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Daily Market Report | Apr. 08, 2021

S&P 500 Keeps Climbing – Wall Street Journal, 4/8/2021

  • The S&P 500 rose Thursday, poised for another record-setting trading session, as investors awaited comments from Federal Reserve Chairman Jerome Powell.
  • The broad market index climbed 0.3% after closing at its 18th record this year on Wednesday.
  • The Nasdaq Composite rose 0.9%, driven by gains in technology stocks.
  • The Dow Jones Industrial Average, however, lost roughly 0.2%.
  • The largest tech companies have surged ahead as the bond market calmed, easing concerns about the high valuations of growth stocks. Fed policy makers’ comments, released Wednesday, highlighted their intention to continue with easy monetary policies until the economy has recovered more.
  • At 12 p.m. ET, Mr. Powell will be speaking about the global economy at the IMF’s virtual spring meetings.
  • The latest data on jobless claims showed that layoffs rose for a second week, highlighting the unevenness of the economic recovery.
  • Worker filings for initial unemployment benefits rose to 744,000 last week, from a revised total of 728,000 the prior week.
  • In bond markets, the yield on the 10-year U.S. Treasury note declined 1.643%, down from 1.653% on Wednesday.
  • It had climbed as high as 1.749% at the end of last month. Yields rise when bond prices fall.
  • Overseas, the pan-continental Stoxx Europe 600 ticked up roughly 0.5%.
  • In Asia, most major benchmarks climbed. The Shanghai Composite Index added less than 0.1%, and Hong Kong’s Hang Seng Index rose 1.2%.

Covid-19 Live Updates: Newly Reported U.S. Cases Rise as U.K. Variant Takes Hold – Wall Street Journal, 4/8/2021

  • Newly reported coronavirus cases in the U.S. rose, as a more contagious form of the virus takes hold across the country.
  • The U.S. reported more than 74,000 new coronavirus cases for Wednesday, according to data compiled by Johns Hopkins University that was published early Thursday. The data may update later.
  • Wednesday’s total was up from Tuesday’s tally of 61,958, and while lower than peak levels reached in January, the figure remains elevated compared with daily caseloads for much of last month.
  • The nation reported more than 2,500 fatalities for Wednesday, which included a backlog of data on deaths from Oklahoma. Overall, the U.S. death toll surpassed 559,000, according to Johns Hopkins data.
  • Vaccination programs, meanwhile, continued to make progress, with nearly a third of the population having received at least one shot and an average of three million doses administered each day over the past week, according to a Wall Street Journal analysis of Centers for Disease Control and Prevention data.
  • Covid-19 cases appear to be plateauing in Germany this week, though a continued increase in intensive-care unit hospitalizations suggests the lull could be due to lower testing around the Easter holiday.
  • The country registered 20,407 new confirmed cases on Wednesday, according to the Robert Koch Institute for infectious diseases, down from 24,300 a week ago.
  • Given the country’s slow progress in vaccinations, which are currently reserved for the elderly and the chronically ill, federal and state authorities are planning to meet next week to discuss the details of a strict, nationwide three-week lockdown.

U.K. Limits AstraZeneca Covid-19 Vaccine to Over-30s Amid Blood-Clot Concerns – Wall Street Journal, 4/8/2021

  • The U.K.’s vaccines advisory body said the Covid-19 vaccine produced by AstraZeneca should preferably not be given to people under 30 following concerns that it causes potentially deadly blood clots in very rare instances.
  • The decision Wednesday to restrict the vaccine for younger people is a setback for the U.K.’s flagship inoculation drive and leaves the country increasingly dependent on Covid-19 shots developed and produced in other countries.
  • British Prime Minister Boris Johnson said that he didn’t see “any reason at this stage” to alter the country’s plan to gradually reopen the economy over summer. He added he was confident about the country’s vaccine supply.

At-home cooking boom powers Conagra’s sales surge – Reuters, 4/8/2021

  • Conagra Brands beat quarterly sales estimates on Thursday as it benefited from shoppers buying more higher-priced items, fewer promotional activities and a rate hike in its foodservice business.
  • Net sales rose 8.5% to $2.77 billion in the third quarter ended Feb. 28, beating analysts’ expectations of $2.72 billion, thanks to a 10.8% rise in sales of grocery and snacks and an 11.7% rise in revenue from frozen foods.
  • On an adjusted basis, Conagra earned 59 cents per share, a cent more than expectations.
  • But it forecast organic sales to fall between 10% and 12% in the current quarter, saying it does expect the same frenzied shopping trends it saw a year earlier.
  • It expects to earn between 49 cents and 55 cents per share on an adjusted basis for the fourth quarter, largely above analysts’ expectations of 51 cents, according to Refinitiv IBES data.

Valero warns of bigger first-quarter loss on costs from Texas deep freeze – Reuters, 4/8/2021

  • U.S. refiner Valero Energy on Thursday warned that its first-quarter loss would exceed the previous three months, joining the ranks of energy firms hit hard by the severe winter storm in Texas in February.
  • Valero said it expects net loss attributable to its stockholders in the range of $1.81 to $2.05 per share for the first quarter, compared with an 88 cents loss in the fourth quarter.
  • The company estimated the impact of excess electricity and natural gas costs, incurred mainly by its refining and ethanol business segments, to be between $1.14 and $1.18 per share.
  • U.S. Gulf Coast refining segment’s operating income would be hit by about $480 million due to the additional costs, while the U.S. Mid-Continent region’s income could be impacted by as much as $45 million.
  • Last week, Exxon Mobil said the cold snap would cut its first-quarter profit by up to $800 million, while Phillips 66 forecast a bigger-than-expected adjusted loss for the quarter, citing impact to its U.S. Gulf Coast petrochemical operations.

Amazon’s Union Vote Count Set to Begin in Alabama – Wall Street Journal, 4/8/2021

  • Federal labor officials are expected to begin counting the votes Thursday or Friday in a closely watched union election by Amazon.com workers in Bessemer, Ala., who are seeking to become the first company employees in the U.S. to gain union representation.
  • The number of ballots cast totaled 3,215, according to the Retail, Wholesale and Department Store Union, which would represent the Bessemer workers if they vote to unionize. About 6,000 people work at the Amazon facility in Bessemer.
  • The union said there were hundreds of ballots challenged over voter eligibility during the processing of ballots. The labor board hasn’t yet provided a tally of votes.

GM extends North America production cuts due to chip shortage – Reuters, 4/8/2021

  • General Motors is extending production cuts at some of its North America factories due to a chip shortage that has roiled the global automotive industry, the U.S. carmaker said on Thursday.
  • The move’s impact has been baked into GM’s prior forecast that the shortage could shave up to $2 billion off this year’s profit.
  • GM’s Lansing Grand River assembly in Michigan will extend its downtime through the week of April 26.
  • GM’s Spring Hill assembly in Tennessee will take downtime, starting the week of April 12 for two weeks.
  • The company said it has not taken downtime or reduced shifts at any of its more profitable full-size truck or full-size SUV plants due to the shortage.

MacBook, iPad production delayed as supply crunch hits Apple – Nikkei – Reuters, 4/8/2021

  • Production of some of Apple’s MacBooks and iPads has been postponed due to a global component shortage, the Nikkei reported on Thursday.
  • Chip shortages have caused delays in a key step in MacBook production, the report said, adding that some iPad assembly was postponed because of a shortage of displays and display components.
  • According to the report, Apple’s production plans for iPhones have not been affected by the supply shortage, however, the supply of some components for the devices is “quite tight”.
  • The shortage of components remains a supply chain issue for Apple, but has not yet impacted any product availability for consumers, Nikkei added.
  • Apple’s major supplier Foxconn has also warned of the chip shortage affecting supply chains to clients, with businesses and consumers across the globe facing the brunt of an unprecedented shortage in semiconductor microchips.

Global IT Spending Expected to Rise 8.4% to $4.1 Trillion This Year – Wall Street Journal, 4/8/2021

  • Chief information officers and other corporate technology leaders are moving on from stopgap information technology measures deployed during the coronavirus pandemic and eyeing more ambitious projects, according to the latest IT spending forecast by research and consulting firm Gartner.
  • Companies world-wide are expected to spend $4.1 trillion on IT this year, up 8.4% from 2020 and regaining the pace of corporate IT growth before Covid-19 brought much of the global economy to a standstill, Gartner said.
  • Ramped up spending of more than 10% from last year on both enterprise software and devices is expected to lead the gains, Gartner said.
  • Gartner now estimates IT spending came in last year at roughly $3.8 trillion.

Risky Borrowers Are Falling Behind on Car Payments – Wall Street Journal, 4/8/2021

  • A greater share of people with low credit scores has been falling behind on their car payments in recent months, a sign of stress among consumers whose finances have been hit hard by the pandemic.
  • Some 10.9% of subprime borrowers with outstanding auto loans or leases were more than 60 days past due in February, up from 10.7% in January and 8.7% a year prior, according to credit-reporting firm TransUnion.
  • It marked the sixth consecutive month-over-month increase and the highest level in monthly data going back to January 2019.
  • More than 9% of subprime auto borrowers were more than 60 days past due in the fourth quarter, the highest quarterly figure in data going back to 2005.

U.S. weekly jobless claims unexpectedly rise, but labor market improving – Reuters, 4/8/2021

  • The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but the increase likely understated the rapidly improving labor market conditions as more parts of the economy reopen and fiscal stimulus kicks in.
  • Initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 744,000 for the week ended April 3 compared to 728,000 in the prior week.
  • Data for the prior week was revised to show 9,000 more applications received than previously reported.
  • Including the PUA program, 892,539 people filed claims last week, remaining below one million for a third straight week.
  • About 5.634 million people were on extended benefits during the week ended March 20, up 117,108 from the prior week.
  • Another 786,962 were on a state program for those who have exhausted their initial six months of aid, down 230,780 from the week before. There were 18.2 million receiving benefits under all programs during the week ended March 20.

Fed Minutes Show Expectations for Stronger Economic Recovery – Wall Street Journal, 4/8/2021

  • Federal Reserve officials pointed to a brighter outlook for the economy at their most recent meeting while agreeing to provide continued support through ultralow interest rates and large monthly bond purchases.
  • Still, most of the 18 officials at the meeting expected rates to remain pinned near zero through 2023 and expressed no readiness to reduce the bond purchases last month, according to minutes of the meeting, released Wednesday.
  • While some Fed officials said the scenario could drive employment and spending up faster than anticipated, most didn’t see an outsize risk of inflation becoming a problem, the minutes showed.
  • The central bankers want to see more improvement before they dial back the easy-money policies implemented early last year to counter the pandemic’s economic fallout.

Inflation Has Gone K-Shaped in the Pandemic Like Everything Else – Bloomberg, 4/8/2021

  • Low-income Americans bore the brunt of job losses when the pandemic arrived. Now they’re getting hit hardest by price increases as the economy recovers.
  • The headline consumer inflation rate in the U.S. remains subdued, at 1.7% — but it masks large differences in what people actually buy.
  • Some of the biggest price hikes of recent months, for example, have come in gasoline. A gallon of regular is up 75 cents since late last year –- adding more than $60 a month to the budget of someone who fills up with 20 gallons a week.
  • Food-price inflation is running at more than double the headline rate, and staples like household cleaning products have also climbed.
  • An analysis by Bloomberg Economics, which reweighted consumer-price baskets based on the spending habits of different income groups, found that the richest Americans are experiencing the lowest level of inflation.
  • The richest 10% of households captured 70% of wealth created in 2020, according to the Federal Reserve, while the bottom half got just 4%.
  • A January study by Opportunity Insights, a Harvard research project, found that the recession was essentially over for those making at least $60,000 a year, while employment among the lowest-paid –- who earn less than half that amount –- was still almost 30% below pre-pandemic levels.

Biden Softens Tax Plan Aimed at Profitable Companies That Pay Little – Wall Street Journal, 4/8/2021

  • A 15% minimum tax on large, profitable corporations that is part of President Biden’s infrastructure proposal would affect far fewer companies than the version he campaigned on, according to details the Treasury Department released Wednesday.
  • The tax—aimed at companies that report large profits to investors but low tax payments—would apply only to companies with income exceeding $2 billion, up from the $100 million threshold that Mr. Biden pushed during the campaign.
  • The Biden plan would now also let companies subject to the tax get the benefit of tax credits for research, renewable energy and low-income housing, a recognition that the campaign-trail version could have undercut the president’s preference to encourage companies to invest in those areas.
  • The result is that just 180 companies would even meet the income threshold and just 45 would pay the tax, according to administration estimates that assume the rest of the administration’s plan gets implemented.

Sen. Joe Manchin Rules Out Support for Weakened Senate Filibuster – Wall Street Journal, 4/8/2021

  • Sen. Joe Manchin, a pivotal centrist, further closed the door on the prospect that he could support any move to end the filibuster in the Senate, a rule change that would allow his party to pass legislation with a simple majority rather than the 60 votes needed for most bills.
  • “I have said it before and will say it again to remove any shred of doubt: There is no circumstance in which I will vote to eliminate or weaken the filibuster,” he said in an opinion article posted on the Washington Post website Wednesday evening.
  • Some senators have floated potential changes that stop short of eliminating the filibuster altogether such as bringing back the “talking filibuster,” in which senators must be present and talking on the floor to block bills.
  • That idea has been floated by both President Biden and Mr. Manchin.
  • The West Virginia senator didn’t address the talking-filibuster idea in his opinion article.

Biden to Unveil Gun Restrictions Including ‘Ghost Guns’ Measures – Wall Street Journal, 4/8/2021

  • President Biden plans to unveil new gun restrictions, including on untraceable weapons known as ghost guns that can be made from parts purchased online, and will nominate a top gun-control advocate to head the Bureau of Alcohol, Tobacco, Firearms and Explosives, officials said.
  • Facing pressure from Democrats and gun-control groups to act during a spate of mass shootings, Mr. Biden will issue executive orders and directives to federal agencies Thursday, administration officials said.
  • The president is expected to call for tighter controls on the kind of arm brace used by the shooter who killed 10 people last month in Boulder, Colo. A brace makes a firearm more stable and accurate.
  • The White House will also direct the Justice Department to issue a proposed rule within 30 days aimed at stopping the proliferation of ghost guns, an official said. Additional details weren’t provided Wednesday.

EUROPE & WORLD

G-20 to Seek Agreement on Global Minimum Tax Rate by Mid-2021 – Wall Street Journal, 4/8/2021

  • Finance ministers from the Group of 20 leading economies Wednesday said they hope to agree on a minimum tax rate for company profits by the middle of this year as part of a wider overhaul of the way international businesses are taxed.
  • The finance ministers met virtually two days after Treasury Secretary Janet Yellen argued for a global minimum corporate tax rate, seeking international cooperation that is crucial to funding the Biden administration’s $2.3 trillion infrastructure proposal.
  • Italian Finance Minister Daniele Franco said after the meeting that Ms. Yellen had stressed the need for a minimum rate and that her proposal was consistent with the G-20’s ambitions.
  • “What we see this year is an acceleration in the process, and the G-20 is expecting to reach an agreement in July,” Mr. Franco said.

Tencent’s Biggest Investor Cashes In on Pandemic Rally – Wall Street Journal, 4/8/2021

  • Tencent’s largest shareholder raised $14.6 billion by selling stock in the Chinese internet and videogaming giant, cashing in on one of the most lucrative technology bets in history after the pandemic gave a huge boost to the sector.
  • Internet conglomerate Prosus said Wednesday it had cut its stake in Tencent to 28.9% from 30.9% to increase its financial flexibility to invest in growth ventures. It is also the latest attempt to narrow a persistent gap between the company’s market value and that of its stake in Tencent.
  • In 2001, Prosus parent Naspers, Africa’s largest-listed company, paid $34 million for a one-third stake in Tencent before it went public.

Hong Kong-listed Tencent, the world’s largest videogame company by revenue and operator of the popular WeChat do-everything app, is now China’s most valuable publicly listed company with a market capitalization equivalent to $775.9 billion.

Factmonster – TODAY in HISTORY

  • The 17th Amendment was ratified, requiring the direct election of U.S. senators by popular vote rather than by the state legislators. (1913)
  • The Works Progress Administration (WPA) was approved by Congress to help alleviate joblessness during the Great Depression. (1935)
  • The League of Nations assembled for the last time. (1946)

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