Daily Market Report | Mar. 18, 2021
Tech Shares Fall as Bond Yields Rise – Wall Street Journal, 3/18/2021
- U.S. stocks fell Thursday as shares of technology companies and other high-growth stocks succumbed to another selloff in the government bond market.
- The moves are the latest shock tied to the sharp rise in Treasury yields. Signs of a recovering economy have led investors to dump government bonds, pushing yields higher.
- Stock future had started heading lower overnight after the 10-year Treasury yield, a key benchmark for lending costs, ticked up to 1.747%, breaching 1.7% for the first time since January 2020.
- A day earlier, the Fed had increased some projections for growth and inflation based on the latest round of stimulus doled out by Congress and the rollout of Covid-19 vaccines.
- Bond investors are betting that the Fed will raise interest rates within the next two years, despite data Wednesday that showed most policy makers still expect to maintain ultralow interest rates through 2023.
- Just seven of 18 Fed officials anticipated lifting rates in 2022 or 2023, up from five in December.
- Also Thursday, the number of Americans applying for first-time unemployment benefits rose to 770,000 in the week ended March 13, up from 725,000 in the week prior.
- While filings for jobless claims, a proxy for layoffs, has fallen from its peak last year, they remain at historically high levels.
- In Asia, most major benchmarks closed higher. China’s Shanghai Composite Index added 0.5%, while Hong Kong’s Hang Seng rallied 1.3%. Australia’s S&P/ASX 200 declined 0.7%.
Covid-19 Live Updates: Newly Reported U.S. Cases Rise Slightly – Wall Street Journal, 3/18/2021
- Newly reported Covid-19 cases in the U.S. were up slightly from a day earlier but roughly in line with recent levels, as the decline in daily U.S. infections from their peak slows.
- There were more than 56,000 new cases reported for Wednesday, according to data compiled by Johns Hopkins University and published early Thursday morning Eastern Time. That number might update later in the morning.
- Wednesday’s figure was up from 53,579 a day earlier and down slightly from 57,939 a week earlier.
- More than 1,100 deaths were reported for Wednesday, according to Johns Hopkins data, down from 1,286 a day earlier and 1,554 a week earlier.
- With the nation’s vaccine rollout continuing apace, Walt Disney said Wednesday that it would reopen the Disneyland and Disney California Adventure parks on April 30.
- The parks had been closed for more than a year, resulting in thousands of employee furloughs and a major shift in Disney’s strategy.
- The European Union’s health agency plans to announce its conclusions regarding the safety of AstraZeneca PLC’s Covid-19 vaccine on Thursday.
- Many European countries, including Germany, France and Italy, have suspended the vaccine’s use over the past week, following reports that people who had received it developed rare blood clots, and some had died, further slowing Europe’s already slow vaccine rollout.
- Analysis of the vaccine took on extra urgency this week after the Paul Ehrlich Institute, Germany’s medicines regulator, Monday recommended suspending the vaccine’s rollout pending further investigation.
Dollar General warns of dropping sales as pandemic boom peters out – Reuters, 3/18/2021
- Dollar General forecast annual sales and profit below estimates on Thursday, indicating the roll out of vaccines and a reopening economy would lead to a bigger-than-expected slowdown from a pandemic-fueled rush for discounted groceries.
- Same-store sales in the fourth quarter ended Jan. 29 rose 12.7%, beating analysts’ estimate of a 10.7% increase, helped by the $600 stimulus checks that boosted spending in January.
- Net income rose about 20% to $642.7 million, or $2.62 per share, but missed estimates of $2.72 per share.
- Dollar General said it expects full-year same-store sales to fall 4% to 6%, compared with analysts’ estimate of a 1.2% decline, according to IBES data from Refinitiv.
- Overall net sales are expected to be flat to 2% lower, compared with estimates of a 1.4% increase.
- The company forecast annual earnings per share of $8.80 to $9.50, below estimates of $10.08.
U.N. body raises global economic growth forecast for 2021 to 4.7% – Reuters, 3/18/2021
- The global economy is set to grow by 4.7% this year thanks to a stronger-than-expected recovery in the United States, a report by the U.N. Conference on Trade and Development (UNCTAD) said on Thursday, revising up its previous forecast of 4.3%.
- The upwards revision from its previous forecast made last September factors in an expected boost in U.S. consumer spending on the back of progress distributing COVID-19 vaccines and a vast stimulus package, the report said.
- Earlier this month, the OECD also revised higher its growth forecast for this year to 5.6 % from 4.2 %.
- The report estimates that last year there was a 3.9 % drop in output as the spread of the coronavirus sparked lockdowns across the world.
- It called the impact “exorbitant”, describing the “destruction of income on an unprecedented scale” with people in developing countries particularly hard hit.
Nikola, Lordstown shares drop in latest sign of turbulence for EV sector – Reuters, 3/18/2021
- Shares of Nikola, hit by a key investor cutting its stake, and Lordstown Motors, targeted by a regulatory inquiry, slumped on Thursday in the latest sign of pressure for once high-flying electric-vehicle makers.
- Nikola shares were down 3.5% in premarket trading while Lordstown was trading 4.8% lower, adding to declines of roughly 50% from their highs this year amid concern about the electric truck makers’ ability to delivery on technology, as well as worries about rising yields and valuation.
- Nikola said on Wednesday that South Korea’s Hanwha has decided to sell up to half of its stake in the company.
- Lordstown on Wednesday disclosed that it received a request for information from the U.S. Securities and Exchange Commission regarding accusations by Hindenburg Research, a short seller that accused the electric truck startup of misleading consumers and investors.
- Last week, Hindenburg accused Lordstown of using “fake” orders to raise capital and claimed that its upcoming truck was years away from production.
II-VI Makes Revised Bid for Coherent – Wall Street Journal, 3/18/2021
- II-VI Inc. has submitted a new takeover offer for Coherent valued at roughly $7 billion, as a frenzied bidding war for the laser maker nears a climax.
- II-VI, which has been locked in a battle with Lumentum Holdings for Coherent, submitted a bid valued at roughly $285 a share, according to people familiar with the matter.
- It follows the latest offer from Lumentum, unveiled earlier Wednesday and worth around $275 a share.
- Santa Clara, Calif.-based Coherent’s board was planning to meet late Wednesday to compare the bids, the people said.
- Should II-VI’s be deemed superior, Lumentum would likely have a window to make a new offer or walk away—with a $200 million-plus breakup fee.
BNY Mellon invests in cryptocurrency storage firm Fireblocks – Reuters, 3/18/2021
- Bank of New York Mellon has invested in Fireblocks, a platform that allows banks and other financial institutes to store, move and issue cryptocurrencies, as the world’s largest custodian bank deepens its focus on digital assets.
- BNY Mellon’s investment was part of a $133 million funding round that also saw participation from hedge fund Coatue Management, investment firm Ribbit Capital, growth equity firm Stripes and SVB Capital, Fireblocks said on Thursday.
- The latest round values Fireblocks at close to $1 billion, according to a person familiar with the matter.
Disney to Reopen Parks in California on April 30 – Wall Street Journal, 3/18/2021
- Walt Disney on Wednesday said it would reopen the Disneyland and Disney California Adventure parks on April 30.
- The company said that more than 10,000 cast members would be returning to work.
- Chief Executive Bob Chapek said he could have never guessed Disneyland would be closed for more than a year when the gates closed last March.
- Mr. Chapek said the company was still calculating what its capacity limits at Disneyland would be, saying it would be “well above” the minimum attendance required to turn a profit each day it is open.
- The company expects an onslaught of demand for the limited number of tickets, one indication of consumers’ urge to resume activities after 12 months of stay-at-home orders and business restrictions.
Google Invests $7 Billion Across U.S. as It Bets on the Post-Pandemic Office – Wall Street Journal, 3/18/2021
- The Alphabet unit said it would spend $7 billion this year expanding its footprint of offices and data centers across the U.S., including pouring $1 billion into its home state of California.
- It said it would hire at least 10,000 new full-time staff over the course of the year, positioning the search-engine giant for what it said it expects to be a post-pandemic recovery in the U.S.
- The company said the investment commitment is aimed at existing sites but that it was also creating three new office sites, in Minnesota, Texas and North Carolina, expanding Google’s presence to 19 states.
Exclusive: Google’s privacy push draws U.S. antitrust scrutiny – sources – Reuters, 3/18/2021
- Google’s plan to block a popular web tracking tool called “cookies” is a source of concern for U.S. Justice Department investigators who have been asking advertising industry executives whether the move by the search giant will hobble its smaller rivals, people familiar with the situation said.
- Alphabet’s Google a year ago announced it would ban some cookies in its Chrome browser to increase user privacy. Over the last two months, Google released more details, leading online ads rivals to complain about losing the data-gathering tool.
- The questions from Justice Department investigators have touched on how Chrome policies, including those related to cookies, affect the ad and news industries, four people said.
- Investigators are asking whether Google is using Chrome, which has 60% global market share, to reduce competition by preventing rival ad companies from tracking users through cookies while leaving loopholes for it to gather data with cookies, analytics tools and other sources, the sources added.
Boeing Faces New Hurdle in Delivering Dreamliners – Wall Street Journal, 3/18/2021
- Federal air-safety regulators have stripped Boeing’s authority to inspect and sign off on several newly produced 787 Dreamliners, part of heightened scrutiny of production problems that have halted deliveries of the popular wide-body jets.
- The Federal Aviation Administration said its inspectors, rather than the plane maker’s, would perform routine pre-delivery safety checks of four Dreamliners that Boeing has been unable for months to hand over to its airline customers while it grapples with various quality lapses.
- The wide-body jets have an excellent safety record and are used frequently on international routes.
- Boeing learned of the FAA’s move in January and has already factored the FAA signoffs into its expected delivery schedule, a person familiar with Boeing’s planning said.
U.S. Unemployment Claims Rose to 770,000 Last Week – Wall Street Journal, 3/18/2021
- Worker filings for jobless benefits rose last week, pausing a downward trend amid other signs of recent labor-market improvement.
- Unemployment claims, a proxy for layoffs, rose by 45,000 to 770,000 last week from an upwardly revised 725,000 a week earlier, the Labor Department said Thursday.
- Total continuing claims, which gives a good approximation of the number of people receiving benefits, rose by more than 2 million during the week ended Feb. 20, to 20.1 million.
- The increase was almost entirely due to growth in continuing claims for two federal pandemic-related benefits programs.
Fed Holds Steady on Interest Rates, Bond Purchases – Wall Street Journal, 3/18/2021
- The Federal Reserve kept its easy-money policies in place and vowed to maintain them until the U.S. economy recovers further from the effects of the coronavirus pandemic, while officials also highlighted an improved outlook for growth.
- “We will continue to provide the economy the support that it needs for as long as it takes,” Fed Chairman Jerome Powell said at a press conference Wednesday after the conclusion of a two-day policy meeting.
- Central bankers voted unanimously to maintain overnight interest rates near zero, where they have been set for the past year, and to continue purchasing at least $120 billion of Treasury bonds and mortgage-backed securities monthly.
- They sharply raised their forecasts for economic growth and inflation, anticipating that the Covid-19 vaccination campaign and trillions of dollars of fiscal stimulus will propel the U.S. economy to its fastest expansion since the early 1980s.
- Even so, most Fed officials still expect to maintain ultralow interest rates through 2023.
- Just seven of 18 policy makers at Wednesday’s meeting anticipate lifting rates in 2022 or 2023, up from five in December.
- Officials haven’t said exactly how long they would allow inflation to run above 2%, or how high they would allow it to rise.
- But their median forecast now shows annual inflation accelerating to 2.4% in the fourth quarter of this year, up from their December projection of 1.8%, and remaining at or slightly above 2% through 2023.
China Plans to Ask U.S. to Roll Back Trump Policies in Alaska Meeting – Wall Street Journal, 3/18/2021
- Beijing plans to press Washington to reverse many of the policies targeting China introduced during the Trump presidency in the first face-to-face meeting of senior U.S. and China officials since President Biden’s election, according to people with knowledge of the plans.
- U.S. officials say the meeting is a way to present American complaints about Chinese actions, such as its curtailing of freedoms in Hong Kong, naval expansion in the South China Sea, economic pressure on U.S. allies, intellectual-property violations and cybersecurity incursions.
- The U.S. also plans to sound out Chinese officials about ways the two countries could work together on issues such as climate change and global health.
- China comes with a different agenda that has little overlap with Washington’s, a sign of how far apart the two sides are and how difficult it will be to repair the relationship.
- The measures China wants reversed include limits on American sales to Chinese firms such as its telecommunications company Huawei Technologies and chip maker Semiconductor Manufacturing International Corp.; visa restrictions on Communist Party members, Chinese students and state-media journalists; and closure of the Chinese Consulate in Houston.
IRS Delays Tax-Filing Deadline Until Mid-May – Wall Street Journal, 3/18/2021
- The Internal Revenue Service delayed the main April 15 tax-filing and payment deadlines for individuals until May 17, giving taxpayers and preparers a bit of breathing room in an unusually complicated tax season.
- The move comes after lawmakers and accountants urged the government to allow more time to complete 2020 tax returns and adjust to tax-law changes implemented during the pandemic.
- The automatic extension applies to individual returns and payments for 2020 that are due on April 15; they will be extended to May 17 without penalties and interest.
- It doesn’t apply to 2021 estimated-tax payments due on April 15, the IRS said late Wednesday.
Treasury Department Says It Has Issued 90 Million Stimulus Payments – Wall Street Journal, 3/18/2021
- The U.S. government has issued approximately 90 million stimulus payments worth $242 billion, more than half of the estimated total relief authorized under the latest Covid-19 relief package, the Treasury Department and Internal Revenue Service said Wednesday.
- The Treasury, which is issuing the payments in rolling batches, began processing the payments on Friday primarily to taxpayers who provided their direct deposit information on their 2019 or 2020 tax returns.
- The Treasury said it would continue to issue payments over the coming weeks through direct deposit, mailed checks or debit cards.
EUROPE & WORLD
U.S. Economic Recovery, Higher Fuel Prices Force Brazil’s Hand in Rate Rise – Wall Street Journal, 3/18/2021
- Brazil on Wednesday became the first major economy to raise interest rates this year, a harbinger for other developing countries that could be forced to raise borrowing costs and endanger their fragile economies.
- The central bank’s decision to lift its benchmark lending rate to 2.75% from its record low of 2% comes as inflation hit a four-year high in Latin America’s biggest economy amid a weakening currency and sharply rising fuel prices.
- Economists say the tightening monetary policy in Brazil underscores risks for emerging markets, many of which have dire outlooks in comparison with developed countries.
- A strong U.S. recovery is prompting a rise in long-term bond yields, which attracts more investors to buy dollars at the expense of emerging-market currencies.
Bank of England sees recovery signs but stresses outlook still unclear – Reuters, 3/18/2021
- The Bank of England said Britain’s economic recovery was gathering pace thanks to the speed of COVID-19 vaccinations but that the outlook remained unclear, dampening speculation it might be moving towards a reversal of its huge stimulus.
- Pandemic restrictions could be lifted “somewhat more rapidly” than the British central bank had thought last month, it said on Thursday after its March policy meeting.
- As expected, the BoE kept its stimulus programme unchanged ahead of the expected recovery in Britain’s economy later this year, helped by the inoculation programme.
- The BoE kept its benchmark interest rate at an all-time low of 0.1%, in line with forecasts in a Reuters poll of economists.
- The central bank also left unchanged the size of its 895 billion pound ($1.25 trillion) bond-buying programme.
Air China to buy 18 Airbus A320neo jets from GECAS subsidiary – Reuters, 3/18/2021
- Air China will buy 18 Airbus A320neo jets from AFS Investments, a subsidiary of aircraft lessor GECAS, the airline said on Thursday, in a boost to Airbus as it competes with Boeing for Chinese market share.
- Air China said the order was worth $2.24 billion, based on list prices and deliveries of the narrow-body aircraft were expected to be completed by 2022.
- The airline said it believed the new jets would make it more competitive in a domestic market recovering fast from the coronavirus pandemic and that low financing costs and a favourable exchange rate had helped with the deal.
Nokia signs 5G equipment deal with AT&T – Reuters, 3/18/2021
- Nokia has signed a five-year deal with AT&T to deploy a 5G network on the mobile operator’s C-Band spectrum in parts of the United States, the Finnish company said on Thursday.
- Nokia said its portfolio for C-Band, meaning satellite transmissions in the 4-8GHz frequency range, includes support for different 5G networks, cloud-based implementations and Open RAN products.
- U.S. wireless companies last month won $78 billion in bids in the government’s auction for a band of C-Band spectrum critical to next-generation 5G networks.
- C-Band spectrum provides a good balance of both capacity and coverage, while also allowing rapid 5G rollout and fast introduction of services.
Factmonster – TODAY in HISTORY
- After months of American protests, Britain repealed the Stamp Act. (1766)
- Soviet cosmonaut Aleksei Leonov made the first spacewalk. (1965)
- The biggest art theft in U.S. history occurs at the Isabella Stewart Gardner Museum in Boston. The works, including pieces by Vermeer and Rembrandt, were never recovered. (1990)
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