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Daily Market Report | Mar. 16, 2021

Tech Stocks Outperform, Continuing Rebound – Wall Street Journal, 3/16/2021

  • Technology stocks climbed Tuesday, recovering ground after recent losses, while major U.S. stock indexes were mixed.
  • The tech-heavy Nasdaq Composite gained 0.8% in morning trading.
  • The Dow Jones Industrial Average slipped 0.3%, and the broad-based S&P 500 inched up 0.2%.
  • Both the Dow and S&P 500 closed at records on Monday, while the Nasdaq is down more than 3.5% from its record close last month.
  • Retail sales fell 3% in February, data from the Commerce Department showed. Economists had expected a pullback—though a smaller one—after a jump in spending at the start of the year.
  • February tends to be a quiet month for retail sales and severe weather wreaked havoc over parts of the country last month.
  • Investors are keeping an eye on the U.S. Federal Reserve to see if it will address the recent rise in bond yields. Rate-setters at the central bank are gathering for a two-day policy meeting starting Tuesday.
  • Industrial production fell 2.2% in February compared with January, breaking four consecutive months of gains, according to new data released by the Fed on Tuesday. The bulk of the declines were due to severe winter weather, which sent some plants offline, the central bank said.
  • Overseas markets were broadly higher. The Stoxx Europe 600 rose 0.8%, led by shares of companies that produce cars and car parts. German-listed shares of Volkswagen rallied 18% after the car maker said it expected business to recover significantly this year.
  • Rising coronavirus case numbers in Europe have fed into “growing doubts about whether demand will in fact recover as strongly as expected, at least in the second quarter,” Commerzbank analyst Carsten Fritsch wrote in a note.

Covid-19 Live Updates: New U.S. Cases Rise; Vaccine Eligibility Expands – Wall Street Journal, 3/16/2021

  • Newly reported Covid-19 infections in the U.S. rose from a day earlier, as did deaths, while the country’s vaccination effort continued apace.
  • There were more than 56,000 new infections reported for Monday, according to the latest data compiled by Johns Hopkins University, including a backlog of more than 4,000 cases recorded by Alabama.
  • The daily total was up from 38,222 a day earlier and 45,014 a week earlier.
  • Newly reported cases remain elevated in the U.S., even as they have dropped far below levels registered at a fall surge peak in early January, when the country recorded around 300,000 new infections on several days.
  • There were 740 deaths reported for Monday, according to Johns Hopkins data, up from 572 a day earlier and 724 a week earlier.
  • Vaccine distribution is ramping up, with more states making the shots available to all adults. Mississippi and Connecticut on Monday announced plans to expand vaccine availability to their adult populations, joining Alaska and Michigan, which did so last week.
  • According to the Centers for Disease Control and Prevention, all but five states have administered over 30,000 doses per 100,000 residents. The CDC’s data tracker showed Monday that some 109 million doses of the three Covid-19 shots approved for use in the U.S. have been administered so far, with 14.8% of adults now fully vaccinated against the disease.
  • The outlook for Europe darkened again this week after a number of governments on the continent suspended use of the AstraZeneca vaccine, further slowing an already glacial vaccine rollout, just as infections are rebounding.
  • In Germany, coronavirus infections continued to rise rapidly, accelerating the rebound in cases that began in mid-February and prompting scientists to call for a swift reversal of recent lockdown relaxations.
  • The country registered 5,480 new cases on Monday, according to the RKI, up from 5,011 a week ago, and the upward trend is accelerating. Hospitalizations and deaths are also up.

Analysis: Private equity investors fret over record U.S. buyout prices – Reuters, 3/16/2021

  • Private equity firms are paying more for leveraged buyouts to keep pace with soaring valuations of acquisition targets, making some investors leery of whether the industry can keep delivering on promises of lucrative returns.
  • Private equity firms paid an average 13.2 times a company’s annual earnings before interest, tax, depreciation, and amortization (EBITDA) for U.S. leveraged buyouts in 2020, an all-time high, up from 12.9 times in 2019, according to financial data provider Refinitiv.
  • Some investors are growing concerned about whether buyout firms can deliver the 15% to 20% annual returns they target when they raise new funds.
  • The share of U.S. leveraged buyouts where private equity firms put down more than 50% of the deal price as equity jumped to 41% in 2020 from 25% in 2019, according to Refinitiv.
  • There is evidence some investors are apprehensive.
  • U.S. private equity fundraising dropped to $203.2 billion in 2020 from its record high of $320.5 billion in 2019, according to Pitchbook.
  • Private equity firms are becoming more selective. The total volume of U.S. leveraged buyouts dropped to $84.7 billion in 2020 from $124.3 billion in 2019, according to Refinitiv.

U.S. solar industry predicts installations will quadruple by 2030 – Reuters, 3/16/2021

  • Solar installations in the United States are expected to quadruple by 2030 thanks to the extension of a key industry subsidy late last year and booming demand for carbon-free power, an industry body said on Tuesday.
  • Installations rose 43% last year to 19.2 GW, an annual record for the industry. Residential installations took a large hit in the second quarter due to the pandemic, but ended the year up 11% at a record 3.1 GW.
  • The sector will install 324 gigawatt (GW) of capacity over the next decade, more than three times the nearly 100 GW installed by 2020, the U.S. Solar Energy Industries Association (SEIA) said, citing a report issued jointly with Wood Mackenzie.
  • The 324 GW of solar energy would produce enough electricity to power about 60 million homes, or around 40% of homes in the country today.
  • Just 3% of U.S. electricity is generated from the sun, but SEIA hopes that will rise to 20% over the next decade.

OxyContin Owner Increases Settlement Offer to $4.28 Billion – Wall Street Journal, 3/16/2021

  • The family that owns OxyContin maker Purdue Pharma LP agreed to pay roughly $4.28 billion—a larger sum than previously promised—to resolve lawsuits accusing it of helping to fuel the opioid epidemic.
  • The payment from members of the Sackler family is part of a larger restructuring plan filed Monday night in U.S. Bankruptcy Court in White Plains, N.Y., that is intended to get Purdue out of chapter 11.
  • A group of around half of all U.S. states has repeatedly demanded more money from the Sackler family, a concession included in Monday’s plan.
  • At the time of its September 2019 bankruptcy filing, the family had agreed to pay $3 billion with the promise of up to another $1.5 billion contingent on the sale of its international business.
  • The new offer guarantees $4.28 billion, paid in installments over the next decade.

Foxconn eyes EVs for troubled Wisconsin plant, may go with Mexico – Reuters, 3/16/2021

  • Major Apple supplier Foxconn may make electric vehicles at its high-profile but troubled plant in the U.S. state of Wisconsin, though could decide on Mexico, the chairman of the Taiwanese company said on Tuesday.
  • Foxconn announced a $10 billion investment in Wisconsin at a White House ceremony in 2017, touted by then-President Donald Trump as proof of his ability to revive American manufacturing, but its future has been uncertain.
  • Speaking in Taipei, Foxconn Chairman Liu Young-way said the infrastructure was there in Wisconsin to make electric vehicles (EVs) because of its proximity to the traditional heartland of U.S. automaking.
  • Liu said Foxconn would invest roughly T$10 billion ($354 million) annually over the next three years in new businesses including EVs.

U.S. Retail Sales Fell 3% in February – Wall Street Journal, 3/16/2021

  • U.S. shoppers pulled back sharply on retail spending during February, but a broader economic rebound appears poised to accelerate this spring because of the easing pandemic and another round of government stimulus.
  • Retail sales—a measure of purchases at stores, at restaurants and online—fell by 3% in February compared with the prior month, the Commerce Department said Tuesday.
  • January sales advanced a revised 7.6%, up from the earlier estimate of a 5.3% increase.
  • Retail sales were up 6% over the last three months compared with the same period a year ago.

U.S. business inventories rise moderately in January as sales surge – Reuters, 3/16/2021

  • U.S. business inventories rose moderately in January amid a sharp rebound in consumer spending at the start of the year, and it is now taking businesses the shortest time in nearly nine years to clear shelves.
  • Business inventories increased 0.3% in January after rising 0.8% in December, the Commerce Department said on Tuesday.
  • Inventories fell 1.8% on a year-on-year basis in January.
  • Retail inventories decreased 0.5% in January, instead of 0.6% as estimated in an advance report published last month. That followed a 1.7% increase in December.
  • Motor vehicle inventories dropped 1.5%, rather than 1.4% as previously reported. Retail inventories excluding autos, which go into the calculation of GDP, dipped 0.1%, instead of slipping 0.2% as estimated last month.
  • Business sales shot up 4.7% in January after rising 1.0% in December. At January’s sales pace, it would take 1.26 months for businesses to clear shelves. That was the shortest time since April 2012 and was down from 1.32 months in December.

U.S. import prices rise strongly in February, boosted by crude oil, commodities – Reuters, 3/16/2021

  • U.S. import prices increased strongly in February, boosted by higher costs for crude oil and commodities, strengthening expectations for an acceleration in inflation this year.
  • The Labor Department said on Tuesday import prices rose 1.3% last month after surging 1.4% in January.
  • Economists polled by Reuters had forecast import prices, which exclude tariffs, advancing 1.2% in February.
  • In the 12 months through February, import prices accelerated 3.0%.
  • That was the largest gain since March 2012 and followed a 1.0% rise in January.
  • Imported fuel prices surged 11.1% last month after advancing 9.0% in January. Imported food prices shot up 1.6%.
  • Excluding fuel and food, import prices climbed 0.3%. The so-called core import prices rose 0.9% in January.

Winter storms hammer U.S. manufacturing production – Reuters, 3/16/2021

  • Output at U.S. factories plunged in February, depressed by winter storms in Texas, which put some petroleum refineries, petrochemical facilities and plastic resin plants out of commission for the rest of that month.
  • Manufacturing production dropped 3.1% last month, also weighed down by a global semiconductor shortage, the Federal Reserve said on Tuesday. That followed a 1.2% jump in January and ended nine straight monthly increases in factory output.
  • Excluding the weather impact, manufacturing output fell 0.5%, the U.S. central bank said.
  • Production at auto plants continued to be hampered by a shortage of semiconductors, tumbling 8.3% last month.
  • The weakness in manufacturing output combined with a 5.4% dive in mining to push down industrial production by 2.2% in February. That followed a 1.1% jump in January. Bitterly cold temperatures boosted utilities output 7.4%.

Homebuilder confidence drops as interest rates and lumber prices rise – CNBC, 3/16/2021

  • A monthly index measuring homebuilder confidence in the single-family housing market fell, as builders face rising interest rates and rising costs for materials, especially lumber.
  • The National Association of Home Builders/Wells Fargo Housing Market Index fell 2 points to 82 in March.
  • Anything above 50 is considered positive sentiment. The index stood at 72 in March 2020 and hit a high of 90 in November.
  • Of the index’s three components, current sales conditions fell 3 points to 87.
  • Sales expectations in the next six months increased 3 points to 83, and buyer traffic was unchanged at 72.

Fed Seen Standing Firm on Interest Rates, Bond Purchases – Wall Street Journal, 3/16/2021

  • Federal Reserve officials will likely note an improving economic outlook at their policy meeting this week, while also stressing that it is too early to change their plans for interest rates and bond purchases.
  • Fed Chairman Jerome Powell has said repeatedly in recent weeks that he wants to see “substantial further progress” in the recovery before the central bank begins scaling back its $120 billion a month in bond purchases.
  • The Fed, meanwhile, won’t raise rates until its goals of maximum employment and sustained 2% inflation have been reached—a scenario officials have described as a long way off.
  • The officials also will be updating their projections for the path of short-term interest rates, a guide to how Fed policy might evolve in the next couple of years.
  • The so-called dot plot, which garners a great deal of market attention, in December showed 12 of 17 Fed officials anticipated their benchmark federal-funds rate would remain pinned near zero through 2023.

EUROPE & WORLD

Nokia to Cut Up to 10,000 Jobs to Offset 5G Investment – Wall Street Journal, 3/16/2021

  • Nokia plans to cut between 5,000 and 10,000 jobs over the next two years, a move it said would make it more competitive in the 5G equipment market against rivals Huawei Technologies and Ericsson.
  • The job cuts would reduce the Finnish company’s current workforce of about 90,000 workers by as much as 11% and lower its cost base by around $700 million, the company said Tuesday.
  • It said the savings would offset increased investment in research and development, among other areas.

China Appears to Block Signal, One of Last Popular Encrypted Messaging Apps – Wall Street Journal, 3/16/2021

  • Messaging app Signal became unusable for many people in mainland China this week, stifling one of the last widely used messaging apps that could send and receive encrypted messages in the country without a virtual private network.
  • The government’s apparent move to block Signal intensifies its hold on public and private discourse in China, where many social-media and messaging apps, including Facebook, Twitter and, most recently, the popular social-audio platform Clubhouse, have been banned.
  • Signal users in mainland China started reporting around Monday evening problems with sending and receiving messages in the app. Using a virtual private network, or VPN, a tool that enables internet users to circumvent China’s elaborate system of web filters, resolved those issues, which led users to conclude that the app had been blocked in China.

Huawei announces royalty rates for 5G phone technology – Reuters, 3/16/2021

  • Huawei Technologies announced royalty rates for the use of its 5G phone technology for the first time, in a move its chief legal officer said was an effort to increase transparency at an event on Tuesday.
  • The company was put on an export blacklist by former U.S. President Donald Trump in 2019 and barred from accessing critical technology of U.S. origin, affecting its ability to design its own chips and source components from outside vendors.
  • But, Huawei is looking to showcase its own research achievements, with the company expecting to receive around $1.3 billion in revenue from patent licensing between 2019 and 2021, according to its head of IP, Jason Ding.
  • For every phone that uses Huawei’s 5G technology, which are capable of working the company will receive up to $2.5 in royalties, Ding said.

Volkswagen looks to electric vehicles, cost cuts for profit recovery – Reuters, 3/16/2021

  • Volkswagen is confident that cost cuts will help it raise profit margins in the coming years, the world’s second-largest carmaker said on Tuesday, a day after outlining an ambitious electric mobility expansion.
  • Preferred shares in the company rose as much as 6.5% to their highest level since July 13, 2015, giving the carmaker a market valuation of more than 118 billion euros ($141 billion). They are up more than a third year-to-date.
  • Volkswagen aims to more than double deliveries of electric vehicles to 1 million this year, it said, adding it would also apply a standardized platform model introduced for vehicle production years ago to software, batteries and charging.
  • Volkswagen confirmed it aimed for an operating margin of 7%-8% by 2025, adding it would likely end 2021 at the upper end of a 5%-6.5% target corridor.
  • Diess’ comments come a day after Volkswagen unveiled plans to build half a dozen battery cell plants in Europe and expand infrastructure for charging electric vehicles globally, accelerating efforts to overtake Tesla.

Factmonster – TODAY in HISTORY

  • Ferdinand Magellan reached the Philippines. (1521)
  • Adolf Hitler cancelled the military clauses of the Treaty of Versailles. (1935)
  • The My Lai massacre occurred in Vietnam. (1968)
  • Lieutenant Colonel Oliver L. North and Vice Admiral John M. Poindexter of the National Security Council are indicted on charges of conspiracy to defraud the United States for their role in the Iran-contra affair. (1988)

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