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Daily Market Report | Feb. 26, 2021

U.S. Stocks Waver After Tech Selloff – Wall Street Journal, 2/26/2021

  • U.S. stocks struggled to right themselves Friday, one day after a sharp selloff in technology stocks amplified fears that equity valuations got overheated on the back of low bond rates and central-bank policy.
  • The Dow Jones Industrial Average fell 0.9%, or 273 points, and the S&P 500 was down 0.1%.
  • The Nasdaq Composite rose 0.5%, while equities markets overseas were down as well.
  • A wave of selling in U.S. government bonds on Thursday, combined with the Nasdaq Composite’s biggest fall since October, took some investors by surprise this week.
  • Yields on U.S. Treasurys, considered among the safest assets to own, have been rising in recent days as money managers bet on a rapid economic rebound.
  • The rollout of Covid-19 vaccines, a fresh fiscal stimulus package promised by President Biden, and the Federal Reserve’s pledge to keep its easy-money policies in place have buoyed sentiment for many weeks.
  • But the improving returns from bonds and the technology sector’s sharp rally in recent years is now fueling concerns that valuations of some stocks are too high.
  • In bond markets, the yield on the 10-year Treasury ticked down to 1.49%, from 1.513% on Thursday, its highest closing level in a year.
  • Fresh data released Friday showed that U.S. consumer spending increased 2.4% in January after household incomes got a boost from the latest round of stimulus checks. Investors expect Congress to pass another fiscal aid package in the coming weeks.

Coronavirus Live Updates: New U.S. Cases Top 70,000 for Third Day in a Row – Wall Street Journal, 2/26/2021

  • Newly reported coronavirus cases in the U.S. topped 70,000 for the third consecutive day, but hospitalizations continued to decline as vaccination campaigns across the country ramped up.
  • The U.S. reported just over 75,000 new cases for Thursday, according to data compiled by Johns Hopkins University that was published early Friday on the East Coast.
  • Hospitalizations fell further, with 52,669 Covid-19 patients requiring treatment in hospitals as of Thursday, the lowest level since Nov. 4, according to the Covid Tracking Project.
  • The number of Covid-19 patients in intensive care units declined to 10,846, 48% lower than levels a month earlier.
  • Nearly 14% of the U.S. population has now been given at least one dose of a Covid-19 vaccine, according to a Wall Street Journal analysis of data from the Centers for Disease Control and Prevention.
  • A committee of independent medical experts is convening Friday to review Johnson & Johnson’s single-dose Covid-19 vaccine, the final step before U.S. health regulators decide whether to authorize use of a third shot.
  • The panel, which includes 22 medical specialists in fields like internal medicine, pediatrics, vaccines and epidemiology, regularly advises the U.S. Food and Drug Administration about experimental vaccines.
  • It voted to recommend shots from Pfizer and Moderna before the agency authorized them in December.
  • If the panel votes to endorse the J&J shot, the agency is expected to permit the product’s wide use as soon as Saturday.

Salesforce full-year profit forecast disappoints, shares drop – Reuters, 2/25/2021

  • Salesforce.com on Thursday forecast full-year profit that was below market expectations, sending the shares of the online software company down 3.9% in extended trading.
  • Revenue in the quarter ended Jan. 31 rose to $5.82 billion from $4.85 billion a year earlier, driven by increased demand for its cloud-based software.
  • Analysts on average expected revenue to be $5.68 billion, according to IBES data from Refinitiv.
  • Excluding items, the company earned $1.04 per share, beating estimates of 75 cents.
  • The company raised its fiscal 2022 revenue forecast slightly to between $25.65 billion and $25.75 billion, above analysts’ average estimate of $25.42 billion.
  • The largest provider of customer relationship management software forecast full-year adjusted earnings per share between $3.39 and $3.41, below estimates of $3.49 per share.

Airbnb bookings rebound as lockdown-weary Americans step out for short trips – Reuters, 2/25/2021

  • Airbnb reported better-than-expected gross bookings on Thursday in its first quarterly earnings report since going public, indicating a strong rebound in demand for vacation rentals in North America as COVID-19 pandemic curbs ease.
  • Airbnb’s overall revenue fell 22% to $859 million, while adjusted loss before interest, taxes, depreciation and amortization shrank to about $21 million from $276.4 million, a year earlier, helped by cost cuts.
  • Analysts on average expected Airbnb to post revenue of $747.4 million and adjusted loss before interest, taxes, depreciation, and amortization of $122 million.
  • Leisure travelers in the company’s biggest market stepped out to nearby locations that could be accessed by a car and are within 50 miles, lifting daily booking rates up by 13%, Airbnb said.
  • The company’s gross bookings fell 31% to $5.9 billion in the fourth quarter ended Dec. 31, but beat market expectation of $5.17 billion, according to IBES data from Refinitiv.
  • Nights and experiences booked at Airbnb dropped 39% to 46.3 million units, but was better than the Wall Street’s estimate of a 47% drop.
  • Airbnb expects wider vaccine rollouts in 2021 to help a significant rebound in travel. It said both nights booked as well as gross bookings in the current quarter are expected to be higher than a year ago, but lower than the same period in 2019.

DoorDash sees orders slowing on vaccine rollouts; shares tumble – Reuters, 2/25/2021

  • Food delivery company DoorDash expects fewer customer orders in the back half of the year as the vaccine rollouts embolden more people to venture out to restaurants and cafes, after nearly a year of staying indoors.
  • Fourth-quarter revenue rose more than three-fold to $970 million.
  • But net loss widened to $312 million from $134 million a year earlier.
  • DoorDash said the vaccine rollouts and consumers returning to stores would coincide with the seasonally softer second and third quarters.
  • The company forecast 2021 marketplace gross order value between $30 billion and $33 billion and in the range of $8.6 billion to $9.1 billion for the current quarter. In the fourth quarter ended Dec. 31, they rose 227% to $8.2 billion.
  • First-quarter adjusted earnings before interest, taxes, depreciation, and amortization are expected to take a hit from recently imposed caps on fees it collects from restaurants and the passage of Proposition 22, a law that classifies its drivers or “dashers” as contractors.

Dell beats revenue estimates on buoyant demand for desktops, notebooks – Reuters, 2/25/2021

  • Dell Technologies beat Wall Street estimates for holiday-quarter revenue on Thursday, helped by demand for its desktops and notebooks as most offices continued to work remotely during the COVID-19 health crisis.
  • Total revenue rose 9% to $26.1 billion in the three months ended Jan. 29, while analysts had estimated $24.5 billion, according to IBES data from Refinitiv.
  • Revenue from its client solutions group, which includes desktop PCs, notebooks and tablets, was $13.8 billion, up 17% from a year earlier. The company said it had shipped a record 50.3 million units during 2020.
  • Revenue from its data center business was $8.8 billion in the quarter, in line with a year earlier, while sales at VMware was $3.3 billion. Dell plans to spin off its 81% stake in the software unit to help reduce debt.
  • Net income attributable to the company rose to $1.2 billion from $408 million a year earlier, as it shaved off administrative costs by 19% in the quarter.

Beyond Meat Signs Supply Deals With McDonald’s, Yum – Wall Street Journal, 2/26/2021

  • Beyond Meat said it struck deals to supply plant-based meat imitations to McDonald’s, KFC and Pizza Hut, a victory in the company’s effort to take meat alternatives into the American dining mainstream.
  • Beyond’s sales for 2020’s fourth quarter increased 3.5% to $102 million, despite its U.S. food service sales dropping 43% from the same quarter a year ago.
  • The company’s quarterly loss of $25.1 million came in bigger than analysts projected and grew from the third quarter of 2019, when Beyond reported a $19 million loss.
  • Under separate agreements announced Thursday, California-based Beyond said it would be the preferred supplier for a new plant-based burger from McDonald’s, while helping develop new plant-based menu items for Yum Brands chains KFC, Pizza Hut and Taco Bell.
  • Yum’s partnership with Beyond will focus on creating new menu items that expand on the companies’ earlier introductions, which included Beyond-made fried chicken tested by KFC in 2019, and Beyond-made toppings launched in 2020 at Pizza Hut.

AT&T Carves Out Pay-TV Business in Deal With TPG – Wall Street Journal, 2/25/2021

  • AT&T agreed to sell a stake in its pay-TV unit to private-equity firm TPG and carve out the struggling business, pulling the telecom giant back from a costly wager on entertainment.
  • The transaction would move the DirecTV and AT&T TV services in the U.S. into a new entity that will be jointly run by the new partners. AT&T will retain a 70% stake in the business. TPG will pay $1.8 billion in cash for a 30% stake.
  • The deal values the new company at $16.25 billion with about $6.4 billion of debt. That is well below the $49 billion—about $66 billion including debt—that the Dallas company paid to buy international satellite operator DirecTV in 2015.
  • AT&T said it would get about $7.8 billion in cash from the transaction to help pay down debts.
  • Those proceeds include $5.8 billion that the new company will borrow from banks and pay back to AT&T.

Costco to Raise Minimum Hourly Wage to $16, as Congress Debates $15 – Wall Street Journal, 2/25/2021

  • Costco Wholesale will pay its U.S. workers at least $16 an hour starting next week, the company’s chief executive told Congress on Thursday as lawmakers debate raising the federal minimum to $15 an hour.
  • The warehouse retail chain’s minimum U.S. wage has been $15 an hour, the same as the starting wage at Amazon.com and Target. Rival Walmart recently said it would raise wages for some workers but keep its starting wage at $11 an hour.
  • Costco has long paid its store workers more than most competitors, in part to reduce turnover as part of its low-cost operating model.
  • Costco Chief Executive Craig Jelinek said at the hearing Thursday that Costco’s average wage for hourly workers is $24 an hour.
  • “This isn’t altruism,” Mr. Jelinek said. “It helps in the long run by minimizing turnover, maximizing employee productivity, commitment and loyalty.” In the U.S., employees average more than 9 years with the company, he said.
  • Walmart’s average U.S. wage after recent increases take effect will be more than $15 an hour, the company has said.

Tesla Temporarily Halted U.S. Production Over Parts Shortage – Wall Street Journal, 2/26/2021

  • Tesla Chief Executive Elon Musk said the company paused activity at its lone U.S. car plant in Fremont, Calif., because of parts shortages but has restarted operations.
  • “Fremont shut down for two days (parts shortages) & restarted yesterday,” Mr. Musk tweeted Thursday.
  • The auto industry has been grappling with a global shortfall of semiconductors that has caused production-line shutdowns.
  • Companies such as General Motors., Ford Motor and Volkswagen have idled some of their production capacity as they await critical parts.
  • Mr. Musk didn’t elaborate on the nature of the parts shortages. Tesla didn’t immediately respond to a request for comment.

Fisker mulls battery cell manufacturing in Europe, U.S. with major supplier – Reuters, 2/26/2021

  • Fisker CEO said on Thursday that the electric vehicle startup is considering setting up a battery cell manufacturing facility with an unidentified major supplier in Europe or the United States, to secure stable supplies of the key component.
  • Fisker, which was once a rival to Tesla Motors in the nascent market for electric luxury cars, struggled with the recall of batteries made by its previous supplier, A123, which later filed for bankruptcy.
  • Fisker, which is yet to produce saleable vehicles, has been partnering with companies for manufacturing its electric cars to speed up vehicle development and production.
  • On Wednesday, Fisker said it would work with Apple supplier Foxconn to produce more than 250,000 vehicles a year beginning in late 2023.
  • Fisker’s production is on track to start in the fourth quarter of next year, with a starting price of $37,499.

Australia lifts ban on Boeing 737 MAX, among first in Asia-Pacific – Reuters, 2/26/2021

  • Australia said on Friday it would lift a near two-year ban on flights involving Boeing Co 737 MAX planes, becoming among the first in the Asia-Pacific region to do so.
  • “We … are confident that the aircraft are safe,” Graeme Crawford, acting chief of the Civil Aviation Safety Authority, said in a statement.
  • The regulator has accepted comprehensive return-to-service requirements set by the U.S. Federal Aviation Administration (FAA) for the 737 MAX, he added.No Australian airlines operate the 737 MAX, but Virgin Australia has 25 of the planes on order. Singapore Airlines Ltd and Fiji Airways operated them on flights to Australia.

Boost to Household Income Primes U.S. Economy for Stronger Growth – Wall Street Journal, 2/26/2021

  • U.S. household income jumped 10% in January as the government delivered stimulus payments to households and consumer spending rose 2.4%, priming the economy for a burst in growth this year.
  • The increase in income was the second largest on record, eclipsed only by last April’s increase when the federal government sent an initial round of pandemic-relief payments, the Commerce Department said Friday.
  • Under a $900 billion stimulus program signed by former President Donald Trump in late December, the federal government has been sending one-time cash payments of $600 to most households.
  • It also has been paying jobless workers $300 a week on top of their normal unemployment benefits.
  • Gross domestic product fell 3.5% in 2020 compared with 2019, the Commerce Department said Thursday.

Biden Orders U.S. Airstrike in Syria, Targeting Iran-Backed Militia – Wall Street Journal, 2/26/2021

  • The U.S. military launched an airstrike in Syria targeting groups affiliated with an Iran-backed militia in response to deadly rocket attacks in northern Iraq earlier this month, U.S. officials said.
  • The Pentagon said in a statement that the attack destroyed facilities at a border-control point used by Iranian-backed militant groups, including Kataib Hezbollah and Kataib Sayyid al-Shuhada.
  • The airstrike was the first known instance in which the Biden administration had approved the use of military force against an adversary since taking office last month.

Biden Pick Tanden’s Confirmation Battle Puts Spotlight on Two Senate Centrists – Wall Street Journal, 2/26/2021

  • The fate of Neera Tanden’s nomination to lead the Office of Management and Budget came down to two centrist senators after another Republican added his name to the list of lawmakers who oppose confirming her.
  • Republican Sen. Chuck Grassley of Iowa said on Thursday that he would vote against Ms. Tanden. Mr. Grassley, who often votes with other Republicans but has backed many of President Biden’s cabinet nominees so far, hadn’t disclosed his position.
  • Democratic Sen. Joe Manchin of West Virginia said last week that he would vote against Ms. Tanden, meaning a Republican would have to break with other members of the party and join the remaining 49 Democrats for the nomination to pass.
  • The White House is now homing in on Sens. Lisa Murkowski (R., Alaska) and Kyrsten Sinema (D., Ariz.), people involved in the discussions said.
  • A “no” vote from either senator, neither of whom has so far tipped her hand, would doom Ms. Tanden’s chances of clearing the Senate.

Democrats Dealt Blow on Minimum-Wage Drive for Covid-19 Bill – Wall Street Journal, 2/26/2021

  • The Senate parliamentarian told lawmakers Thursday night that a proposed increase in the minimum wage to $15 an hour didn’t comply with Senate rules, dealing a blow to Democrats’ efforts to include it in the $1.9 trillion coronavirus relief package.
  • The parliamentarian, the neutral arbiter of the chamber’s rules, issued guidance saying she thought it didn’t meet the guidelines for reconciliation, the process that Democrats are using to pass their relief plan with a simple majority in the Senate, and would be ruled out of order.
  • The parliamentarian’s ruling against the wage increase now puts pressure on Democrats to decide if they will abide by the guidance or seek to overturn it.
  • Some progressive Democrats already have pushed to ignore the parliamentarian’s recommendation and approve the measure, an unusual step that the White House and some Senate Democrats have said they would resist.

EUROPE & WORLD

Brazil’s Vale books hefty dam disaster charges, but bullish about core earnings – Reuters, 2/26/2021

  • Brazil’s Vale SA logged $4.9 billion in provisions related to the Brumadinho dam disaster in quarterly earnings, but its ferrous metal division turned in a strong performance and the miner was upbeat about the outlook for key products.
  • EBITDA or earnings before interest, taxes, depreciation and amortization rose 20% to $4.2 billion in the fourth quarter from the same period a year earlier when Vale also booked heavy charges related to the dam disaster.
  • Stripped of the dam disaster provisions, however, last quarter’s EBITDA was $9.1 billion, a 94% jump from a year ago, buoyed by a surge in sales prices for iron ore, its main product, as well as sharp climbs in pricing for nickel and copper.
  • Its ferrous metals unit saw EBITDA, adjusted for some one-off factors, come in at $8.8 billion, thanks to a 26% increase in sales volume and a 17% price increase for the division’s products. That was the unit’s second-highest ever adjusted EBITDA.
  • That said, it trimmed its forecast for 2021 copper production to 360,000-380,000 tonnes from 390,000 tonnes, but did not elaborate on the reasons for the revision.

Exclusive: China’s Huawei, reeling from U.S. sanctions, plans foray into EVs – sources – Reuters, 2/26/2021

  • China’s Huawei plans to make electric vehicles under its own brand and could launch some models this year, four sources said, as the world’s largest telecommunications equipment maker, battered by U.S. sanctions, explores a strategic shift.
  • Huawei Technologies is in talks with state-owned Changan Automobile and other automakers to use their car plants to make its electric vehicles (EVs), according to two of the people familiar with the matter.
  • Huawei is also in discussions with Beijing-backed BAIC Group’s BluePark New Energy Technology to manufacture its EVs, said one of the two and a separate person with direct knowledge of the matter.
  • The plan heralds a potentially major shift in direction for Huawei after nearly two-years of U.S. sanctions that have cut its access to key supply chains, forcing it to sell a part of its smartphone business to keep the brand alive.

China’s Ant to boost consumer finance unit capital as it restructures micro-lending: sources – Reuters, 2/26/2021

  • China’s Ant Group is in talks with other shareholders in its new consumer finance unit to bolster the firm’s capital as the fintech giant prepares to fold in its lucrative micro-lending businesses, people familiar with the matter said.
  • It would need additional capital of 30 billion yuan ($4.6 billion) to meet regulatory requirements, said one of the people who has direct knowledge of the plans.
  • Ant plans to bring most of its micro-lending businesses into the unit – equivalent to roughly 1 trillion yuan ($155 billion) in outstanding loans – a move which will allow it to maintain operations nationwide and expand more easily, said two sources.

Covid-19 Vaccine ‘Passports’ Raise Ethics Concerns, Logistical Hurdles – Wall Street Journal, 2/26/2021

  • As vaccine rollouts gain momentum, governments world-wide are looking at ways for people to prove they are inoculated against the coronavirus, raising logistical and ethical concerns about whether others will be excluded from daily life.
  • The U.K. government recently announced it will consider whether Britons will need proof of vaccination or a negative Covid-19 test to visit bars, return to the office or attend theaters and sporting events.
  • In Israel, a vaccine passport was launched last week allowing those who are inoculated to go to hotels and gyms. Saudi Arabia now issues an app-based health passport for those inoculated, while Iceland’s government is doling out vaccine passports to facilitate foreign travel.
  • Last month, President Biden issued executive orders asking government agencies to assess the feasibility of creating digital Covid-19 vaccination certificates.
  • But the concept is potentially fraught with pitfalls.
  • It could discriminate against minority communities, who are less likely to accept the vaccines, according to national surveys, or young people, who are less likely to be given priority to receive them. There are questions about the ethics of granting businesses access to peoples’ health records.

Factmonster – TODAY in HISTORY

  • Napoleon Bonaparte escaped from exile on the island of Elba. (1815)
  • Leaders of the Boxer Uprising in China, Chi-hsui and Hsu Cheng-yu, were beheaded. (1901)
  • RADAR (Radio Detection and Ranging) was first demonstrated by Robert Watson-Watt. (1935)

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