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Daily Market Report | Mar. 05, 2021

Stocks Slip, Yields Climb After Jobs Report – Wall Street Journal, 3/5/2021

  • U.S. stocks wobbled Friday after February’s stronger-than-expected employment report helped government bond yields extend their recent surge.
  • The S&P 500 slipped 0.5%, while the Dow Jones Industrial Average edged down 0.1%, or about 35 points.
  • The technology-heavy Nasdaq Composite, meanwhile, dropped 1.6%.
  • The S&P 500 was on pace to end the week with a modest loss, while the Nasdaq was on course to fall about 4% for the week. It would be the third consecutive week of declines for both stock gauges.
  • Technology stocks have borne the brunt of the shift in sentiment in recent weeks. The Nasdaq Composite Index, a closely watched barometer for the sector, on Thursday fell to its lowest level since Jan. 4.
  • The index ended the day down 9.7% from its Feb. 12 high, putting it just short of correction territory.
  • The February report showed the economy added 379,000 new jobs last month, ahead of estimates of 210,000.
  • The unemployment rate was 6.2%, versus the consensus of 6.3%.
  • Stocks have stumbled in recent weeks as a climb in bond yields has called into question whether low interest rates, which propelled valuations higher for much of the past year, can continue for much longer. Yields, which rise as bond prices fall, have rallied in response to expectations of a quickening pace of growth and inflation as the economy reopens from the coronavirus pandemic.
  • Overseas, the pan-continental Stoxx Europe 600 ticked down 0.2%. Major Asian indexes declined. Japan’s Nikkei 225 ticked 0.2% lower, while Hong Kong’s Hang Seng Index dropped 0.5%.

Covid-19 Live Updates: New U.S. Cases, Deaths Fall – Wall Street Journal, 3/5/2021

  • Newly reported coronavirus infections ticked down slightly and deaths declined, as the number of cases each day appeared to plateau after a recent drop.
  • There were more than 65,000 new Covid-19 cases reported in the U.S. for Thursday, according to data compiled by Johns Hopkins University and published early Friday morning Eastern time.
  • That was down slightly from the 66,460 reported for Wednesday, and the latest number could update later in the morning.
  • While most states continue to see declines, some states are seeing an uptick. The Journal’s analysis showed that in more than 15 states as of Wednesday, the average number of new cases over the past seven days was greater than the average number of cases over the past 14 days, a sign cases are on the rise.
  • Those states include Texas, Arkansas, New Jersey and Mississippi.
  • The U.S. reported more than 1,700 deaths for Thursday, down from Wednesday’s 2,468.

WHO Investigators to Scrap Plans for Interim Report on Probe of Covid-19 Origins – Wall Street Journal, 3/5/2021

  • A World Health Organization team investigating the origins of Covid-19 is planning to scrap an interim report on its recent mission to China amid mounting tensions between Beijing and Washington over the investigation and an appeal from one international group of scientists for a new probe.
  • The group of two dozen scientists is calling in an open letter on Thursday for a new international inquiry. They say the WHO team that last month completed a mission to Wuhan—the Chinese city where the first known cases were found—had insufficient access to adequately investigate possible sources of the new coronavirus, including whether it slipped from a laboratory.
  • Beijing, meanwhile, is pressing for similar WHO-led missions to other countries, including the U.S., to investigate whether the virus could have originated outside China and spread to Wuhan via frozen food packaging.
  • According to an advance copy of the open letter, the group of 26 scientists and other experts in areas including virology, zoology and microbiology said that it was “all but impossible” for the WHO team to conduct a full investigation, and that any report was likely to involve political compromises as it had to be approved by the Chinese side.

Costco Sales Rise 15% in Latest Quarter – Wall Street Journal, 3/4/2021

  • Costco Wholesale’s sales climbed again in the latest quarter as Americans continue to shop for food and goods for the home during the pandemic.
  • The wholesale retail chain’s revenue rose to $44.77 billion in the quarter ended Feb. 14, a 15% increase from the year-earlier period, driven by strong demand for fresh food and household goods and topping analysts’ projections of $43.7 billion.
  • Comparable sales, at stores or digital channels operating for at least 12 months, increased 12.9% during the February quarter, excluding the impact of gasoline sales and currency movements.
  • The retailer’s e-commerce sales rose 74.8% from the prior year as adjusted.
  • The average ticket size increased 11.9% company-wide.
  • Costco recorded a profit of $951 million, or $2.14 a share, for the quarter, up from $931 million, or $2.10 a share, in the comparable period last year. Analysts were targeting $2.45 a share.
  • This included $246 million in pretax costs primarily related to premium wages paid during the Covid-19 pandemic.

Broadcom shares fall as chip sales disappoint – Reuters, 3/4/2021

  • Shares of Broadcom fell on Thursday after the company reported chip sales slightly below Wall Street estimates, joining a growing list of chip industry peers hit by the global semiconductor shortage.
  • Strong software revenue helped overall sales rise to $6.66 billion in the fiscal first quarter from $5.86 billion a year earlier.
  • Overall first-quarter sales beat analyst expectations of $6.62 billion, according to IBES data from Refinitiv.
  • Broadcom reported semiconductor solutions revenue of $4.90 billion for its fiscal first quarter ended Jan. 31, slightly below analyst estimates of $4.95 billion, according to IBES data from Refinitiv.
  • For the fiscal first quarter, Broadcom’s infrastructure software business had sales of $1.74 billion, beating Wall Street estimates of $1.64 billion, according to Refinitiv data.
  • Excluding items, the company earned $6.61 per share in the fiscal first quarter, beating analysts’ estimate of $6.56 per share.
  • Broadcom forecast second-quarter revenue of about $6.5 billion, compared with analysts’ estimates of $6.33 billion, according to IBES data from Refinitiv.

Gap forecasts return to sales growth on Athleta boost, vaccine roll-out – Reuters, 3/4/2021

  • Apparel retailer Gap on Thursday forecast a return to sales growth this year, as it expects sales at its Athleta brand to double in the next two years and the roll-out of COVID-19 vaccines to drive traffic at its stores.
  • Athleta’s sales surged 29% to more than a billion dollars in the fourth quarter and that is expected to reach $2 billion by 2023, Chief Executive Officer Sonia Syngal told analysts in a post-earnings conference call.
  • Online sales surged 49% in the quarter.
  • On a per share basis, Gap earned 28 cents per share in the fourth quarter, 10 cents more than expectations, according to IBES data from Refinitiv.
  • Fiscal year 2021 net sales are expected to reflect mid- to high-teens growth, and Gap forecast earnings to be in the range of $1.20 per share to $1.35 per share.

30-Year Mortgage Rate Tops 3% for First Time Since July – Wall Street Journal, 3/5/2021

  • Americans who purchased new homes or refinanced their mortgages 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.
  • Even before the recent climb in rates, surging U.S. home prices had begun to outweigh the savings afforded by historically low borrowing rates. The typical monthly mortgage payment in the fourth quarter rose to $1,040 from $1,020 a year earlier even as mortgage rates declined, according to the National Association of Realtors.
  • Rising rates can also put the brakes on refinancings, which accounted for about 60% of mortgage originations in 2020, according to the Mortgage Bankers Association.
  • With a 30-year rate of 2.75%, about 18 million U.S. homeowners could reduce their monthly payments through a refinance, according to mortgage-data firm Black Knight.
  • When the rate rises to 3.25%, the pool of eligible homeowners shrinks to about 11 million.

Treasury Rout Pushes Bond Funds Into Riskier Assets – Wall Street Journal, 3/5/2021

  • Optimism about economic recovery has triggered a selloff in U.S. Treasurys that is pushing fixed-income investors to run for cover in some unlikely havens.
  • Fund managers are bulking up on junk bonds, corporate loans, equity-linked bonds and even stocks, analysts and investors said, while selling assets that trade more in line with government debt, including mortgage-backed and investment-grade corporate bonds.
  • Sales of new CLOs hit $58 billion in the first two months of 2021, the biggest start to any year since at least 2013, according to data compiled by Barclays PLC.

Just 12% of Americans plan spring break travel – industry – Reuters, 3/5/2021

  • U.S. travel demand remains low even as tens of millions of Americans get vaccinated for COVID-19, with just 12% planning a spring break trip this year, the industry said on Thursday.
  • The industry said the number planning to travel for spring break fell from 16% in a poll a week earlier.
  • The U.S. Travel Association said polling that it commissioned suggested Americans remained wary about travel and that it was “far from clear when demand for travel will rebound on its own.”
  • The group believes travel demand will see a significant rebound by Memorial Day on May 31. President Joe Biden said this week the United States would have enough COVID-19 vaccine for every American adult by the end of May.

U.S. Senate mulls $30 billion in funding to boost chipmaking sector, source says – Reuters, 3/5/2021

  • The U.S. Senate is considering including in a new bill to boost competitiveness against China $30 billion in funding for previously-approved measures to supercharge the country’s chipmaking industry, a congressional source said on Thursday.
  • Lawmakers aim to bring the package, which would include other elements to boost the U.S. tech sector, to a full vote in April, the person said, declining to be named because the legislation has not been finalized.
  • The source, who is involved in the effort, said that the Schumer-led package is likely to have provisions curbing China’s access to U.S. capital markets, a focus of the Trump administration’s crackdown on Beijing.
  • Schumer said last month he had directed lawmakers to craft a new bill to boost U.S. competitiveness against China, based on legislation he and Republican Senator Todd Young proposed last year to provide funding of $100 billion to spur research in key tech areas, from artificial intelligence to quantum computing and semiconductors.

U.S. job growth blows past expectations as recovery gets back on track – Reuters, 3/5/2021

  • The U.S. economy created more jobs than expected in February as falling new COVID-19 cases and additional pandemic relief money from the government boosted hiring at restaurants, putting the labor market recovery back on firmer footing.
  • Nonfarm payrolls surged by 379,000 jobs last month after rising 166,000 in January. Payrolls fell in December for the first time in eight months.
  • Restaurants and bars hired 286,000 workers last month, accounting for 75% of the gain in payrolls. There were also increases in employment at other leisure and hospitality businesses.
  • Though the unemployment rate fell to 6.2% last month from 6.3% in January, it continues to be understated by people misclassifying themselves as being “employed but absent from work.” Without this problem, the unemployment rate would have been 6.7%, and is close to 10%, including people who have given up the search for work.
  • The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, was steady at 61.4% in February.
  • The Labor Department’s closely watched employment report on Friday showed at least 4.1 million Americans have been out of work for more than six months, accounting for 41.5% of the unemployed population in February. Another 3.5 million have permanently lost their jobs.
  • Employment remains 9.5 million below its pre-pandemic level.

U.S. Trade Deficit Widened in January as Americans Bought More Imported Goods – Wall Street Journal, 3/5/2021

  • The U.S. trade deficit widened in January as American consumers stepped up purchases of imported products.
  • The deficit in trade of goods and services expanded by 1.9% to a seasonally adjusted $68.2 billion in January, the Commerce Department said Friday, compared with a $66.97 billion gap in December.
  • Imports increased 1.2% to $260.2 billion from December, while exports grew 1.0% to $191.9 billion.
  • In January, the U.S. deficit in trade in goods with China declined to $26.25 billion from $27.23 billion in December.
  • Exports to China fell 12.2% to $12.86 billion, while imports declined 6.6% to $39.11 billion.
  • Under the so-called Phase One trade agreement signed with the Trump administration, China committed to boosting its imports of certain U.S. products in agriculture, manufacturing and energy by a combined $200 billion between 2020 and 2021.
  • China fell far short of its purchase goal for 2020, and its imports of covered products in January came to $9.82 billion, down from and average of $11.2 billion in the previous three months, according to an analysis by Panjiva, a research unit of S&P Global Market Intelligence.
  • The company projects China must increase its monthly imports of the covered items to an average of $14.8 billion to meet its purchase goal for 2021.

Senate Advances Democrats’ Covid-19 Aid Bill – Wall Street Journal, 3/5/2021

  • Senate Democrats advanced a $1.9 trillion coronavirus relief package Thursday after making a series of adjustments related to student loans, infrastructure and other matters, with approval in the chamber expected within days.
  • All 50 Democrats stuck together on the procedural vote, confirming that the party has coalesced around the broad relief package, while all 50 Republicans were opposed. Vice President Kamala Harris broke the tie in Democrats’ favor.
  • The legislation would send a $1,400 direct check to many Americans, provide $350 billion to state and local governments, fund vaccine distribution, and expand the child tax credit, among other measures.
  • Individuals who make less than $75,000 and married couples making less than $150,000 will still receive the full $1,400 payment, but the size of the payment will shrink more quickly for people with higher incomes.
  • The payment will hit zero for individuals making $80,000 and couples making $160,000—a drop from the previous caps of $100,000 for individuals and $200,000 for couples.
  • Senate Democrats added a provision that would make much student-loan forgiveness free from income taxes, creating an exception from 2021 through 2025 to the normal rule that canceled debt is income.
  • Democrats in the Senate will remove a measure raising the minimum wage to $15 an hour by 2025 that was in the legislation the House approved.

Powell Confirms Fed to Maintain Easy-Money Policies – Wall Street Journal, 3/5/2021

  • Federal Reserve Chairman Jerome Powell reiterated his intention to keep easy-money policies in place but provided no sign the central bank will seek to stem a recent rise in Treasury yields, prompting them to rise further.
  • “Today we’re still a long way from our goals of maximum employment and inflation averaging 2% over time,” Mr. Powell said Thursday during the interview.
  • Some analysts said his latest remarks did little to ease investor fears about rising bond yields.
  • Mr. Powell’s remarks came at his last scheduled public event before Fed policy makers meet on March 16-17. He said the central bank will maintain ultra-low interest rates until its employment and inflation goals have been met, and will continue hefty asset purchases until “substantial further progress” has been made.

Cuomo Advisers Altered Report on Covid-19 Nursing-Home Deaths – Wall Street Journal, 3/5/2021

  • New York Gov. Andrew Cuomo’s top advisers successfully pushed state health officials to strip a public report of data showing that more nursing-home residents had died of Covid-19 than the administration had acknowledged, according to people with knowledge of the report’s production.
  • The July report, which examined the factors that led to the spread of the virus in nursing homes, focused only on residents who died inside long-term-care facilities, leaving out those who had died in hospitals after becoming sick in nursing homes.
  • As a result, the report said 6,432 nursing-home residents had died—a significant undercount of the death toll attributed to the state’s most vulnerable population, the people said.
  • The initial version of the report said nearly 10,000 nursing-home residents had died in New York by July last year, one of the people said.
  • Federal prosecutors in Brooklyn asked the Cuomo administration in February for information about nursing-home deaths, The Wall Street Journal has reported. Federal prosecutors expressed interest in the July report, people familiar with the matter said.

National Guard Is Asked to Protect Capitol for Two More Months – Wall Street Journal, 3/5/2021

  • Capitol Police requested that the National Guard extend the deployment of troops to protect the Capitol for two more months, a defense official said Thursday, as congressional leaders look to strengthen security following the Jan. 6 assault by supporters of former President Donald Trump.
  • Concerns about security caused House leaders to pause the chamber’s business for the day Thursday, though the Senate continued to work, after Capitol Police warned of intelligence that “shows a possible plot to breach the Capitol by an identified militia group.”
  • Currently, roughly 5,200 National Guard members are deployed in Washington, including troops from more than two dozen states and territories, said a spokesman for the D.C. National Guard. The deployment was supposed to end March 12.

EUROPE & WORLD

China Sets 2021 GDP Growth Target at Over 6% – Wall Street Journal, 3/5/2021

  • Chinese leaders said they would target gross domestic product growth of 6% or more this year, a relatively modest goal that nonetheless signals continued optimism after a year in which the coronavirus eviscerated the global economy.
  • The target, announced Friday in Beijing by Premier Li Keqiang, is comfortably lower than most economists’ expectations that the world’s second-largest economy will grow by 8% or more this year.
  • Even so, many economists had predicted that Beijing would forgo the numerical target altogether, as it did last year for the first time since 1994, yielding to the uncertainties of the Covid-19 pandemic.
  • Mr. Li said in the annual report on Friday that the government would seek to cut the fiscal-deficit target to 3.2% of China’s projected GDP this year, compared with a target of more than 3.6% in 2020.
  • Beijing also plans to reduce the amount of debt that local governments are permitted to raise, allowing localities to issue 3.65 trillion yuan, the equivalent of $580 billion, in local government special-purpose bonds in 2021, from the 3.75 trillion yuan earmarked last year.
  • Mr. Li said China aims to keep consumer price inflation at around 3% in 2021, compared with last year’s 3.5% target and its actual increase of 2.5%.
  • The government also said it plans to create 11 million new jobs this year, up from the 2020 target of 9 million. It also aimed to cap the urban surveyed jobless rate at 5.5% in 2021, compared with a ceiling of 6% in 2020.

Factmonster – TODAY in HISTORY

  • The Boston Massacre, a pre-Revolutionary incident that grew out of anger towards British troops, occurred. Five anti-British rioters were killed. (1770)
  • In the last free elections in Germany until after World War II, the Nazi Party received 44% of the vote. (1933)
  • Soviet dictator Josef Stalin died at age 73, after 29 years in power. (1953)

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