Daily Market Report | Mar. 17, 2021
Tech Stocks Slip Ahead of Fed Meeting – Wall Street Journal, 3/17/2021
- The S&P 500 dropped Wednesday, weighed down by technology shares, as investors awaited the Federal Reserve’s latest economic outlook and any signals on the future of interest rates and bond purchases.
- Shares of big tech stocks helped pull indexes lower, with Apple retreating 2%.
- Economically sensitive sectors like financials and industrials, meanwhile, gained ground.
- Federal Reserve officials, who are scheduled to release their latest economic projections at 2 p.m. ET, are likely to say they expect the labor market and inflation to rebound faster than they anticipated in December.
- The central bank is broadly expected to reaffirm its commitment to ultralow interest rates and bond purchases for now.
- Money managers have started pricing in a rise in inflation, leading to a selloff in government bonds, and are betting that interest rates will start climbing by the end of next year. They have also started exiting stocks that look to be too richly valued after last year’s rally.
- Investors will scrutinize signals from Fed Chairman Jerome Powell at his press conference, which starts at 2:30 p.m.
- In overseas markets, the Stoxx Europe 600 edged 0.4% lower. Most major indexes in Asia were little changed. South Korea’s Kospi index fell 0.6%, while the Shanghai Composite, Hang Seng and Nikkei 225 indexes all ended the day nearly flat.
Covid-19 Live Updates: Newly Reported U.S. Cases Edge Lower – Wall Street Journal, 3/17/2021
- Newly reported Covid-19 cases in the U.S. ticked down from a day earlier, but deaths rose significantly, as more California counties eased virus-related restrictions.
- The nation reported 52,329 new cases for Tuesday, according to data compiled by Johns Hopkins University and published early Wednesday morning Eastern time.
- Tuesday’s figure was down from 56,649 reported for Monday and 57,695 reported a week earlier.
- There were more than 1,200 deaths reported for Tuesday, according to Johns Hopkins data, up from 741 a day earlier but down from 1,793 a week earlier.
- More counties in California are reopening, as new Covid-19 cases, hospitalizations and deaths continue to fall following a deadly winter surge.
- Over the weekend, the country’s most populous county, Los Angeles, was downgraded from the state’s most restrictive tier, color-coded purple, to red, allowing for reduced-capacity indoor dining and the reopening of gyms and movie theaters.
- On Tuesday, additional counties became eligible for the less-restrictive red tier, according to state data. Those included San Diego, Riverside, Ventura and Santa Barbara. Around a dozen counties had recently moved to the red tier after the weekend.
Lennar rides U.S. housing boom to exceed profit estimates – Reuters, 3/17/2021
- Lennar beat quarterly profit estimates on Tuesday as historically low mortgage rates and a COVID-19 pandemic-induced shift to suburban living encouraged more Americans to buy homes.
- Orders surged 25.8% to 15,570 homes, while the number of homes sold jumped 19.3% to 12,314.
- Revenue rose 18% to $5.33 billion.
- Profit was $2.04 per share, higher than analysts’ estimates of $1.71 per share, according to Refinitiv IBES data.
- Lennar estimated second-quarter orders — an indicator of future sales — between 16,500 homes and 16,700 homes, above analysts’ estimates of 16,240 homes, helped in part by a shortage of previously owned houses on the market.
- But Lennar’s delivery forecast of between 14,200 homes and 14,400 homes was below expectations of 15,067 homes, as land constraints and soaring lumber prices limit homebuilding activity.
U.S. SPACs overtake 2020 haul in less than three months – Reuters, 3/17/2021
- Wall Street thought 2020 was a frenetic year for special purpose acquisition companies (SPACs).
- Yet with more than nine months to go until the end of 2021, initial public offerings (IPOs) of U.S.
- SPACs this week surpassed the $83.4 billion the sector raised in all of 2020, data from industry tracker SPAC Research showed.
- This is also more than the $29.5 billion that IPOs of companies that operate businesses – as opposed to being empty shells like SPACs – have raised since the start of the year, according to IPOScoop data.
- The $200 million IPO of Build Acquisition Corp on Tuesday pushed the total raised by U.S. SPACs in IPOs above last year’s haul, which was already more than six times the previous all-time record, according to SPAC Research.
- Currently, 408 SPACs with $131.1 billion in cash are looking for companies to merge with. Based on the rough rule of thumb that a SPAC typically merges with a company 3-5 times its size, this equates to potentially over $600 billion in purchasing power.
Google to Cut Commission It Charges App Developers – Wall Street Journal, 3/17/2021
- Google is reducing the cut it takes from app sales in its Play store, joining rival Apple in shrinking commissions as the power the tech giants wield through their digital marketplaces has drawn the ire of developers and scrutiny of regulators.
- The company behind the world’s largest mobile operating system, Android, said Tuesday that it would reduce service fee it collects from 30% to 15% on the first $1 million developers earn from its app store.
- The reduction, which begins in July, is a slight departure from Apple’s decision late last year to reduce its rate to 15% for software makers who generate less than $1 million in annual sales.
- By reducing its take of app sales, Google estimates that 99% of developers would see their fees cut in half.
Apple Scores Legal Win in France Over App-Privacy Changes – Wall Street Journal, 3/17/2021
- France’s competition regulator rejected a plea from advertising companies and publishers to block Apple’s plan to restrict tracking of individuals’ mobile-app usage.
- In a potential blow to smaller companies hoping to block big-tech rivals’ privacy initiatives on antitrust grounds, the French regulator on Wednesday said that Apple’s plan to require apps to obtain consent from users to track them “doesn’t appear to be abusive.”
- “We can’t intervene just because there might be a negative impact for companies in the ecosystem,” said Isabelle de Silva, head of France’s competition authority, at a press conference. “At this stage, we haven’t found flagrant examples of discrimination.”
- The authority said, however, that it plans to pursue an in-depth investigation to determine whether Apple’s changes could be regarded as “self-preferencing” by imposing stricter rules on third-party apps than it does on itself. That investigation could stretch to next year, Ms. de Silva said.
AerCap-GECAS deal may hurt aircraft market competition – IATA – Reuters, 3/17/2021
- Aircraft leasing giant AerCap’s acquisition of rival GECAS will reduce competition in the aircraft market, the head of global airline industry body IATA warned on Wednesday.
- “We understand that the situation of the leasing companies is difficult,” IATA Director General Alexandre de Juniac told Reuters. “But combining the two to have a big player (in) a very dominant situation is not good news for us.”
- The world’s two largest aircraft lessors announced plans last week to combine, with Ireland’s AerCap agreeing to pay more than $30 billion for GECAS, the air finance business of General Electric.
Commodities Boom Hits Home – Wall Street Journal, 3/17/2021
- Prices are surging for the raw materials used to build American homes.
- Lumber, one of the biggest costs in home-building after land and labor, has never been more expensive and is more than twice the typical price for this time of year.
- Crude oil, a starting point for paint, drain pipe, roof shingles and flooring, has shot up more than 80% since October.
- Copper, which carries water and electricity throughout houses, costs about a third more than it did in the autumn.
- Prices for granite, insulation, concrete blocks and common brick have all pushed to records in 2021, according to the Bureau of Labor Statistic’s producer-price index, which measures the change in prices that producers receive for their output. Drywall and ceramic tiles are short of records but have also climbed.
- American Homes 4 Rent, which built more than 1,600 rentals last year and plans to construct another 2,000 houses this year, said its lumber bill is between $20,000 and $25,000 per house, up from about $10,000.
Never Mind Peak Oil, Global Forecaster Calls Peak Gasoline – Wall Street Journal, 3/17/2021
- The world’s thirst for gasoline isn’t likely to return to pre-pandemic levels, the International Energy Agency forecast, calling a peak for the fuel that has powered personal transportation for more than a century.
- The Paris-based energy watchdog, in its closely followed five-year forecast, said an accelerating global shift toward electric vehicles, along with increasing fuel efficiency among gasoline-powered fleets, will more than outweigh demand growth from countries in the developing world.
- The world will have 60 million electric vehicles on its roads by 2026, the IEA said, up from 7.2 million in 2019.
- The agency tracks EV trends closely as an important signal for gasoline and crude-oil demand.
- The IEA said Wednesday it sees global crude demand recovering, reaching as much as 104 million barrels a day by 2026, up about 4% from 2019 levels, thanks to the developing world.
- Economic powerhouses such as China, India and other Asian countries will account for 90% of the net increase in oil demand over the coming five years, the agency said.
- But for the first time, the agency said it no longer forecasts a complete bounce back in demand for gasoline—the product that for years underpinned the world’s thirst for crude.
Fed Likely to Hold Steady on Interest Rates, Bond Purchases – Wall Street Journal, 3/17/2021
- The Federal Reserve is likely to reaffirm its plans to maintain easy-money policies until the U.S. economy recovers further from the effects of coronavirus pandemic, while also noting the brightening outlook for growth.
- Mr. Powell and his colleagues have repeatedly said the central bank will hold overnight interest rates near zero until the economy reaches maximum employment and sustained 2% inflation—conditions they don’t expect to meet this year.
- The Fed also plans to continue buying at least $120 billion a month of Treasury debt and mortgage-backed securities until “substantial further progress” is made toward those objectives.
- Economists surveyed by The Wall Street Journal this month forecast U.S. GDP to grow nearly 6% this year, measured from the fourth quarter of last year to the same period this year—the fastest since a 7.9% burst in 1983.
- Since their February forecasts, the economists’ projections for inflation have moved up by roughly half a percentage point, while they have moved down by roughly half a percentage point for the unemployment rate.
House Votes to Extend PPP Application Deadline – Wall Street Journal, 3/17/2021
- The House passed a bill extending the deadline for applying for a Paycheck Protection Program loan to May 31, sending the legislation to the Senate as the current March 31 deadline looms.
- Under the bill, which passed by a vote of 415-3, firms have until May 31 to apply for a loan and the SBA faces a June 30 deadline to process them. Small business advocates had called for an extension of the March 31 deadline to give lenders more time to implement a series of changes the Biden administration made to the program.
President Biden Says He Supports Changing Senate Filibuster Rules – Wall Street Journal, 3/17/2021
- President Biden said he supports bringing back a requirement that senators must be present and talking on the floor to block bills, as Democrats explore ways to smooth the path for their policy agenda by revising the legislative filibuster rule.
- The comments Tuesday marked a shift for Mr. Biden, who represented Delaware in the U.S. Senate for 36 years and has previously said he would prefer to preserve the filibuster rather than get rid of it, as some Democrats have advocated.
- Mr. Biden’s remarks came the same day Senate Minority Leader Mitch McConnell threatened to grind the Senate to a halt if Democrats make any changes to the filibuster.
- Democrats are at least two votes shy of the 51 needed to kill off the legislative filibuster, a step that would clear the way for them to pass sweeping legislation on voting rights, immigration, gun regulations and other measures unlikely to attract bipartisan support.
- As an alternative, Senate Democrats are exploring a return to traditional talking filibusters, like the one famously depicted by Jimmy Stewart in the 1939 film “Mr. Smith Goes to Washington.”
- The idea was floated recently by West Virginia Sen. Joe Manchin, a centrist Democrat, who, like Mr. Biden, has said he is adverse to abolishing the filibuster entirely but open to revisions.
Biden Imposes His First Sanctions on Chinese Officials Ahead of Bilateral Meeting – Wall Street Journal, 3/17/2021
- The Biden administration added new sanctions against two dozen Chinese officials it says have undermined Hong Kong’s partial autonomy from Beijing, signaling a continuing strong U.S. line on an issue that has contributed to fraying bilateral ties.
- Announced Tuesday evening in Washington, the measures marked the first time the Biden administration imposed sanctions on Chinese officials. The move comes shortly before senior U.S. and Chinese officials are due to arrive in Alaska on Thursday to hold the first high-level in-person talks between the two countries since President Biden took office in January.
- In a statement on the new sanctions, U.S. Secretary of State Antony Blinken cited Beijing’s plans—approved by Chinese lawmakers last week—to revamp the electoral system in Hong Kong, a move meant to ensure that only people whom China’s Communist Party considers “patriots” will be allowed to govern the former British colony.
- The new measures mean that foreign financial institutions that knowingly conduct significant transactions with these officials are now subject to U.S. sanctions, Mr. Blinken said.
Gavin Newsom Recall: What Happens Next? – Wall Street Journal, 3/17/2021
- Republican activists who want to recall California Gov. Gavin Newsom have until Wednesday to gather signatures to place the recall question on the ballot. Proponents claim they have gathered more than two million signatures to date, likely more than enough to trigger a recall election.
- Mr. Newsom, a Democrat, said Tuesday that he is prepared for a recall election. “The reality is, it looks like it’s going on the ballot,” he said at a press conference Tuesday. “We will fight it, we will defeat it. At the same time, it’s not going to keep me from focusing on my job 24-7.”
- Activists from Rescue California, a group that has helped circulate the recall petition, say they are tapping into anger over Mr. Newsom’s policies closing businesses, schools and houses of worship to combat the spread of the coronavirus.
- About 46% of registered voters said they approved of the job Mr. Newsom was doing, a sharp drop from his 64% approval rating in September, according to a poll released last month by the nonpartisan Institute of Governmental Studies at University of California, Berkeley.
- Half of voters surveyed said a recall election would be a bad thing for the state, and 45% said they would vote to keep Mr. Newsom, while 36% said they would vote to remove him.
- Shortly before being recalled in 2003, Gov. Gray Davis had a 26% approval rating, according to polling by the Public Policy Institute of California at the time.
EUROPE & WORLD
European new car sales drop by 20% year-on-year in February: ACEA – Reuters, 3/17/2021
- European car registrations fell in February, industry data showed on Wednesday, as coronavirus lockdowns and accompanying uncertainty across Europe took a toll on sales.
- New car registrations dropped by 20.3% year-on-year to 850,170 vehicles in the European Union, Britain and the countries of the European Free Trade Association (EFTA), figures from the European Automobile Manufacturers’ Association (ACEA) showed.
- Most European markets posted declines. Registrations in Spain registered a drop of 38%. Sales in France and Germany, fell by 21% and 19% respectively, while Italy reported a smaller drop of 12% in the month.
Toyota, Honda to Halt Some U.S. Production Over Supply Shortages – Wall Street Journal, 3/17/2021
- Toyota Motor, Honda Motor and Samsung Electronics said supply-chain problems were complicating their businesses, as freak weather, port blockages and the continued impact of Covid-19 combine to disrupt global supply chains.
- Toyota and Honda said Wednesday that they would halt production at plants in North America because of a squeeze in crucial supplies, including plastic components, petrochemicals and semiconductors.
- Separately, Samsung, the world’s largest maker of smartphones, said a severe global shortage in chips would hurt its business into the next quarter. The South Korean company also said it might withhold launching a new model of one of its most popular handsets, though it said the move was aimed at keeping it from competing with an existing handset.
BMW expects at least half of sales to be electric cars by 2030 – Reuters, 3/17/2021
- BMW expects at least half of its sales to be zero emission vehicles by 2030, setting a more conservative target than some rivals in the race to embrace cleaner driving.
- In the short term, the German carmaker forecast on Wednesday a big rise in pretax profit for this year, with a strong performance in all areas – from MINIS through its upmarket BMW brand to top-of-the-range Rolls-Royces.
- BMW said around 90% of its market categories would have fully-electric models available by 2023 and the electric BMW i4 would be launched three months ahead of schedule this year.
- The carmaker said its MINI brand would be fully electric “by the early 2030s” and electric models would account for at least 50% of group deliveries by 2030.
Covid-19 Restrictions May Have Led to Rise in Child Deaths in South Asia – Wall Street Journal, 3/17/2021
- The same Covid-19 lockdowns that may have saved lives in South Asia last year may have contributed to a jump in deaths of young children by cutting off essential services, a new report said.
- In 2019, South Asia recorded the deaths of 1.4 million children under the age of five, according to a report released Wednesday by Unicef. Last year, such deaths may have climbed by an additional 228,000 as the pandemic made access to medical care and food difficult.
- Also, an additional 11,000 pregnant women may have died due to limited access to medical care in India, Nepal, Pakistan, Afghanistan, Sri Lanka and Bangladesh, according to the report, which was supported by the World Health Organization and the United Nations Population Fund.
- In close to 60 countries that have figures for deaths last year, the number of deaths was more than 10% above average. Less than two-thirds of the increase in deaths has been attributed directly to Covid-19.
Factmonster – TODAY in HISTORY
- British forces evacuated Boston during the Revolutionary War. (1776)
- Douglas MacArthur became supreme commander of Allied forces in the southwest Pacific theater during World War II. (1942)
- President Bush delivered an ultimatum to Saddam Hussein: leave Iraq within 48 hours or face an attack. (2003)
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. Any economic forecasts set forth may not develop as predicted.
All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.
Material presented is excerpts derived from third party content and you may need a subscription to access the full the content. The views and opinions expressed are those of the authors and do not necessarily reflect the views of Pence Wealth Management or LPL Financial.
Prior to making any investment decision please consult your financial advisor regarding your specific situation.