Daily Market Report | Mar. 08, 2021
Stocks Waver as Bond Yields Rise – Wall Street Journal, 3/8/2021
- U.S. stocks wobbled Monday and a selloff in U.S. government bonds extended into its sixth week following progress toward a new fiscal stimulus bill that brightened economic prospects and sapped demand for technology stocks.
- In the bond market, the yield on benchmark 10-year US. Treasurys ticked up to 1.591% as investors moved funds out of assets considered to be the safest in the world. Yields rise when bond prices fall.
- It had ended Friday at 1.551%, its highest since February 2020.
- President Biden’s $1.9 trillion Covid-19 relief plan was approved in the Senate over the weekend and faces a vote in the House as early as Tuesday. The additional fiscal spending is expected to bolster the pace of economic recovery and boost inflation.
- Among other stocks, General Electric rose 3.8%. The Wall Street Journal reported that the industrial conglomerate was nearing a $30 billion deal to combine its aircraft-leasing business with Ireland’s AerCap.
- Overseas, the pan-continental Stoxx Europe 600 rose 1.3%, led by banking stocks.
- Europe’s stock market is benefiting from investors rotating into value stocks, analysts said.
- In Asia, most major benchmarks fell. The Shanghai Composite dropped 2.3% and Hong Kong’s Hang Seng Index declined 1.9% as investors grappled with signs that Chinese policy makers will take more action to rein in debt and prevent asset bubbles from forming.
- Newly reported coronavirus cases in the U.S. continued to decline, along with hospitalizations, as more people in the country received vaccinations.
- The U.S. reported just over 46,000 new cases for Sunday, according to data compiled by Johns Hopkins University that was published early Monday.
- Hospitalizations due to Covid-19 across the country totaled 40,212, the lowest level since Oct. 20, according to the Covid Tracking Project.
- Sunday’s total is down nearly 70% from Jan. 6, when hospitalizations peaked at 132,474.
- The number of Covid-19 patients in intensive-care units also fell, to 8,137, down from 8,409 the previous day.
- Around 17.7% 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.
- Vaccination levels vary by state. Nearly a quarter of Alaska residents have received at least one dose, and 15.6% are fully vaccinated. While in Georgia, 13.4% of residents have received at least a single dose and 8.5% have completed their vaccinations.
Treasury Yields Jump Again on Covid-19 Stimulus, Jobs – Wall Street Journal, 3/8/2021
- U.S. Treasury yields jumped Monday following the Senate’s approval of the $1.9 trillion Covid-19 relief bill over the weekend, which moves President Biden’s key spending package closer to being signed into law.
- The 10-year yield briefly rose as high as 1.610% on Monday morning, surpassing the 1.609% hit when Treasurys sold off sharply on Feb. 25, according to Tradeweb, before dropping back to 1.598%. Bond yields rise when prices fall.
- A rise in real yields—or the yields on inflation-protected Treasurys, known as TIPS—is potentially more important in judging how and when the Fed might change its policy. These haven’t risen as much as normal yields and the gap between the two has grown, which indicates higher inflation expectations.
- On Monday, 10-year inflation expectations hit 2.24%, the highest since the summer of 2014.
- Shorter-term inflation expectations have risen even faster, with the five-year measure exceeding 2.55% Monday.
Disneyland, other California theme parks, stadiums could reopen April 1 – Reuters, 3/5/2021
- California health officials set new rules on Friday that would allow Disneyland and other theme parks, stadiums and outdoor entertainment venues to reopen as early as April 1, after a closure of nearly a year due to the coronavirus pandemic.
- But the return of Mickey Mouse to the “Happiest Place on Earth” and live spectators to the California ball parks of America’s favorite pastime still come with major caveats.
- Theme and amusement parks would be permitted to restart on April 1 with severely limited capacity, but only if the counties where they operate are removed from the “purple” tier of California’s color-coded COVID-19 restrictions, the system’s most stringent classification.
- Masks and other safety measures would still be required, and the parks initially would be open only to state residents.
- Attendance would range from 15% to 35% of normal capacity.
- Outdoor stadiums, ball parks and performance arenas would also be allowed to welcome back live audiences starting April 1, though at a fraction of maximum seating and subject to the same tiered system of constraints.
GE Nears Deal to Combine Aircraft-Leasing Unit With AerCap – Wall Street Journal, 3/8/2021
- General Electric is nearing a $30 billion-plus deal to combine its aircraft-leasing business with Ireland’s AerCap Holdings, according to people familiar with the matter, the latest in a string of moves by the industrial conglomerate to restructure its once-sprawling operations.
- Though details of how the deal would be structured couldn’t be learned, it is expected to have a valuation of more than $30 billion, some of the people said. An announcement is expected Monday, assuming the talks don’t fall apart.
- With more than 1,600 aircraft owned or on order, Gecas is one of the world’s biggest jet-leasing companies, alongside AerCap and Los Angeles-based Air Lease.
- AerCap has a market value of $6.5 billion and an enterprise value—adjusted for debt and cash—of about $34 billion, according to S&P Capital IQ, and around 1,400 owned or ordered aircraft.
Disney’s ‘Raya and the Last Dragon’ Undercut Without Cinemark – Wall Street Journal, 3/8/2021
- Walt Disney’s “Raya and the Last Dragon,” its first domestic release in a year, delivered tepid results after Cinemark theaters, the nation’s third-largest chain, didn’t play the film.
- The animated “Raya and the Last Dragon” grossed $8.6 million in the U.S. and Canada over the weekend, according to preliminary studio estimates, with the film appearing in 2,045 theaters throughout North America, Disney said.
- “Raya and the Last Dragon” is also available on Disney’s direct-to-consumer streaming platform, Disney+, for an additional $29.99 on top of the monthly subscription rate of $6.99. The company hasn’t released viewer data.
- Cinemark Holdings didn’t respond to requests about why it chose not to play “Raya and the Last Dragon,” the weekend’s biggest release from the film industry’s biggest studio.
- But the move comes amid growing tension between Hollywood studios and movie theater chains over whether the theaters should get to show movies before they premiere on streaming services, and for how long.
American Airlines unveils $7.5 billion debt sale to repay government loans – Reuters, 3/8/2021
- American Airlines Group said on Monday it will sell $7.5 billion of bonds and leveraged loans backed by its loyalty program to repay U.S. government debt.
- While U.S. airlines received billions of dollars in federal grants to cover payroll costs over the past year, American also secured up to $7.5 billion of term loans from the U.S. Treasury to help it navigate the coronavirus pandemic.
- Under the deal announced on Monday, American will issue a private offering of notes worth about $5 billion, half due in 2026 and half in 2029, and a $2.5 billion term loan credit facility.
- In January, the airline authorized a $1 billion stock sale, following an ongoing $1 billion offering launched in October to boost liquidity.
Covid-19 Aid Bill Heads Back to House After Tense Senate Vote – Wall Street Journal, 3/8/2021
- The $1.9 trillion Covid-19 relief bill faces what is expected to be a very close vote in the House as early as Tuesday after the Senate narrowly approved the aid package over the weekend with concessions to accommodate centrist Democrats.
- The Senate changes to the bill, which first passed the House Feb. 27 with more generous unemployment provisions, mean House Speaker Nancy Pelosi must hold together her slim majority caucus for a second House vote to send President Biden’s top legislative priority to his desk.
- There were positive signals for Mrs. Pelosi and her leadership team over the weekend, when key progressives in the House appeared poised to support the relief bill a second time even as many expressed frustration at the changes that curtailed the extension of unemployment benefits and blocked an effort to gradually raise the federal minimum wage to $15 an hour.
- Mrs. Pelosi cannot afford many defections. The House version of the relief plan passed last month by a margin of 219-212, with two Democrats voting against it. The two no votes came from moderates, Reps. Jared Golden of Maine and Kurt Schrader of Oregon.
U.S. wholesale inventories unrevised; sales surge – Reuters, 3/8/2021
- U.S. wholesale inventories increased solidly in January despite a surge in sales, suggesting inventory investment could again contribute to economic growth in the first quarter.
- The Commerce Department said on Monday that wholesale inventories rose 1.3% as estimated last month.
- Stocks at wholesalers gained 0.6% in December.
- The component of wholesale inventories that goes into the calculation of gross domestic product also increased 1.3% in January.
- Inventories rose 0.6% in January from a year earlier.
- Businesses are replenishing inventories after they were drawn down early in the coronavirus pandemic.
- Sales at wholesalers surged 4.9% after advancing 1.9% in December.
- At January’s sales pace it would take wholesalers 1.24 months to clear shelves, down from 1.29 in December.
U.S. Set to Power Global Economic Recovery From Covid-19 – Wall Street Journal, 3/8/2021
- The U.S. could help drive a powerful global economic recovery this year, as it plays a more central role in the comeback than after the financial crisis, reflecting the unusual nature of the Covid-19 shock and the flexibility of the American economy.
- The world economy is likely to grow by around 6% this year, according to Oxford Economics, the fastest rate in almost half a century, as vaccine campaigns allow pandemic restrictions to be lifted and businesses to snap back.
- For the first time since 2005, the U.S. is expected this year to make a bigger contribution to global growth than China, said the research firm.
- Since the U.S. economy is about one-third larger than China’s, its contribution to global growth will be larger than China’s if, as expected, both grow roughly at the same rate this year.
- The U.S. economy contracted 3.5% last year and is expected to grow about 7% this year, according to Goldman Sachs. China grew 2.3% last year and is expected to grow 8% this year, the bank said.
Yellen Expects U.S. Economy to Return to Full Employment in 2022 – Wall Street Journal, 3/8/2021
- The $1.9 trillion Covid-19 relief package passed by the Senate should allow the U.S. economy to return to full employment in 2022, Treasury Secretary Janet Yellen said Monday.
- “We expect the resources here to really fuel a very strong economic recovery,” Ms. Yellen said in an interview on MSNBC. “I’m anticipating, if all goes well, that our economy will be back to full employment, where we were before the pandemic, next year.”
- Without the legislation, the Congressional Budget Office has estimated that the labor market could take until 2024 to recover, Ms. Yellen noted.
EUROPE & WORLD
Chinese Stocks Slide, With a Major Index in Correction Territory – Wall Street Journal, 3/8/2021
- China’s main stock benchmarks tumbled, erasing all of this year’s gains, as investors grappled with signs that policy makers in Beijing will take more action to rein in debt and prevent asset bubbles from forming.
- The CSI 300—an index of the 300 largest stocks listed in mainland China—fell 3.5% Monday while the Shanghai Composite Index dropped 2.3%, hitting their lowest closing levels in 2021.
- The CSI 300 is now in correction territory, having declined more than 10% from a recent peak on Feb. 10, just before the start of the Lunar New Year holiday.
- Top Chinese financial regulators recently warned about the risk of asset bubbles forming in domestic real-estate prices and global financial markets.
- Last week, Chinese leaders also indicated they could renew their focus on curbing debt levels now that the economy is on firmer footing. China was the only major world economy to report growth in 2020; it expanded 2.3%.
- China upped the stakes in its tech race with the U.S. as leaders laid out plans to speed up development of advanced technologies from chips to artificial intelligence and quantum computing over five years.
- In a draft economic blueprint unveiled at the country’s annual legislative gathering, officials said they would boost research and development spending by more than 7% annually over the five years to the end of 2025.
- That will account for a higher percentage of gross domestic product than in the previous five-year period.
- Chinese Premier Li Keqiang said in a speech Friday that China will revise regulation and policies to support the flow of venture capital into startups, free up bank lending and extend tax incentives to encourage research and development.
- China’s leaders are pushing to rival the U.S. in cutting-edge technologies and in developing an independent supply chain to wean companies off dependence on American suppliers. The initiatives follow a bruising few years in which the Trump administration piled restrictions on Chinese companies such as Huawei that cut off access to some critical components.
Huawei Loses Cellular-Gear Market Share Outside China – Wall Street Journal, 3/8/2021
- Huawei Technologies lost ground last year to Western rivals in cellular-equipment markets outside China, according to an industry research firm, a signal the U.S. campaign to curb the Chinese manufacturer is starting to make an impact.
- Huawei’s share of revenue from selling wireless-equipment around the world, excluding China, fell 2 percentage points, according to Dell’Oro Group, coming in at about 20% in 2020.
- Huawei remained in third place behind rivals Ericsson and Nokia, which both picked up market share last year, according to the research firm.
- Ericsson solidified its ex-China market share lead at around 35%, up 2 percentage points, while Nokia gained 1 percentage point to finish the year with about 25% share.
- The new Biden administration has said it considers Huawei a security threat and would work with allies to secure their telecom networks.
- Nations that have enacted or are considering such restrictions—including Australia, the U.K. and several other European countries—comprise more than 60% of the world’s cellular-equipment market, Mr. Pongratz said.
- More than 25 European telecom providers have switched from Huawei to another supplier in recent years, he said.
Factmonster – TODAY in HISTORY
- Russia’s February Revolution, which eventually led to the overthrow the csarist government, began. (1917)
- The Soviet Union claimed to be in possession of the atomic bomb. (1950)
- First U.S. combat troops arrived in Vietnam. (1965)
- President Reagan called the USSR an “Evil Empire.” (1983)
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