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Daily Market Report | Mar. 23, 2021

Stocks Waver Ahead of Powell’s Testimony – Wall Street Journal, 3/23/2021

  • U.S. stocks traded near flat Tuesday ahead of testimony by Federal Reserve Chairman Jerome Powell, who plans to say that the U.S. economy’s recovery remains far from complete.
  • The S&P 500 ticked up less than 0.1%, a modest move for the broad market index after the opening bell.
  • The Nasdaq Composite Index was less than 0.1% lower, while the Dow Jones Industrial Average edged down 23 points.
  • Mr. Powell plans to reiterate in a hearing before Congress that the central bank will continue providing support to the economy through loose monetary policy. He and Treasury Secretary Janet Yellen will begin two days of testimony at 12 p.m. ET.
  • Investors are also reassessing their expectations for a fast and widespread global recovery, which had led to rising bets earlier this year that companies sensitive to an economic recovery would benefit. Rising Covid-19 cases in Europe and recent extensions to lockdowns in Germany, France and Italy are also weighing on sentiment.
  • The bond market is stabilizing, with the 10-year Treasury note yield easing down for a third straight day to 1.65%, from 1.682% on Monday. Still, investors are looking to see if Mr. Powell will shift his stance on the recent rise in bond yields and whether the Fed will consider slowing bond purchases to tamp down inflation.
  • In Asia, most major benchmarks declined by the close of trading.
  • The Shanghai Composite Index dropped 0.9% and Hong Kong’s Hang Seng fell 1.3%.
  • Overseas, the pan-continental Stoxx Europe 600 edged down 0.2%, led by losses in travel stocks.
  • The German government imposed another four-week lockdown, with restrictions over the Easter holiday.
  • Among European equities, Swedish auto maker Volvo tumbled over 7% after saying that the global chip shortage prompted it to reduce production in the second quarter.
  • Turkey’s benchmark stock index fell 0.5%, extending declines after President Recep Tayyip Erdogan replaced the central bank chief. It has lost over 10% this week so far.

Covid-19 Live Updates: New U.S. Cases Edge Higher – Wall Street Journal, 3/23/2021

  • Newly reported coronavirus cases in the U.S. edged higher, as many states push forward with vaccinations programs and look to reopen schools.
  • The U.S. reported more than 50,000 new cases for Monday, according to data compiled by Johns Hopkins University that was published early Tuesday.
  • The seven-day average of newly reported cases, which helps smooth out irregularities in data reporting, stood at 54,308 as of Sunday, according to a Wall Street Journal analysis of data compiled by Johns Hopkins University. The 14-day average was 53,989.
  • When the seven-day average is higher than the 14-day average, it indicates that cases are rising.
  • The country reported 593 Covid-19 fatalities for Monday, bringing the total death toll to nearly 543,000, according to Johns Hopkins data.
  • Hospitalizations continued to fall, with around 39,000 Covid-19 patients hospitalized around the country, according to the latest data posted by the Department of Health and Human Services.
  • Vaccinations, meanwhile, continued apace, with more than 126.5 million shots administered as of Monday, and 17.4% of Americans aged 18 and older fully vaccinated, according to data from the Centers for Disease Control and Prevention.

U.S. Health Officials Raise Concerns Over AstraZeneca Vaccine Data – Wall Street Journal, 3/23/2021

  • U.S. officials said they were told AstraZeneca may have released outdated information about trial results for its Covid-19 vaccine—a surprise disclosure that immediately cast doubt on the company’s assertion a day before that results showed the shot to be highly effective.
  • The early-morning statement from the National Institute of Allergy and Infectious Diseases came a day after AstraZeneca released interim data from large-scale U.S. trials that it said found its Covid-19 vaccine to be 79% effective in preventing symptomatic disease.
  • NIAID, in its highly unusual statement, said an independent data monitoring board working with AstraZeneca in conducting its trials raised concerns about the company’s disclosures and had urged the drugmaker to work with it to ensure that the most accurate, up-to-date efficacy data would be made public.
  • AstraZeneca, in its own statement, said it would update and reissue its trial results in 48-hours.

WeWork discloses $3.2 billion loss in 2020 as it seeks SPAC deal – source – Reuters, 3/23/2021

  • WeWork lost $3.2 billion last year, the office-sharing startup disclosed in a presentation shown to prospective investors as part of a pitch for $1 billion in investment and a stock market listing, a person familiar with the matter told Reuters.
  • The company’s losses narrowed from $3.5 billion in 2019 and it plans to go public at a valuation of $9 billion including debt through a merger with a special purpose acquisition company (SPAC), according to a person directly briefed on the presentation that was sent out to existing and potential new investors.
  • The report said that WeWork forecast occupancy to rebound to 90% by the end of 2022, from 47% at the end of last year when the COVID-19 pandemic shut its co-working spaces around the world.
  • The company expects adjusted earnings before interest, taxes, depreciation and amortization of $485 million next year, the report added.

Microsoft in talks to acquire Discord for more than $10 billion: Bloomberg News – Reuters, 3/23/2021

  • Microsoft is in talks to buy messaging platform Discord for more than $10 billion, Bloomberg News reported, citing people familiar with the matter.
  • Discord has reached out to potential buyers and Microsoft is one of them, the report said, citing people familiar with the matter. One person said it was more likely to go public than sell itself.
  • Discord, which is valued at around $7 billion as of last December, is a platform on which users coordinate group activities such as games, discussions and even virtual parties.
  • The Xbox maker has been seeking to strengthen its video game offerings with $7.5 billion acquisition of ZeniMax Media last year, its biggest gaming acquisition ever.

U.S. new home sales plunge amid harsh weather – Reuters, 3/23/2021

  • Sales of new U.S. single-family homes dropped more than expected in February amid bitterly cold weather, which also weighed on activity in other parts of the economy last month.
  • The Commerce Department said on Tuesday that new home sales plunged 18.2% to a seasonally adjusted annual rate of 775,000 units last month.
  • January’s sales pace was revised up to 948,000 units from the previously reported 923,000 units.
  • Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, tumbling 6.5% to a rate of 875,000 units in February. New home sales are drawn from a sample of houses selected from building permits.

U.S. current account deficit hits 12-year high in 2020 – Reuters, 3/23/2021

  • The U.S. current account deficit raced to a 12-year high in 2020 as the COVID-19 pandemic severely disrupted exports and could remain elevated this year as an economic recovery driven by massive fiscal stimulus draws in imports.
  • The Commerce Department said on Tuesday the current account deficit, which measures the flow of goods, services and investments into and out of the country, surged 34.8% to $647.2 billion last year. That was the largest shortfall since 2008.
  • Exports of goods and services to, and income received from foreign residents dropped $578.3 billion to $3.23 trillion in 2020.
  • Imports of goods and services from, and income paid to, foreign residents fell $411.3 billion to $3.87 trillion.
  • The current account gap represented 3.1% of gross domestic product last year, also the largest share since 2008 and up from 2.2% in 2019.

Biden Administration Officials Put Together $3 Trillion Economic Plan – Wall Street Journal, 3/23/2021

  • Administration officials are crafting a plan for a multipart infrastructure and economic package that could cost as much as $3 trillion and fulfill key elements of President Biden’s campaign agenda, according to people involved in the discussions.
  • The first proposal would center on roads, bridges and other infrastructure projects and include many of the climate-change initiatives Mr. Biden outlined in the “Build Back Better” plan he released during the 2020 campaign.
  • That package would be followed by measures focusing on education and other priorities, including extending the newly expanded child tax credit scheduled to expire at the end of the year and providing for universal prekindergarten and tuition-free community college, the people said.
  • If the proposals add up to $3 trillion over a decade, that would represent 1% of GDP and a 5% increase in federal spending beyond current projections.
  • Democrats are also exploring raising the top marginal income-tax rate for high-income individuals, increasing capital-gains taxes and tightening international tax rules on companies, according to lawmakers and aides.

Federal Reserve Payments to the Treasury Department Rose in 2020 – Wall Street Journal, 3/23/2021

  • The Federal Reserve sent more profits to the Treasury Department last year as the income from its swelling asset holdings offset the impact of lower interest rates.
  • The Fed sent $86.89 billion to Treasury in 2020, up 58% from $54.89 billion in 2019, the central bank said Monday in an annual financial statement.
  • The asset purchases expanded the Fed’s balance sheet to $7.36 trillion in 2020 from $4.17 trillion in 2019.
  • The Fed’s interest income in 2020 was $101.54 billion, down 1.2% from 2019.
  • At the same time, the central bank’s interest expenses—mostly its payments to banks on reserves—tumbled to $8.6 billion in 2020 from $40.95 billion in 2019.

Powell, Yellen Set for First Joint Appearance in Congress – Wall Street Journal, 3/23/2021

  • Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen are set to make their first joint appearance on Capitol Hill Tuesday afternoon when they testify on the government’s pandemic relief efforts.
  • Mr. Powell is expected to tell lawmakers that the economy’s recovery remains far from complete despite recent improvement and that the central bank plans to continue providing support.
  • “The recovery has progressed more quickly than generally expected and looks to be strengthening,” he said in prepared remarks released Monday. “But the recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes.”
  • The hearing, which will be Ms. Yellen’s first since being sworn in as Treasury secretary, is required each quarter under the March 2020 Cares Act, which provided the Treasury with $454 billion to support emergency Fed lending programs as the pandemic unfolded last year.

Fed’s Kaplan says he is among policymakers expecting rate hike in 2022 – Reuters, 3/23/2021

  • Dallas Federal Reserve President Robert Kaplan said on Tuesday that he is among the policymakers expecting the central bank could start raising rates as soon as next year.
  • As more people are vaccinated against the coronavirus and the economy continues to improve with the help of generous fiscal stimulus, including a $1.9 trillion aid package signed into law this month, Kaplan said he would be an early advocate for scaling back monetary support.
  • Kaplan said that he now expects the economy to grow by 6.5% in 2021 and for inflation to rise by as much as 2.5% this year before settling down in 2022.

EUROPE & WORLD

Europe Despairs as Covid-19 Vaccine Rollout Stalls and Pandemic Grinds On – Wall Street Journal, 3/23/2021

  • Europeans of all ages, from children to grandparents, are becoming exhausted with a crisis that is now entering its second year and whose end seems to be receding beyond the horizon. Vaccinations are progressing at a glacial pace, Covid-19 cases are spiraling up again and increasingly unpopular governments impose new restrictions weekly.
  • The mixture of pessimism, resignation, and anger contrasts with feelings of optimism elsewhere in the West, especially in the U.S. and the U.K., where vaccinations are progressing much faster and attention is moving to reopening the economy.
  • Millions of Germans aged 70 and older, as well as teachers and people with chronic diseases, haven’t yet been vaccinated. Europe was late in ordering the shots, late in approving them and has also been hit by manufacturing hiccups and delivery delays.
  • Over 70% of Germans are unsatisfied with the way the government organized and purchased vaccines, according to a Deutschlandtrend poll from early March conducted by Infratest Dimap for public broadcaster ARD.
  • In Italy, calls to children’s helpline Telefono Azzurro rose 36% in 2020, a historic jump, said Ernesto Caffo, child psychiatrist and founder of the helpline. Calls for suicide attempts alone rose 121%.

Tencent Music quarterly revenue rises on paying-user additions – Reuters, 3/23/2021

  • China’s Tencent Music Entertainment Group posted a 14.3% rise in quarterly revenue on Monday, as the music streaming platform benefited from adding more paying users and a rebound in ad sales.
  • Total revenue of the company, controlled by Chinese tech giant Tencent Holdings, rose to 8.34 billion yuan ($1.28 billion) in the fourth quarter ended Dec. 31, topping analysts’ average estimate of 8.33 billion yuan, according to IBES data from Refinitiv.
  • Profit attributable to equity holders of the company rose to 1.2 billion yuan ($184.42 million) in the quarter from 1.04 billion yuan ($159.83 million) a year earlier.

China’s Geely Automobile plans new EV unit after profit fell by a third in 2020 – Reuters, 3/23/2021

  • China’s Geely Automobile Holdings said on Tuesday it and its parent Zhejiang Geely Holding Group will form a joint venture for electric vehicles (EV) and launch a new brand called Zeekr, after its profit fell 32% last year.
  • Revenue fell 5% from the previous year to 92.11 billion yuan.
  • Geely Automobile sold 1.32 million cars last year, down from 1.36 million units in 2019. It expects to sell 1.53 million cars this year.
  • Hangzhou-based Geely Automobile, highest-profile Chinese automaker in the world due to parent group’s investments in Volvo Cars and Daimler, posted 2020 profit of 5.53 billion yuan ($850 million), versus 8.19 billion yuan in 2019, as auto sales in the world’s biggest market was hit by the COVID-19 pandemic.

Truckmaker Volvo hit by semi-conductor shortage, sees negative impact on earnings and cash flow – Reuters, 3/23/2021

  • Swedish truckmaker Volvo said on Monday that a shortage of semiconductors would have a substantial impact on production in the second quarter.
  • The firm said it will implement stop days across its global truck manufacturing operations in the beginning of the quarter.
  • Volvo said visibility into the global supply chain of semiconductors was very low and that the uncertainty about the development was high. It said the disturbances were also expected to impact the firms other business areas.
  • “The disturbances are expected to have a negative impact on earnings and cash flow,” it said without giving further details.

Chinese Tech Faces New Curbs on Connecting Banks and Borrowers – Wall Street Journal, 3/23/2021

  • China’s internet lenders are facing another setback, with potential curbs on fee-based business that could push them to take more risk with their own balance sheets.
  • Regulators are considering stricter rules on what is known as loan facilitation, people familiar with the matter said. In this system, internet-lending platforms assess borrowers, connect them with lenders and sometimes help with risk management for outstanding loans but don’t put any capital at risk.
  • Overall, authorities want to ensure that online platforms have skin in the game, banks have a proper grip on the risks they are running and consumer data isn’t misused.
  • Beijing is concerned both about financial stability and about reining in Western-style borrowing and spending habits among younger generations.

Factmonster – TODAY in HISTORY

  • Lewis and Clark began their return journey east. (1806)
  • Benito Mussolini founded his own party in Italy, the Fasci di Combattimento. (1919)
  • President Barack Obama signed a health-care overhaul bill, called the Patient Protection and Affordable Care Act, into law. (2010)

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