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Daily Market Report | Mar. 31, 2021

Stocks Rise Ahead of Biden’s Spending Plan – Wall Street Journal, 3/31/2021

  • U.S. stocks rose Wednesday as investors awaited the rollout of President Biden’s multitrillion dollar spending program and details on how taxpayers will fund it.
  • Mr. Biden is expected to roll out his ambitious $2 trillion program targeting infrastructure, green energy, manufacturing and housing on Wednesday.
  • The fresh spending could give the economy another boost, coming on top of the recent $1.9 trillion stimulus program.
  • But money managers are also nervous because the president has signaled that he plans to fund the program in part by charging the highest-earning Americans the biggest tax rates they have faced in years.
  • He also aims to raise corporation tax and hike levies on foreign earnings.
  • In bond markets, the yield on the benchmark 10-year Treasury note was relatively flat, down to 1.719%, compared with 1.724% on Tuesday. The yield, which moves inversely to prices, climbed as high as 1.77% Tuesday.
  • In overseas markets, the Stoxx Europe 600 was flat. Credit Suisse fell a further 3.7% amid continuing concern about the fallout from the Swiss bank’s dealings with Archegos Capital Management.
  • Most major Asian stocks indexes declined. Japan’s Nikkei 225 retreated 0.9%, while the Hang Seng dropped 0.7%. The Shanghai Composite Index fell 0.4%.

Covid-19 Live Updates: U.S. Reports Fall in New Cases but Deaths Rise – Wall Street Journal, 3/31/2021

  • Newly reported Covid-19 cases in the U.S. were down from a day earlier, but deaths were up, as the debate over reopening raged on.
  • The U.S. reported more than 60,000 new cases for Tuesday, according to data compiled by Johns Hopkins University and published early Wednesday morning Eastern time.
  • The seven-day moving average, which smooths out irregularities in the data, was 65,789 as of Monday, according to a Wall Street Journal analysis of Johns Hopkins data. The 14-day average was 59,741.
  • When the seven-day average is higher than the 14-day average, as it has been since March 24, it indicates cases are on the rise.
  • There were more than 840 deaths reported on Tuesday, up from 701 a day earlier, according to Johns Hopkins data.
  • French President Emmanuel Macron is expected to announce tighter lockdown restrictions Wednesday as a surge of Covid-19 infections pushed the country’s hospital system to its limit.
  • Mr. Macron is scheduled to make a national TV address after meeting with top officials amid widespread calls for measures strong enough to stifle the spread of Covid-19 variants that have fueled a surge in infections and hospitalizations.

Lululemon Bolsters Revenue, Profit – Wall Street Journal, 3/31/2020

  • Lululemon Athletica posted further gains in sales and profit to close out its latest fiscal year, showcasing the apparel company’s continued resilience during a time when surging coronavirus cases shifted more consumer spending online.
  • The company reported $1.7 billion in net revenue for the quarter ended Jan. 31, a 24% rise from the same period a year earlier.
  • More than half of net revenue came from selling directly to consumers, compared with 33% in the fourth quarter of 2019.
  • Comparable sales—which typically include stores open at least a year and e-commerce—increased 21%, fueled by online sales. Comparable bricks-and-mortar sales slumped 28% in the latest quarter.
  • Women’s apparel continues to be the strongest performing category for Lululemon, which reported that part of the business grew nearly 20% last year, while the men’s category expanded 17% in 2020.
  • Mirror, the at-home fitness company Lululemon acquired for $500 million in June, generated $170 million in revenue in 2020, a figure that includes results from before the acquisition.
  • Net income for the quarter rose 11% to $330 million.
  • Lululemon issued full-year guidance for net revenue between $5.55 billion and $5.65 billion, and earnings per share between $6.10 and $6.25. The retailer said it expects net revenue between $1.1 billion and $1.13 billion for the first quarter of 2021.

Walgreens Reports Stronger Profit as Covid-19 Vaccine Rollout Ramps Up – Wall Street Journal, 3/31/2020

  • Walgreens Boots Alliance reported a stronger profit for its latest quarter, a performance that comes as it looks to make itself a cornerstone in the distribution of Covid-19 vaccines under new Chief Executive Rosalind Brewer.
  • Walgreens on Wednesday reported $32.8 billion in sales from continuing operations for its quarter that ended Feb. 28, up almost 5% from the year-earlier period.
  • Comparable sales in the U.S. were up 2%, including a 4.5% gain in pharmacy items.
  • Demand for other retail products was lower, amid a weaker cough, cold and flu season, the company said.
  • Profit rose to $1.03 billion, or $1.19 a share, from $946 million, or $1.07 a share, for the year-earlier period.
  • After adjustments, Walgreens reported earnings of $1.40 a share, ahead of what analysts expected for that metric.

ConocoPhillips sees higher Q1 output, warns of profit hit from unwinding hedges – Reuters, 3/31/2021

  • ConocoPhillips said on Wednesday its first-quarter results will benefit from higher oil prices and output, while warning of a $600 million profit hit from its recent acquisition of Concho Resources and related commodity price hedges.
  • It also forecast production of 1.47 million barrels of oil equivalent per day (boepd) to 1.49 million boepd, in the first quarterly result after it closed its nearly $10 billion deal for smaller rival Concho.
  • The top independent U.S. oil producer expects average prices to be $43 to $45 per barrel of oil equivalent for the first quarter, much higher than the $33.21 it earned in the last three months of 2020.
  • The company, which reiterated its annual output forecast and budget, said it had settled all oil and gas hedging positions acquired from Concho as of the end of the quarter.
  • The expenses and hedges were also expected to hit cash from operations by about $1 billion.

Kimberly-Clark raises prices on Scott toilet paper, diapers in U.S. and Canada – Reuters, 3/31/2021

  • Kimberly-Clark said on Wednesday it would raise prices on many of its products including Scott toilet paper, tissues and diapers in the United States and Canada to offset rising commodity costs.
  • Kimberly Clark said the price increases, in the mid-to-high single digits, will start from late June and impact the company’s baby and child care, adult care and Scott bathroom tissue businesses.
  • Most consumer product companies have been pressured by recent increases in cost of raw materials such as pulp, recycled fiber and resins, even as hygiene and cleaning products remain in demand despite easing of coronavirus-related restrictions.
  • Pulpmakers have also raised prices for hardwood pulp and forecast rising global demand for tissues and toilet papers.

Alaska Air to purchase additional 23 737-9 MAX from Boeing – Reuters, 3/31/2021

  • Alaska Air said on Tuesday it would buy an additional 23 737 MAX 9 jets, in a move that highlights growing confidence in Boeing’s aircraft following a 20-month safety ban triggered by two fatal crashes.
  • The amended deal, under which deliveries are expected between 2023 and 2024, is also expected to increase the pace at which the airline’s fleet shifts back to Boeing planes.
  • In December, Seattle-based Alaska Air had agreed to buy 23 MAX 9 jets, an order worth about $2.96 billion at list prices before significant discounts.
  • Alaska, for which 737 MAX order book inclusive of options and lease commitments stands at 120 airplanes, may exercise further options to purchase 15 aircraft with deliveries between 2023 and 2026.

Global auto recovery to take more hits from Japan chip plant fire, severe U.S. weather: IHS – Reuters, 3/31/2021

  • A recent fire at a Japanese semiconductor factory and severe weather in parts of the United States in February have exacerbated an ongoing chip shortage plaguing the global auto industry, data firm IHS Markit said on Wednesday.
  • IHS said it now expects disruptions to the production of nearly 1.3 million global light vehicles, up from a prior forecast of 1 million in the first quarter.
  • IHS Markit also said vehicle output would be affected by unseasonably cold weather that gripped the southwestern parts of the United States last month, with deadly snowstorms lashing Texas and hurting factory production and retail sales.
  • Global automotive production figures in the first quarter are expected to expand 12% compared to 2020, according to a forecast by IHS.

Ballot review enters second day in landmark Amazon union election – Reuters, 3/31/2021

  • Amazon.com’s landmark union election was set to resume Wednesday morning with a second session of reviewing ballots from employees in Alabama, who are deciding whether to organize one of the company’s U.S. warehouses for the first time.
  • The public tally of the ballots sent to more than 5,800 workers at the Bessemer, Alabama, facility is not expected to begin until later this week or next.
  • Amazon and union representatives are currently weighing in on the eligibility of votes cast, and the parties may attempt to clear some challenges to ballots before the public hearing begins, a person familiar with the process said.
  • Amazon has fought against the unionization attempt by the Retail, Wholesale and Department Store Union (RWDSU), in an election that may influence the future of labor organizing at America’s second largest private employer after Walmart.

Biden Set to Unveil $2 Trillion Infrastructure Plan – Wall Street Journal, 3/31/2021

  • President Biden will unveil a $2 trillion infrastructure plan centered on fixing roads and bridges, expanding broadband internet access and boosting funding for research and development, while proposing an expansive increase in corporate taxes to pay for the package.
  • The measure, which comes after Mr. Biden signed a $1.9 trillion coronavirus relief bill into law, is the first of a two-part economic plan that the president hopes to move through Congress in the coming months. A second plan focused on child care, healthcare and education will be released in April.
  • The White House said the proposal will cost $2 trillion over eight years and would be paid for over 15 years by raising the corporate tax rate to 28% from 21% and increasing taxes on companies’ foreign earnings.
  • Mr. Biden’s proposal includes $621 billion to modernize transportation infrastructure, $400 billion to help care for the aging and those with disabilities, $300 billion to boost the manufacturing industry, $213 billion on retrofitting and building affordable housing and $100 billion to expand broadband access, among other investments.
  • The plan calls for modernizing 20,000 miles of roadway; building 500,000 electric-vehicle charging stations; replacing the country’s existing lead pipes and service lines; repairing aging schools; expanding home care for the elderly and disabled; and investing billions of dollars in domestic semiconductor manufacturing.
  • Combined, Mr. Biden’s economic proposals are expected to cost between $3 trillion and $4 trillion over a decade, according to people involved in the discussions.
  • It is unknown how much of the second package will be paid for through tax increases, but White House officials are weighing additional proposals.
  • Notably, the plan would set the minimum tax on U.S. companies’ foreign income at 21%, up from 10.5% today, and it would set that tax so it applies to profits earned in each country, rather than letting companies combine their income globally.

U.S. Pending Home Sales Fall Most Since April on Low Inventory – Bloomberg, 3/31/2021

  • U.S. pending home sales fell in February by the most since April as rising home prices and a shortage of available properties deterred buyers.
  • The National Association of Realtors’ index of pending home sales decreased 10.6% from the prior month to 110.3, the lowest reading since May, according to data released Wednesday.
  • “The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift but contracts are not clicking due to record-low inventory,” Lawrence Yun, chief economist at the NAR, said in a statement.
  • While borrowing costs are expected to rise, NAR’s Yun said he doesn’t expect mortgage rates to exceed 3.5% in 2021.

U.S. private payrolls post biggest gain in six months – Reuters, 3/31/2021

  • U.S. private employers hired the most workers in six months in March as more Americans got vaccinated against COVID-19, pushing the economy towards a broader reopening, which is expected to unleash a strong wave of pent-up demand in the coming months.
  • Private payrolls surged by 517,000 jobs this month after rising 176,000 in February. Economists polled by Reuters had forecast private payrolls increasing by 550,000 jobs in March.
  • The leisure and hospitality sectors added 169,000 jobs this month following only 51,000 in February. Construction payrolls rebounded by 32,000 jobs, while hiring at factories increased by 49,000 positions.
  • The ADP report is jointly developed with Moody’s Analytics. It has a very poor track record of predicting the private payrolls count in the government’s more comprehensive, and closely watched employment report because of methodology differences.

Business conditions in Chicago region surge to 2 1/2-year high in another sign of accelerating U.S. economy – MarketWatch, 3/31/2021

  • The Chicago PMI climbed to 66.3 last month from a revised 59.5 in the prior month.
  • Readings above 50 indicate an expanding economy, and anything above 50 is considered exceptional.
  • The prices companies paid for materials rose for the seventh month in a row and hit the highest level in 30 months.
  • Inflation has become a worry again to investors amid a raft of evidence pointing to rising prices.
  • On the brighter side, a gauge that measures employment turned positive for the first time in almost two years.

U.S. Calls for Independent Study of Covid-19 Origin – Wall Street Journal, 3/31/2021

  • The U.S. and more than a dozen other countries expressed concern about a World Health Organization-led mission to China to explore the origins of Covid-19, saying it came too late and wasn’t afforded full or timely access to pertinent data.
  • The statement, backed by Australia, Japan, Canada, the U.K. and other states, called for “transparent and independent analysis and evaluation, free from interference and undue influence.”
  • The statement was echoed by the European Union, whose delegation to the United Nations issued a separate statement along the same lines.
  • The two statements followed the release Tuesday of a report on the WHO-led mission to Wuhan, the Chinese city where the first cases were found. That report found that the virus was “extremely unlikely” to have spilled from a Chinese laboratory.
  • Shortly before the report’s release, however, WHO Director General Tedros Adhanom Ghebreyesus called for a more extensive probe into whether the coronavirus had escaped from a lab, the strongest terms he has used in public yet on the matter.

EUROPE & WORLD

Huawei Suffers Rare Drop in Revenue as U.S. Sanctions Bite – Wall Street Journal, 3/31/2020

  • Huawei Technologies suffered a rare decline in revenue during the fourth quarter last year, as U.S. sanctions hammered its business and sales outside of China fell particularly hard.
  • Revenue in the fourth quarter fell 11.2% to 220.1 billion yuan, equivalent to about $33.6 billion, from a year earlier, according to calculations based on previously released figures by Huawei.
  • For the full year, the company said revenue still grew 3.8% to a record 891.4 billion yuan, thanks to stronger performance earlier in the year.
  • The company’s results indicate that a yearslong U.S.-led campaign to strangle Huawei’s business is showing signs of success. Sales growth in its core business of telecom infrastructure effectively stalled. Smartphone sales plunged, though the drop was offset by rising sales of laptops, smart watches and other consumer electronics.
  • One bright spot was its revenue in China, which grew 15.4% to 584.9 billion yuan last year, helped by the rapid build-out of 5G networks, of which Huawei is a major supplier.
  • Revenue in Europe, the Middle East and Africa as a region fell by 12%. In the Americas, revenue fell by a quarter.

BlackBerry misses fourth-quarter revenue estimates despite recovery in software sales – Reuters, 3/31/2021

  • Canada’s BlackBerry missed Wall Street estimates for fourth-quarter revenue on Tuesday, even as the company said sales of its QNX car software showed improvement.
  • Revenue fell to $210 million in the fourth quarter ended Feb. 28, below analysts’ expectations of $245.1 million, according to IBES data from Refinitiv.
  • Net loss widened to $315 million, or 56 cents per share, in the fourth quarter from $130 million, or 23 cents per share, a year earlier.
  • Excluding items, the company reported a profit of 3 cents per share, in line with analysts’ estimates.

Xiaomi Enters Electric Vehicle Market With $10 Billion Commitment – Wall Street Journal, 3/31/2020

  • Chinese electronics giant Xiaomi became the latest tech company drawn to China’s burgeoning electric vehicle market, pledging $10 billion over the next decade to the initiative.
  • Xiaomi Chief Executive Lei Jun will lead the new stand-alone subsidiary focused on electric vehicles, the company said Tuesday. It will spend an initial 10 billion yuan, equivalent to about $1.5 billion, to launch the business, expanding its investment in the coming years.
  • Mr. Lei appeared late Tuesday before a cheering theater of spectators in Beijing following the announcement. He told the audience that he had deliberated for months with the company’s board about whether Xiaomi should enter the electric vehicle market.
  • He said he ultimately decided that the company’s ample cash cushion gave him the confidence to move forward.

Factmonster – TODAY in HISTORY

  • Daylight Saving Time went into effect in the United States. (1918)
  • The Dalai Lama, fleeing Chinese repression of an uprising in Tibet, arrived at the Indian border and was granted political asylum. (1959)
  • President Lyndon Johnson announced that he would not run for re-election. (1968)

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