senate parliamentarian Elizabeth MacDonough over the proposal to raise the minimum wage to $15 an hour by 2025, a plank of Mr. Biden’s relief plan.
  • Democrats are using a process called reconciliation to pass the aid package with a simple majority, rather than the 60 votes required for most legislation. But reconciliation also comes with Senate rules on what proposals can be approved under the special procedure—including that the provision be directly tied to the budget. The nonpartisan parliamentarian will hear arguments from both parties and is expected to make a ruling on Wednesday or Thursday on the question.
  • A favorable ruling from the parliamentarian on raising the minimum wage through reconciliation will open the door for lawmakers to increase the federal minimum wage for the first time since 2009. But then Democrats will have to agree on exactly how to do so.
  • While many Democrats, including the party’s progressive wing, have embraced raising the minimum wage to $15 an hour by 2025, several senators have qualms about the plan.

EUROPE & WORLD

Outlook for airlines deteriorating in 2021: IATA – Reuters, 2/24/2021

  • Global airline industry body IATA warned that the outlook for airlines had weakened since its December forecasts, and due to tightening travel restrictions it now expected the sector to still be bleeding cash by the fourth quarter of this year.
  • IATA raised its forecast for total airline cash burn for 2021 to between $75 billion and $95 billion, up from the $48 billion it had forecast in December.
  • This summer is make-or-break for many airlines and holiday companies which are struggling to survive with close to a year of almost no revenue due to pandemic restrictions. Without it many will need extra funds after burning through cash reserves.

Factmonster – TODAY in HISTORY

  • Pope Gregory XIII issued a papal bull introducing the Gregorian calendar reform. (1582)
  • Mexico declared its independence from Spain. (1821)
  • Andrew Johnson, 17th president of the United States, became the first president to have impeachment proceedings brought against him by the House of Representatives. (1868)
  • The lease for Guantanamo Bay, Cuba, was signed. (1903)
  • Adolf Hitler outlined the basic points of the Nazi party at the Hofbrauhaus in Munich. (1920)
  • The discovery of a pulsar was announced. (1968)

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