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Daily Market Report | Apr. 07, 2021

Stocks Wobble Ahead of Fed Minutes – Wall Street Journal, 4/7/2021

  • U.S. stocks wobbled Wednesday as investors awaited notes from the Federal Reserve’s last policy meeting for clues on how officials view inflation and the pace of economic recovery.
  • Signs that the economy is rebounding from its coronavirus-driven slump have buoyed investors and helped propel the major indexes to unprecedented levels this week.
  • The rapidly progressing vaccination rollout, combined with both monetary and fiscal support, is aiding in the recovery of the labor market and the manufacturing sector.
  • Money managers are betting that more of the economy will return to a normal footing soon and give a boost to travel and leisure companies.
  • Some investors remain nervous that the easing of restrictions, coupled with pent-up consumer demand, could drive up inflation and prompt the Fed to raise interest rates sooner than expected.
  • Investors are awaiting minutes from the central bank’s March meeting, set to be released at 2 p.m. ET. Policy makers at that time raised their forecasts for growth and inflation and reiterated that loose monetary policies would remain in place for some time.
  • Bond yields have stabilized in recent days, after climbing sharply from the start of the year.
  • The yield on the benchmark 10-year Treasury note ticked up to 1.659%, from 1.656% on Tuesday.
  • Overseas, the pan-continental Stoxx Europe 600 gauge ticked down 0.2%.
  • In Asia, most major stock indexes were mixed. Japan’s Nikkei 225 ticked 0.1% higher, while Hong Kong’s Hang Seng fell 0.9%.
  • In mainland China, the Shanghai Composite Index edged down 0.1%.

Covid-19 Live Updates: New U.S. Cases Fall as Vaccine Rollout Ramps Up – Wall Street Journal, 4/7/2021

  • Newly reported coronavirus cases in the U.S. declined, as President Biden moved up the timeline for broadening vaccination eligibility.
  • The U.S. reported more than 61,000 new cases for Tuesday, according to data compiled by Johns Hopkins University that was published early Wednesday. The data may update later.
  • Tuesday’s figure was lower than Monday’s revised tally of 77,794, when several states resumed reporting data after the Easter weekend.
  • The country reported 896 Covid-19 fatalities for Tuesday, bringing the total death toll to more than 556,500, according to Johns Hopkins data.
  • California plans to fully reopen its economy on June 15 assuming there is enough supply of vaccine for everyone ages 16 and older and Covid-19 hospitalizations remain low.
  • At a press conference Tuesday, Gov. Gavin Newsom said getting the vaccine out quickly was the key to reopening.

EU drug regulator finds link between AstraZeneca vaccine and blood clots – Reuters, 4/7/2021

  • Europe’s drug regulator on Wednesday found a possible link between AstraZeneca’s COVID-19 vaccine and rare blood clotting issues in adults who had received the shot and said it had taken into consideration all available evidence.
  • “One plausible explanation for the combination of blood clots and low blood platelets is an immune response, leading to a condition similar to one seen sometimes in patients treated with heparin,” the European Medicines Agency (EMA) said.
  • The findings come as a major hurdle in the global fight against the pandemic and a shift in the stance of the regulator, which had last week backed the vaccine and said there was no increased risk of blood clots in general from the shot.
  • The EMA’s safety committee, which was assessing the vaccine, has requested for more studies and changes to the current ones to get more information.

Carnival Sees Cruise Bookings Surging Even With Fleet Sidelined – Bloomberg, 4/7/2021

  • Carnival’s bookings are accelerating, reflecting pent-up demand for cruising even as the industry remains essentially on hold.
  • In a quarterly update Wednesday, the company said booking volumes in the first quarter of 2021 were about 90% higher than in the fourth quarter of 2020.
  • Cumulative advanced bookings for next year are ahead of 2019 levels.
  • The Miami-based company also reported an adjusted net loss of $1.95 billion for the first quarter, wider than analysts’ expectation of $1.74 billion.

JPMorgan CEO Jamie Dimon Sees ‘Goldilocks Moment’ for U.S. Economy – Wall Street Journal, 4/7/2021

  • The leader of America’s biggest bank said the U.S. economy is emerging from the coronavirus pandemic into a boom that could last until 2023.
  • In his annual letter to shareholders Wednesday, JPMorgan Chase & Co. Chief Executive Jamie Dimon said strong consumer savings, expanded vaccine distribution and the Biden administration’s proposed $2.3 trillion infrastructure plan could lead to an economic “Goldilocks moment”—fast, sustained growth alongside inflation and interest rates that drift slowly upward.
  • “It’s a lot of money, and it’s bound to cause a booming economy,” he said in an interview with The Wall Street Journal. “Shame on us if we don’t use that growth to help those who need it most.”
  • Mr. Dimon’s outlook is decidedly rosier than it was a year ago, when he warned shareholders to brace for a “bad recession” in which U.S. gross domestic product could fall by up to 35%.
  • He wrote last year’s letter just weeks after he was rushed into emergency surgery to repair a life-threatening heart injury, and the U.S. went dark to stop coronavirus from spreading.

International passenger traffic down 89% in February, no sign of recovery: IATA – Reuters, 4/7/2021

  • Global airline industry body IATA said international passenger traffic plunged 89% in February compared to the same month last year as COVID-19 infections climbed once more, and there was no sign of an aviation recovery yet.
  • “International passenger traffic was down almost 89% and is showing no signs of recovery in the current environment,” IATA’s new director general Willie Walsh said at a presentation on Wednesday.
  • Walsh, formerly the chief executive of British Airways-parent group IAG, was holding his first media briefing since taking on the IATA director general job at the beginning of April.

GM to Make Electric Version of Chevy Silverado Pickup – Wall Street Journal, 4/7/2021

  • General Motors plans to roll out an electric version of its Chevy Silverado pickup truck, the latest in its efforts to convert its global lineup to electric vehicles.
  • The nation’s largest auto maker by sales has set a target date of 2035 for phasing out gasoline- and diesel-powered vehicles from its showrooms globally.
  • GM plans to deliver more than one million electric vehicles across the world by 2025, the company has said.
  • GM estimates the Chevy electric vehicle would have a range of more than 400 miles on a single charge, roughly matching the range a Silverado would travel on a single tank of gasoline.

Investors Big And Small Are Driving Stock Gains With Borrowed Money – Wall Street Journal, 4/7/2021

  • As of late February, investors had borrowed a record $814 billion against their portfolios, according to data from the Financial Industry Regulatory Authority, Wall Street’s self-regulatory arm.
  • That was up 49% from one year earlier, the fastest annual increase since 2007, during the frothy period before the 2008 financial crisis. Before that, the last time investor borrowings had grown so rapidly was during the dot-com bubble in 1999.
  • FINRA’s data doesn’t break down the proportion of the margin debt held by small investors versus big ones.
  • But the largest players often use other tools to amplify their bets, like derivatives.

Jeff Bezos Backs Corporate Tax-Rate Increase and Infrastructure Plan – Wall Street Journal, 4/7/2021

  • Amazon.com Chief Executive Jeff Bezos said he supports a rise in the corporate tax rate and supports President Biden’s focus on major U.S. infrastructure spending.
  • “We recognize this investment will require concessions from all sides—both on the specifics of what’s included as well as how it gets paid for,” Mr. Bezos wrote. He said Amazon was “supportive of a rise in the corporate tax rate” and said the company looked forward to seeing the U.S. government’s progress on the plan.
  • Amazon has taken advantage of policies allowing companies to reduce their tax liability through research spending or investment in renewable energy.
  • The company reported $1.8 billion in U.S. tax liability for 2020 after years of paying far less or even reporting a negative tax liability.
  • Amazon had an effective income-tax rate of 9.4% for 2020, less than half the statutory corporate tax rate of 21%, according to the progressive think tank Institute on Taxation and Economic Policy.

Crowded Ports, Weather Dented U.S. Exports in February – Wall Street Journal, 4/7/2021

  • U.S. companies sent fewer goods overseas in February amid supply-chain disruptions and winter-weather disruptions.
  • The 2.6% seasonally adjusted decline put U.S. exports at $187.3 billion for the month, marking the first decline since May.
  • That caused the trade deficit to widen 4.8% to $71.1 billion, the largest on record, the Commerce Department said Wednesday.
  • Imports also declined, dropping 0.7% to $258.3 billion.
  • U.S. purchases of foods and vehicles decreased as consumers pulled back on overall spending during the month.

Biden’s Infrastructure Plan Faces New Hurdle in Senate Rules – Wall Street Journal, 4/7/2021

  • Some Democratic policy goals in President Biden’s wide-ranging $2.3 trillion infrastructure plan could soon face a familiar obstacle: arcane Senate rules that limit what type of legislation lawmakers can approve along party lines.
  • Those rules could mean that several provisions in the plan, including labor rules and a clean electricity standard, may have to be removed from or amended in the final legislation, according to lawmakers and aides.
  • Rep. Peter DeFazio (D., Ore.), the chairman of the House Transportation and Infrastructure Committee, said he expected several favored measures to be disallowed under the Senate rules.
  • In particular, a push to bring back earmarks—which allow lawmakers to designate specific projects for funding—may be ruled out of bounds, he said.

Pandemic Migration Made Rent Less Affordable Across the U.S. – Bloomberg, 4/7/2021

  • As people relocated during the pandemic, median rents plunged in pricey, more-affluent U.S. counties and soared in cheaper ones where residents tend to earn less, according to a new report by Zumper, one of the country’s largest online apartment rental services. The broader implication is that affordability likely declined nationwide.
  • The data are yet another example of how inequality deepened last year. While people who fled expensive counties might have found the rents in their new locations more affordable than what they previously paid, the surge in demand has made things more expensive for people who lived in those communities before.
  • Meanwhile, the bargains available in expensive counties have disproportionately gone to renters who can afford higher-end apartments, according to Neil Gerstein, an analyst at Zumper and the author of the study.

Central Banks Retreat From U.S. Dollar – Wall Street Journal, 4/7/2021

  • The dollar’s share of global reserves has decreased to its lowest level since 1995, according to International Monetary Fund figures on central banks’ foreign-exchange holdings released last week.
  • The currency now stands at 59% of global reserves as of December 2020—a 1.5 percentage point decline over the quarter.
  • The WSJ Dollar Index slipped 0.25% Tuesday, its fourth decline in five sessions. It has fallen around 8% from a year ago, after the pandemic fueled a rush into ultrasafe assets and the dollar surged against the euro and British pound.
  • The dollar’s depreciation has driven its slip as a share of reserves, along with an increase in central-bank holdings of currencies including the euro and Japanese yen.

EUROPE & WORLD

Samsung Electronics Expects Operating Profit Rose 44% in First Quarter – Wall Street Journal, 4/7/2021

  • Samsung Electronics said it expects a 44% increase in operating profit for the first quarter, topping expectations during a global shortage of semiconductors and despite shutdowns of some U.S. chip-making facilities.
  • The Suwon, South Korea-based firm estimates revenue of 65 trillion won, up 17% compared with the prior year.
  • The world’s largest smartphone and memory-chip maker forecasts operating profit of 9.3 trillion South Korean won, equivalent to about $8.3 billion, during the first three months of the year. That compares with about 6.5 trillion won for the prior year’s quarter.
  • During the Covid-19 pandemic, Samsung and other semiconductor companies have benefited from a short-term boom in demand for memory chips from data centers stepping up capacity and consumers buying more devices to shift to working from home.

China’s Cosco Shipping Expects Profit Surge as Industry Flourishes – Wall Street Journal, 4/7/2021

  • A bullish profit forecast from China’s largest container-shipping company sent its stock soaring and offered fresh evidence of how the industry is thriving thanks to robust global trade flows.
  • Late Tuesday, Cosco Shipping Holdings said it expected this year’s first-quarter net profit to total 15.41 billion yuan, or the equivalent of $2.3 billion. That compares with $44 million for the first three months of 2020.
  • Shipping rates rose nearly 54% compared with the fourth quarter, Cosco Shipping said, citing the widely tracked China Containerized Freight Index. The company controls the world’s third-largest container carrier by capacity.
  • The company’s Hong Kong shares jumped 29% on Wednesday to their highest since August 2008. Its Shanghai-traded stock rose by the daily trading limit of 10%.

Toshiba Gets Deal Proposal That Could Be Worth More Than $20 Billion – Wall Street Journal, 4/7/2021

  • Japan’s Toshiba said Wednesday that it received a proposal for acquisition from private-equity firm CVC Capital Partners, in a deal that could be valued at more than $20 billion if completed.
  • Toshiba said it would seek further details about the offer and consider the proposal carefully.
  • Toshiba’s shares rose 18% in Tokyo trading Wednesday to close at ¥4,530, equivalent to $41.26, the highest level since December 2016. That gives the company a market capitalization of nearly $19 billion.
  • The Nikkei newspaper said CVC was offering a 30% premium, suggesting the proposal would value Toshiba at slightly more than $20 billion.
  • The deal would be one of the largest leveraged buyouts in history, according to Dealogic, and possibly the largest in Asia, rivaling the 2018 deal led by Bain Capital to acquire Toshiba’s flash-memory unit.

Millions Are Tumbling Out of the Global Middle Class in Historic Setback – Bloomberg, 4/7/2021

  • For the first time since the 1990s, the global middle class shrank last year, according to a recent Pew Research Center estimate.
  • About 150 million people—a number equal to the populations of the U.K. and Germany combined—tumbled down the socioeconomic ladder in 2020, with South Asia and sub-Saharan Africa seeing the biggest declines.
  • In its latest World Economic Outlook, released in full on April 6, the International Monetary Fund predicts the global economy in 2024 will be 3% smaller than it would have been without the pandemic, largely because developing world governments have less room to spend their way to recovery, as the U.S. and Europe are doing.
  • The divergences are stark. India will end 2021 with a gross domestic product that’s 5.2% smaller than it would have been otherwise, according to forecasts by Bloomberg Economics. Indonesia’s output will be 9.2% smaller than its pre-crisis trend foretold. The U.S.? Just 1.6% smaller.

U.K. Launches New Competition Watchdog Targeting Big Tech – Wall Street Journal, 4/7/2021

  • The U.K. launched a new regulatory body aimed at policing allegations of anticompetitive behavior among the world’s largest technology companies, adding another agency to a growing list of watchdogs scrutinizing how tech giants use their market heft.
  • Britain’s new Digital Markets Unit will be tasked with making sure tech giants like Facebook and Alphabet’s Google don’t exploit any market dominance to crowd out competition, officials here said.
  • The new unit was unveiled last year but launched officially—with limited powers at first—late Tuesday.
  • It won’t be able to levy fines until Parliament approves legislation governing its oversight power, a legal framework that is expected to be in place by next year.

Factmonster – TODAY in HISTORY

  • S. secretary of commerce Herbert Hoover’s Washington speech was seen and heard in New York in the first long-distance television transmission. (1927)
  • The World Health Organization, a UN agency, was founded. (1948)
  • Hutu extremists in Rwanda began massacring ethnic Tutsis and politically moderate Hutus. In 100 days of killing, an estimated 800,000 are murdered. (1994)
  • Vermont becomes the fourth U.S. state to legalize same-sex marriage, just days after Iowa becomes the third. (2009)

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