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Daily Market Report | Apr. 01, 2021

Stocks Rise, Led by Tech Shares – Wall Street Journal, 4/1/2021

  • U.S. stocks resumed a familiar pattern Thursday, with tech shares rising sharply and outpacing the rest of the market.
  • The Nasdaq Composite rose 1.7%, following a 1.5% gain on Wednesday. The S&P 500 was up 0.8%, after the broad stocks gauge closed out a fourth consecutive quarterly advance on Wednesday, while the Dow Jones Industrial Average was up 0.2%.
  • On the economic front, new claims for jobless benefits edged up to 719,000 last week from 658,000 the previous week, data from the Labor Department showed.
  • The Institute for Supply Management’s March survey of purchasing managers at U.S. factories was better than expected, showing another solid month for new orders, output and employment.
  • The March PMI came in at 64.7, higher than the projected 61.7.
  • That is another welcome sign for the economy. On Wednesday, President Biden unveiled a $2.3 trillion infrastructure plan centered on fixing roads and bridges, expanding broadband internet access and boosting funding for research and development.
  • The yield on 10-year Treasury notes slipped to 1.696% from 1.749% Wednesday.
  • Yields posted their biggest one-quarter rise since 2016 in the first three months of the year, unsettling tech stocks whose valuations had been plumped up by low interest rates.
  • In overseas markets, the Stoxx Europe 600 rose 0.5%, led by tech and real-estate stocks.
  • China’s Shanghai Composite Index and Japan’s Nikkei 225 both rose 0.7%.

Covid-19 Live Updates: New U.S. Cases Continue to Trend Higher – Wall Street Journal, 4/1/2021

  • Newly reported Covid-19 cases in the U.S. rose, as did deaths, as the government launched a new self-testing initiative and Johnson & Johnson reported a problem with a batch of the main ingredient for its vaccine.
  • The U.S. reported more than 66,000 new cases for Wednesday, according to data compiled by Johns Hopkins University and published early Thursday morning Eastern time. That was up from 61,240 a day earlier but down from 86,950 a week earlier.
  • The seven-day moving average, which smooths out irregularities in the data, was 66,876 as of Tuesday, according to a Wall Street Journal analysis of Johns Hopkins data. The 14-day average was 60,262. When the seven-day average is higher than the 14-day average, as it has been for the past week, it indicates cases are rising.
  • Deaths were also up, and appear to be entering an upward trend, with the seven-day average exceeding the 14-day average for two straight days through Tuesday, according to the Journal’s analysis of Johns Hopkins data. There were more than 1,000 deaths reported for Wednesday, up from 875 a day earlier but down from 1,456 a week earlier, Johns Hopkins reported.
  • The number of vaccinated people is also on the rise, with 16.4% of the U.S. population fully vaccinated and 29.4% having received at least one dose. At the current rate, 75% of people would be vaccinated by June 27.

Micron Gives Bullish Sales, Earnings Forecasts; Shares Jump – Bloomberg, 4/1/2021

  • Micron Technology, the largest U.S. maker of memory chips, gave a bullish forecast, buoyed by demand for semiconductors that store data on computers and smartphones.
  • Revenue in the current period will be $7.1 billion, plus or minus $200 million, Micron said.
  • That compares with an average analyst estimate of $6.85 billion, according to data compiled by Bloomberg.
  • Profit, excluding certain items, will be about $1.62 a share, plus or minus 7 cents, the Boise, Idaho-based company added.
  • Wall Street was looking for $1.34 cents a share.
  • Demand for memory chips, which help process and store data, has been boosted by purchases of computers and other devices needed to work and study from home during the pandemic.
  • In the three months ended March 4, Micron posted a revenue of $6.24 billion, up 30% from a year earlier.
  • Net income was $1.1 billion, or 98 cents a share, excluding certain items.

Micron, Western Digital Looking at Possible Deals for Chip Maker Kioxia – Wall Street Journal, 4/1/2021

  • Micron Technology and Western Digital are each exploring a potential deal for Kioxia Holdings that could value the Japanese semiconductor company at around $30 billion, according to people familiar with the matter, as a global scramble for memory chips used in smartphones and other devices heats up.
  • A deal for Kioxia, controlled by private-equity firm Bain Capital, isn’t guaranteed, and it isn’t clear how one might be structured. Should a deal come together, it could be finalized later this spring, some of the people said.
  • Kioxia makes NAND flash-memory chips used in smartphones, computer servers and other devices. It’s become a hot area in part because of increased demand during the coronavirus pandemic for personal computers, with people working remotely and distance learning, as well as gaming and the growing popularity of 5G smartphones.

Microsoft, U.S. Army Strike Nearly $22 Billion Headset Deal – Wall Street Journal, 4/1/2021

  • Microsoft has agreed to build custom augmented-reality headsets for the U.S. Army in a deal worth up to $21.9 billion, expanding the technology company’s role as a major government supplier.
  • The devices will be based on Microsoft’s HoloLens headset that made its debut in 2016, the company said in a blog post Wednesday. More than 120,000 units of the custom gear will be delivered over a 10-year period and supported by Microsoft’s Azure cloud-computing service.
  • The headsets will run on Microsoft software and help keep America’s soldiers safer as well as make them more effective, the company said, in part by enhancing their situational awareness and providing training opportunities.

Global chip supply chain increasingly vulnerable to massive disruption, study finds – Reuters, 4/1/2021

  • A new study from a U.S. industry group found that the global semiconductor supply chain has become increasingly vulnerable to natural disasters and geopolitical disruptions because suppliers have become more concentrated in distinct regions.
  • Modern chipmaking involves more than a thousand steps and requires complex intellectual property, tools and chemicals from around the world. But the Semiconductor Industry Association, representing most U.S. chipmakers, on Thursday said it found more than 50 places in the supply chain where a single region has more than 65% market share.
  • Intellectual property and software to design cutting-edge chips, for example, is dominated by the United States, while special gases key to fabricating chips come from Europe. And the manufacturing of the most advanced chips is completely located in Asia – 92% of it in Taiwan.
  • If Taiwan were unable to make chips for a year, it would cost the global electronics industry almost half a trillion dollars in revenue, the report found: “The global electronics supply chain would come to a halt.”

Ford Says Chip Shortage Forcing Production Halt at Several Plants – Wall Street Journal, 4/1/2021

  • Ford Motor is scheduling more downtime at several U.S. factories, including its two major truck plants, as a global shortage of semiconductors upends vehicle manufacturing for car makers in North America.
  • The company said Wednesday that it would halt production for two weeks in April at its truck plant in Dearborn, Mich., and take a week of downtime on the truck side of its Kansas City, Mo., assembly plant, starting Monday. It also plans to suspend work temporarily and cancel planned overtime at several other factories in North America, attributing the work stoppages to tight chip supplies.
  • On Wednesday, Ford reaffirmed its early guidance and added that it would provide an update on the financial impact of the semiconductor shortage when it reports quarterly results April 28.

Vacation-Home Buyers Propped Up the Mortgage Market. Now They Face a Test. – Wall Street Journal, 4/1/2021

  • The pandemic set in motion a furious scramble to buy vacation homes. Now, curbs on financing those purchases will test that market’s resilience.
  • The number of buyers who locked in mortgage rates for second homes in February was up 93% from a year earlier, far outpacing the 32% climb for primary residences, according to real-estate brokerage Redfin.
  • Buyers attempting to snag second homes and investment properties accounted for 14% of all purchase-mortgage applications in February, a record in data going back more than a decade, according to the Mortgage Bankers Association, a trade group.
  • But Fannie Mae and Freddie Mac are putting up roadblocks. The two mortgage giants, whose government backing is crucial to holding down mortgage rates, earlier this year began to cap how many of these loans it purchases, at the direction of federal officials.
  • The new restrictions say that no more than 7% of the mortgages that lenders sell to Fannie or Freddie can be tied to second homes or investment properties.

U.S. Jobless Claims Remain Near Lowest Levels Since Covid-19’s Onset – Wall Street Journal, 4/1/2021

  • Filings for unemployment benefits rose last week but remained near their lowest levels since the pandemic’s onset, amid signs of a broader U.S. economic recovery.
  • Workers filed 719,000 initial jobless claims, on a seasonally adjusted basis, in the week ended March 27, the Labor Department said Thursday. The increase followed a downward revision to 658,000 initial claims the prior week, the lowest point of the pandemic.
  • The four-week moving average, which smooths out volatility in the numbers, fell to 719,000, its lowest point since the pandemic hit in March 2020.
  • Still, the economy has much ground to regain on its path toward recovery. There were roughly 19 million continuing claims—a proxy for the number of people receiving benefits through regular state, pandemic-related and other programs—in the week ended March 6.

U.S. Manufacturing Surges Most Since 1983, Underscoring Rebound – Bloomberg, 4/1/2021

  • U.S. manufacturing expanded in March at the fastest pace since 1983, catapulted by the firmest orders and production readings in 17 years. The data add to evidence of an economy poised to accelerate.
  • A gauge of factory activity jumped to 64.7 from 60.8 a month earlier, according to Institute for Supply Management data released Thursday.
  • The ISM’s measure of U.S. order backlogs climbed in March to the strongest reading in records back to 1993 and a gauge of supplier delivery times reached an almost 47-year high.
  • At 85.6 in March, the group’s index of prices paid for inputs was little changed from February’s 86 reading that was the highest since July 2008.
  • The ISM’s measure of factory employment improved to a more than three-year high of 59.6 in March from 54.4 a month earlier.
  • Meanwhile, lean business inventories suggest robust output and orders to factories will be sustained in coming months. The ISM’s gauge of customer inventories dropped to the lowest in records back to 1997.

Mortgage Rates in the U.S. Increase for a Seventh Straight Week – Bloomberg, 4/1/2021

  • The average for a 30-year loan was 3.18%, up from 3.17% last week and the highest since June, Freddie Mac data showed Thursday.
  • Rates have increased from the record low of 2.65%, reached in early January. That’s made homes more expensive for buyers, many of whom have to stretch to afford a purchase as they compete for the slim supply of properties on the market.
  • Borrowing costs may continue to rise, along with yields for the benchmark 10-year Treasuries, as the fresh federal stimulus and vaccination efforts boost optimism for an economic rebound.

Biden Infrastructure Plan Aims to Boost Economy’s Productivity Over Time – Wall Street Journal, 4/1/2021

  • The Biden administration’s $1.9 trillion Covid-19 relief package enacted last month aimed to get the economy back on track fast. Now, officials are set on increasing the speed limit for the long term.
  • The roughly $2.3 trillion spending proposal unveiled Wednesday would make investments in infrastructure over the coming decade that officials say would enhance the economy’s productivity, such as through public transportation upgrades that make it easier for commuters to get to their jobs, or rural broadband expansion that improves workplace technology.
  • His proposal includes $621 billion to modernize transportation infrastructure, $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.
  • If the package’s higher spending was spread evenly across the eight years, it would amount to roughly $250 billion a year, or about 1% of annual GDP, according to a senior administration official.
  • The tax provisions would raise about $125 billion, or 0.5% of GDP, a year, in corporate revenue over 15 years, the official said.

Rita Hart Drops Challenge to Narrow Loss in Iowa Congressional Race – Wall Street Journal, 4/1/2021

  • Democratic House candidate Rita Hart said she was dropping the challenge to her narrow election loss in Iowa, after her effort drew increasing concern among Democrats on Capitol Hill.
  • GOP Rep. Mariannette Miller-Meeks took office in January after the Iowa State Board of Canvassers certified her victory over Ms. Hart. She won by just six votes out of the nearly 400,000 total votes cast, following a recount of the entire district.
  • The House Administration Committee opted on party lines earlier in March to review the contest. It isn’t unusual for candidates to appeal to the House to review a race’s results under the Federal Contested Elections Act, but such efforts rarely succeed.
  • If the process had continued, it could have resulted in a vote by the full House on the matter.
  • Some Democrats were both privately and publicly expressing concern over having to vote on the result of the state-certified election in Iowa, after having objected to earlier efforts by GOP lawmakers to overturn President Donald Trump’s election defeat.

EUROPE & WORLD

Toyota Quarterly U.S. Sales Jump 22% as Car Buyers Storm Back – Bloomberg, 4/1/2021

  • Toyota Motor’s first-quarter sales surged 22% from a year earlier in North America, signaling a healthy recovery from when Covid-19 shutdowns kept car buyers at home.
  • Sales rose to 603,066 vehicles in the quarter, the Japanese automaker said by email Thursday. March sales jumped a gaudy 87% to almost 254,000, Toyota said in separate release, but that compares with a month when consumers had all but abandoned showrooms.
  • The carmaker sold its most profitable vehicles in strong numbers. Deliveries of Toyota and Lexus trucks and sport utility vehicles surged more than 30% in the quarter, while those for passenger cars rose just 6.4% against weak figures last year.

Nio Q1, March Deliveries At Record, As EV Maker Stands Up To Industry-Wide Challenges – Yahoo Finance, 4/1/2021

  • Nio delivered 7,257 cars for the month of March, the Chinese EV start-up said in a statement released Thursday. This represented a record monthly total and a 373% increase year-over-year.
  • The quarterly number was at a record 20,060 vehicles, up 423% from the first quarter of 2020.
  • The company said last week chip shortage is forcing it to shut down its Hefei plant for five days, beginning March 29.

TSMC to Invest $100 Billion to Increase Semiconductor Output – Wall Street Journal, 4/1/2021

  • Taiwan Semiconductor Manufacturing Co, a major chip supplier to Apple, said it would invest $100 billion over the next three years to increase production capacity as demand surges.
  • In January, TSMC said it would spend $25 billion to $28 billion on developing advanced chips and building plant capacity in 2021.
  • Other chip makers are also pouring money into increasing capacity. Intel recently said it would spend $20 billion on two new chip factories in the U.S., starting in 2024.
  • Samsung plans to invest about $116 billion by 2030 to further diversify its semiconductor production.

China Approves Merger of Chemical Giants, Creating $150 Billion Company – Wall Street Journal, 4/1/2021

  • China approved a merger between the country’s top two chemical companies, paving the way for another supersize state-run enterprise that Beijing hopes will become a dominant global player.
  • Sinochem Group Co. and China National Chemical, also known as ChemChina, will be placed under a new holding company funded and overseen by a government body that holds state enterprises, according to a Sinochem statement Wednesday, confirming a Wall Street Journal article in December.
  • The combination, which has been in the cards for years, would minimize competition between the two companies and create the world’s largest chemicals conglomerate with around 1 trillion yuan in annual revenue, equivalent to about $153 billion.
  • The new holding-company structure was designed to avoid triggering a U.S. national-security review of ChemChina’s ownership of Swiss agro-giant Syngenta AG, the Journal reported.

Stellantis plans to triple electric vehicle sales in 2021: Elkann – Reuters, 4/1/2021

  • Stellantis is looking at nearly tripling its global sales of electric vehicles this year, the head of holding company Exor, the carmaker’s main shareholder, said on Thursday.
  • The world’s fourth largest carmaker targets global sales of 400,000 high voltage vehicles this year from 139,000 in 2020 thanks to the launch of 11 additional models, John Elkann, who also serves as Stellantis chairman, said in a letter to Exor shareholders.
  • It plans to have fully-electric or hybrid versions of all of its vehicles available in Europe by 2025, broadly in line with plans of rivals such as Volkswagen and Renault-Nissan.

Godfather of Hong Kong Democracy Movement Convicted for Big 2019 Protest – Wall Street Journal, 4/1/2021

  • Martin Lee, the 82-year-old lawyer credited with helping found Hong Kong’s democracy movement, and newspaper publisher Jimmy Lai were among seven veteran activists found guilty by a judge on charges related to a mass demonstration in 2019.
  • The Thursday guilty verdicts raise the prospect of jail time for a prominent group of democracy campaigners who have been fighting to preserve the rule of law in the former British colony since before it was returned to China in the late 1990s.
  • The trial is part of a wave of prosecutions under way in Hong Kong as China crushes dissent in the former British colony.
  • Amid a continuing crackdown that worsened last year when China imposed a sweeping national security law, many of the city’s democracy campaigners are now either on trial, in jail or living in exile.

Factmonster – TODAY in HISTORY

  • American forces landed on Okinawa during World War II. (1945)
  • Steve Wozniak and Steve Jobs founded Apple Computer. (1976)
  • Ayatollah Khomeini proclaimed Iran to be an Islamic Republic. (1979)

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