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Daily Market Report | Mar. 04, 2021

Stocks Wobble Ahead of Powell’s Comments – Wall Street Journal, 3/4/2021

  • U.S. stocks wobbled again Thursday as investors awaited comments from Federal Reserve Chairman Jerome Powell about the outlook for inflation and the central bank’s views on rising bond yields.
  • The S&P 500 slipped 0.1% after two consecutive days of declines.
  • The Nasdaq Composite slipped 0.6%. The Dow Jones Industrial Average gained 37 points, or 0.1%.
  • Fresh data showed that 745,000 Americans applied for first-time unemployment benefits in the week ended Saturday, up from 736,000 the week prior. Economists surveyed by The Wall Street Journal had expected 750,000 jobless claims.
  • The stock market is continuing to reflect and react to moves in government bonds. A recent selloff in U.S. sovereign debt has lifted Treasury yields, curbing investors’ appetite for the technology stocks that had soared in a low-yield environment.
  • A key measure of investors’ inflation expectations also surged higher yesterday. Five-year breakevens—which reflect the expected pace of price increases over the five-year period that begins five years from now—climbed above 2.5% for the first time in 13 years before closing at 2.487% Wednesday, according to Deutsche Bank.
  • Investors say they are hoping Mr. Powell will answer questions on how he views the jump in yields when he speaks at The Wall Street Journal Jobs Summit at 12:05 p.m. ET. Central bank officials have previously said that they will keep monetary policy loose until the economy is stronger, and that they view the rise in bond yields as a signal that investors are optimistic about the U.S. economic recovery.
  • The Fed chair’s comments will also offer one of the last opportunities for markets to hear from key policy makers before a blackout period begins ahead of the next monetary policy review in mid-March.

Covid-19 Live Updates: New U.S. Cases Ease, but Death

Covid-19 Live Updates: Reported Daily U.S. Deaths and Cases Rise – Wall Street Journal, 3/4/2021

  • Newly reported Covid-19 cases and deaths in the U.S. both rose from a day earlier, as President Biden criticized state leaders for loosening virus-related restrictions.
  • There were more than 65,000 new reported cases for Wednesday, according to data compiled by Johns Hopkins University and published early Thursday morning Eastern time. That number might update later.
  • The tally was higher than the 56,758 reported a day earlier, but lower than the 74,429 reported a week earlier.
  • Deaths, a lagging indicator, rose for the third day in a row, with the nation reporting more than 2,300 for Wednesday, according to Johns Hopkins data. There were 1,924 a day earlier and 3,146 a week earlier.
  • President Biden on Wednesday criticized state leaders for loosening Covid-19-related restrictions and protective measures, saying it was a “big mistake.”
  • “Masks make a difference,” Mr. Biden said, describing actions from some state leaders as “neanderthal thinking.”
  • Mr. Biden’s comments come a day after Texas Gov. Greg Abbott said businesses in the state will be able to operate at full capacity and residents will no longer be required to wear masks to visit them.

Okta to Acquire Customer-Authentication Provider for $6.5 Billion – Wall Street Journal, 3/3/2021

  • Okta agreed to buy a software provider that helps businesses manage customers online for $6.5 billion in stock.
  • The deal for Auth0 would help push Okta beyond its traditional focus of single sign-on services for businesses and their employees.
  • For its fiscal year that ended in January, Okta recorded a loss of $266.3 million on $835.4 million in total revenue.
  • On Wednesday, the company also said it expects revenue to grow 29% to 30% for its new fiscal year to at least $1.08 billion.
  • That would mark a slowdown from the 43% revenue growth it recorded between the two prior years.

Snowflake eliminates dual-class share structure, hits estimates on guidance – CNBC, 3/3/2021

  • Snowflake stock fell as much as 7% then rebounded in extended trading on Wednesday after the data analytics software company gave full-year guidance that met but did not exceed analysts’ estimates, and announced an end to its dual-share class structure, which could allow newer investors more control over the company’s direction.
  • The company’s revenue increased by 117% on an annualized basis in the fiscal fourth quarter, which ended Jan. 31, according to a statement.
  • The company’s net loss widened to about $199 million from $83 million in the year-ago quarter.
  • With respect to guidance, Snowflake said it expects $195 million to $200 million in product revenue in the fiscal first quarter, which would be up 92% to 96% year over year. Analysts polled by FactSet were looking for $196.3 million in product revenue.
  • For the full 2022 fiscal year, the company sees $1.00 billion to $1.02 billion in product revenue, representing 81% to 84% growth, a decline from 116% product revenue growth in the fiscal fourth quarter.
  • Analysts polled by FactSet had expected $1.01 billion in product revenue.

Kroger forecasts full-year sales below estimates – Reuters, 3/4/2021

  • Kroger forecast annual same-store sales below analysts’ estimates on Thursday, signaling a bigger-than-expected slowdown in demand from a pandemic-fueled rush for groceries that boosted performance last year.
  • Kroger expects adjusted full-year same-store sales to fall 3% to 5%, more than analysts’ estimates of a 2.5% decline.
  • However, same-store sales, excluding fuel, rose 10.6% in the fourth quarter, beating the Refinitiv IBES estimate of a 9.4% rise.
  • The supermarket chain forecast full-year profit per share between $2.75 and $2.95 per share, above analysts’ estimates of $2.69, as it benefits from cost-saving measures.

Apple Faces U.K. Antitrust Probe Over App Store Rules – Wall Street Journal, 3/4/2021

  • The U.K. is investigating Apple’s treatment of app developers that offer their wares on the company’s App Store, adding a new front to antitrust complaints against the iPhone maker.
  • The Competition and Markets Authority, the U.K.’s antitrust regulator, said Thursday that it has opened an investigation into whether Apple imposes unfair or anticompetitive conditions on app developers, including requirements that some types of apps use Apple’s in-app payment system, from which Apple can take commissions of up to 30%.
  • The authority said it opened the investigation following complaints from developers about some of Apple’s terms, such as the requirement that all apps on iPhones and iPads must be distributed through Apple’s store.
  • The authority said it would conduct its initial investigation through September, and no decision has been made about whether the company broke any laws.

Square to Buy Majority Stake in Jay-Z’s Tidal Music Streaming Platform – Wall Street Journal, 3/4/2021

  • Square said it agreed to buy a significant majority stake in Tidal, a music and entertainment platform owned by rapper Shawn “Jay-Z” Carter and other artists, for $297 million in cash and stock.
  • The San Francisco digital-payments company said Thursday that Mr. Carter will join its board as part of the deal, and Tidal’s current shareholders will remain co-owners.
  • Square said the deal will help musicians find new ways to support their work.
  • The company said Tidal will operate independently within Square, alongside its seller and cash app ecosystems.
  • Square said it expects to complete the transaction in the second quarter, adding that it doesn’t expect the deal to have a material impact on its consolidated revenue or gross profit this year.

GM Looking to Build Second Battery Factory in U.S. – Wall Street Journal, 3/4/2021

  • General Motors is looking to build a second battery factory in the U.S. with joint-venture partner LG Chem, the latest move in the Detroit auto maker’s efforts to expand its investment in electric vehicles.
  • GM and LG are close to completing a decision to locate the plant in Tennessee, said people familiar with the matter.
  • A final selection hasn’t yet been made, the people said.
  • Already, the two companies are building a $2.3 billion battery plant in northeast Ohio that is expected to open next year and eventually supply enough batteries to power hundreds of thousands of vehicles annually.
  • The new plant is likely to be a similar-size investment, some of the people said.

Disney to close at least 60 North American stores, focus on e-commerce – Reuters, 3/3/2021

  • Walt Disney will close at least 60 Disney retail stores in North America this year, about 20% of its worldwide total, as it revamps its digital shopping platforms to focus on e-commerce, the company said on Wednesday.
  • The media and entertainment company also is evaluating a significant reduction of stores in Europe, a spokesperson said, adding that locations in Japan and China will not be affected.
  • Disney currently operates roughly 300 Disney stores around the globe.
  • The company did not say how many people would lose their jobs as a result of the closures.

U.S. weekly jobless claims rise moderately; labor market regaining footing – Reuters, 3/4/2021

  • The number of Americans filing new claims for unemployment benefits rose last week, likely boosted by brutal winter storms in the densely populated South in mid-February, though the labor market outlook is improving amid declining new COVID-19 cases.
  • Initial claims for state unemployment benefits increased 9,000 to a seasonally adjusted 745,000 for the week ended Feb. 27, the Labor Department said. Economists polled by Reuters had forecast 750,000 applications in the latest week.
  • Unadjusted claims rose 31,519 to 748,078 last week. Filings increased significantly in Texas, as well as in Ohio, which has been plagued by fraudulent applications. There was also a large rise in claims in New York.
  • The number of people receiving benefits after an initial week of aid dropped 124,000 to 4.295 million during the week ended Feb 20. But that was mainly due to people exhausting their eligibility for benefits, limited to 26 weeks in most states.
  • At least 4.465 million people were on extended benefits during the week ended Feb. 13. These benefits, which are funded by the government, will expire in mid-March if Congress does not pass the Biden administration’s relief package.
  • At least 18 million people were on unemployment benefits under all programs in mid-February.

30-Year Mortgage Rate Tops 3% for First Time Since July – Wall Street Journal, 3/4/2021

  • Americans who purchased new homes or refinanced their current ones over the past few months may have done so at just the right moment.
  • The average rate on a 30-year fixed-rate mortgage rose to 3.02%, mortgage-finance giant Freddie Mac said Thursday.
  • It is the first time the rate on America’s most popular home loan has risen above 3% since July and the fifth consecutive week it has increased or held steady.
  • Mortgage rates tend to move in the same direction as the yield on the 10-year Treasury, which has been rising.
  • Treasury yields rise when investors feel confident enough in the economy to forgo safe-haven assets such as bonds for riskier ones including stocks.

Democrats to Change Eligibility for Stimulus Checks in Covid-19 Aid Bill – Wall Street Journal, 3/3/2021

  • Senate Democrats agreed Wednesday to narrow eligibility for some of the direct payments that are part of President Biden’s proposed $1.9 trillion Covid-19 relief package, a concession to centrists whose support is needed to pass the bill.
  • The biggest change to emerge Wednesday would shrink the $1,400 checks to zero more quickly for individuals making more than $75,000 and married couples making more than $150,000, according to lawmakers and aides.
  • Lawmakers in the Senate are expected to bring the payments to zero for individuals making $80,000 and married couples making $160,000.
  • Individuals making less than $75,000 and married couples with incomes lower than $150,000 will still receive the full $1,400 check.
  • Party leaders resisted another push by centrists, to reduce the size of weekly federal unemployment benefits in the bill.
  • “I just think that the bill has really enough good stuff, really does have enough good stuff, that we should be able to make this work,” said Mr. Manchin, who had pushed to lower the weekly jobless benefits to $300.

U.S. Businesses Optimistic About Economy Due to Vaccines and Hiring, Fed Beige Book Says – Wall Street Journal, 3/3/2021

  • Most businesses are optimistic about the economic recovery this year as coronavirus vaccines are more widely distributed and hiring picked up slowly across the country, a Federal Reserve report said Wednesday.
  • The Fed’s periodic compilation of anecdotes from business contacts, known as the Beige Book, said the U.S. economy continued to grow modestly in the first several weeks of 2021, though some industries, such as leisure and hospitality, continued “to be restrained by ongoing Covid-19 restrictions.”
  • The Fed said the economy expanded in eight of the Fed’s 12 regions, with areas including the Northeast reporting mixed or stagnant results. The New York area economy declined modestly and the Boston area saw mixed results, the report said.
  • While the report said business contacts expect hiring to pick up, it also said many businesses are having trouble finding workers, particularly in low-skill occupations and skilled trade positions. “Constraints on labor supply included those related to Covid-19, child care, and unemployment benefits,” the report said.
  • Business costs such as materials rose moderately from January through mid-February, the Fed said, widely attributed in many regions of the country to supply-chain disruptions and high demand in areas such as housing.

Biden, Buttigieg to Push Infrastructure Plan – Wall Street Journal, 3/3/2021

  • President Biden will meet Thursday with members of the House of Representatives to discuss his plans for an infrastructure package, a goal that has eluded Democratic lawmakers and his predecessor, Donald Trump, even as members of both parties and outside groups claim there is bipartisan support for such a measure.
  • Joining the president will be Mr. Buttigieg, now 39, a former mayor of South Bend, Ind., and presidential candidate who says his local experience will help him lead the department that is a major source of federal grants for states and towns.
  • Mr. Trump’s example may show how hard it is to deliver on something that all parties say they want. Campaigning for president in 2016, Mr. Trump vowed during a TV appearance to do twice as much as Democratic rival Hillary Clinton, who had initially proposed a $500 billion package, leading his aides to begin working to meet a $1 trillion target.
  • In office, President Trump’s plans were undermined by his other priorities, such as overturning Obamacare, and his own resistance to elements of the plan designed by his administration.
  • When Mr. Trump finally delivered a proposal to Congress in 2018, it was dead on arrival, thanks in part to the decision to put the burden for raising money for new projects overwhelmingly on states and cities, not the federal government.

EUROPE & WORLD

Saudis, Russia Discuss Joint Oil Output Raise Ahead of OPEC Meeting – Wall Street Journal, 3/4/2021

  • Saudi Arabia and Russia are discussing a proposal to bring back a combined one million barrels a day of oil to global markets, people familiar with the matter said, as the countries prepare to hammer out a deal among an alliance of some of the world’s biggest producers.
  • The two sides haven’t yet reached an agreement, and other members of the alliance—including other members of the Organization of the Petroleum Exporting Countries and a group of producers led by Russia—still haven’t weighed in, according to the people familiar with the matter.
  • The proposal under discussion would commit Saudi Arabia to restoring about 500,000 barrels a day of unilateral cuts it has previously made, the people said. OPEC-plus members would then restore collectively another 500,000 barrels a day, including 125,000 from Russia.

Apple-supplier Foxconn flags strong start to year as lockdowns spur electronics demand – Reuters, 3/4/2021

  • Apple supplier Foxconn said it expects first-quarter revenue to rise more than 15% from a year earlier, boosted by strong iPhone sales and robust demand for electronics during lockdowns worldwide to curb the COVID-19 pandemic.
  • Taiwan-based Foxconn, in a short statement on Thursday, said it expects consumer electronics revenue, which includes smartphones and smart watches, to rise more than 15% in the January-March quarter from a year earlier. It did not elaborate.
  • Foxconn said it saw revenue for cloud products that include servers and revenue for computing products such as laptops to rise about 10% in the first quarter, respectively.
  • Foxconn’s chairman said last month that he expects his company and its clients will face only “limited impact” from a chip shortage that has rattled the global automotive and semiconductor industries.

Hyundai profit hit after electric car recall, but LG Chem seen bearing bulk of costs – Reuters, 3/4/2021

  • A large global recall of electric vehicles has led Hyundai Motor to sharply revise down fourth-quarter operating profit, although reports said battery maker LG Chem would bear the bulk of the costs.
  • LG will assume 70% of the estimated $900 million costs to replace battery systems in some 82,000 electric vehicles globally, according to Yonhap news agency and other South Korean media.
  • Hyundai said on Thursday it was revising down fourth-quarter operating profit by 300 billion won ($265 million) or nearly a fifth to 1.3 trillion won, while LG Chem slashed its operating profit by more than 80% to 119 billion won.
  • The new recall applies to nearly 76,000 Kona EVs built between 2018 and 2020, including about 25,000 sold in South Korea. Some Ioniq EV models and Elec City buses were also included.

Factmonster – TODAY in HISTORY

  • The Constitution of the United States went into effect. (1789)
  • Abraham Lincoln was inaugurated as president. (1861)

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