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Daily Market Report | Apr. 15, 2021

Stocks Rise After Strong Earnings, Economic Data – Wall Street Journal, 4/15/2021

  • U.S. stocks rose Thursday as blue-chip companies reported strong earnings and fresh economic data showed a sharp improvement in consumer spending and the labor market.
  • The S&P 500 gained 0.7%, while the Dow Jones Industrial Average added 0.7%, or about 230 points, putting both indexes on pace for record closes. The technology-heavy Nasdaq Composite advanced 1.1%.
  • Investors will be watching earnings reports in the coming weeks as they assess whether stocks can grind higher after a powerful rally.
  • Analysts expect that S&P 500 earnings jumped 29% in the first quarter from the same period a year earlier, according to FactSet.
  • Money managers also parsed new data as they look for signs of improvement in the economy. U.S. retail sales—a measure of purchases at stores, at restaurants and online—jumped 9.8% last month.
  • Household incomes have benefited from recent fiscal stimulus measures that saw $1,400 checks hit some Americans’ bank accounts.
  • Fresh data also showed that 576,000 Americans applied for first-time unemployment benefits in the week ended April 10, a decrease from the 769,000 who applied in the week prior.

Covid-19 Live Updates: U.S. Case Average Trends Higher – Wall Street Journal, 4/15/2021

  • The average number of new Covid-19 cases being reported in the U.S. continued to edge up, as a federal pause on Johnson & Johnson’s Covid-19 vaccine was kept in place.
  • On Wednesday, the U.S. reported 75,375 new cases, according to Johns Hopkins data, down slightly from 77,878 a day earlier.
  • The seven-day average of newly reported cases was 71,282 on Wednesday, up from 53,678 a month ago, according to a Wall Street Journal analysis of data compiled by Johns Hopkins University.
  • More than half of states are seeing a higher seven-day average than 14-day average, which signals a rise in infections. The upper Midwest and parts of the Northeast in particular are recording larger caseloads.
  • Hospitalizations have also been rising recently, with 45,308 Covid-19 patients in hospitals around the U.S., according to the latest data posted by the Department of Health and Human Services.
  • About 23.1% of U.S. residents are now fully vaccinated, while 37.3% have received at last one dose of a vaccine. Vaccination levels vary by state.
  • The federal government’s recommendation to pause using Johnson & Johnson’s Covid-19 vaccine will remain in place after an advisory panel put off a vote on how to move forward following reports of a few cases of life-threatening blood clots.
  • The Advisory Committee on Immunization Practices, or ACIP, said Wednesday it doesn’t have enough information yet about the risk of these unusual side effects to determine whether the vaccine should be continued, discontinued or recommended only for certain groups of the population. The ACIP expects to meet again in another week or two to revisit the issue.

Bank of America Profit Doubles After It Releases Reserves for Bad Loans – Wall Street Journal, 4/15/2021

  • Bank of America said Thursday that its profit doubled in the first three months of the year.
  • Altogether, the bank’s revenue was flat at $22.82 billion, from $22.77 billion a year ago.
  • Still, that beat the $21.9 billion analysts had forecast.
  • Noninterest income rose 19% to $12.62 billion, from $10.64 billion a year earlier, helped by fees in its capital-markets businesses.
  • Adjusted trading revenue rose 17% to $5.08 billion from $4.34 billion a year earlier.
  • Investment banking fees rose 62% to $2.25 billion, from $1.39 billion a year earlier.
  • Net interest income totaled $10.2 billion in the first quarter, down 16% from $12.13 billion a year earlier.
  • Outstanding loans and leases also dropped by 14% to $903.01 billion.
  • The Charlotte, N.C.-based lender posted earnings of $8.05 billion in the first quarter.
  • That compared with $4.01 billion a year earlier, when banks took big hits to their earnings to begin stockpiling rainy-day reserves at the beginning of the pandemic.
  • Bank of America said it released $2.7 billion of its reserves, boosting its bottom line. Charge-offs were down from a year earlier.

Citigroup Reports Higher Earnings, Plans to Trim Consumer Businesses in Asia – Wall Street Journal, 4/15/2021

  • Citigroup on Thursday reported sharply higher first-quarter profit and said it is shutting down most of its consumer-banking operations in Asia, Europe and the Middle East.
  • Revenue fell 7% to $19.3 billion. That was still ahead of the $18.8 billion analysts had expected.
  • Earnings in the institutional clients group, which includes investment banking and trading, rose 64% to $5.9 billion, but revenue fell 2% to $12.2 billion.
  • The consumer bank reported profit of $2.2 billion, compared with a loss a year earlier of $740 million. Revenue fell 14% to $7 billion.
  • The bank posted a profit of $7.9 billion, or $3.62 per share, well above the $2.60 per share forecast by analysts polled by FactSet.
  • A year earlier, Citigroup had reported a quarterly profit of about $2.5 billion, or $1.05 a share.
  • The New York bank released $3.85 billion in reserves, a major driver of earnings in the first quarter and a sign the bank’s outlook on the economy has improved. The bank released $1.5 billion in the fourth quarter.
  • Citigroup also said it would exit its consumer operations in 13 countries, mostly across Asia, to focus on wealth management and other businesses.

BlackRock Profit Jumps on Broader Pandemic Recovery – Wall Street Journal, 4/15/2021

  • BlackRock’s quarterly profit rose 49% as the giant asset manager benefited from surging markets and investors’ willingness to bet on an economic recovery.
  • BlackRock’s revenue rose 19% to $4.4 billion from $3.7 billion in the year ago period when panicked investors fled to cash while a pandemic rippled through the globe.
  • The biggest chunk of revenue—fees from managing investments and administration fees—rose 20%.
  • The world’s largest money manager scaled a new milestone, with assets under management rising to $9 trillion.
  • Across all strategies, BlackRock took in $171.6 billion in net new money, up from roughly $35 billion in the year-ago quarter.
  • The firm’s adjusted per-share profit of $7.77 slightly beat analyst’s expectations.

UnitedHealth Posts Stronger Quarterly Results as Membership Grows – Wall Street Journal, 4/15/2021

  • UnitedHealth recorded stronger year-over-year revenue and profit figures for the first three months of 2021, driven by growth in its insurance programs for communities and seniors and its health-services business.
  • UnitedHealth’s total revenue grew by 9% to $70.2 billion, up from $64.4 billion in the same three months a year earlier.
  • Revenue from premiums improved to $55.49 billion, from $50.64 billion a year earlier.
  • Revenue from UnitedHealth’s Optum business grew by 10.8% to $36.4 billion.
  • For the OptumHealth division, which served 99 million people, revenue per customer grew by nearly a third, in part because of the increasing acuity of the care provided.
  • In the latest quarter, the number of people served by UnitedHealthcare’s medical plans grew by more than 1 million to 49.5 million, driven by expansion of the number of people on its Medicare Advantage plans.
  • The company’s earnings increased to $5.08 a share, compared with $3.52 a share in the first quarter of 2020.
  • Its adjusted profit was $5.31 a share. Analysts surveyed by FactSet had been forecasting an adjusted profit of $4.39 a share, on revenue of $69.07 billion.
  • The company forecast the pandemic will cause a net reduction in its full-year adjusted profit of approximately $1.80 per share.
  • Still, UnitedHealth raised its full-year outlook, citing the trend in its results from the first three months of 2021. UnitedHealth said it now expects a full-year adjusted profit of $18.10 to $18.60 a share. In January, the company had forecast a full-year adjusted profit of $17.75 to $18.25 a share.

Delta Reports Another Quarterly Loss but Says Travel Demand Is Rising – Wall Street Journal, 4/15/2021

  • Delta Air Lines signaled the worst of the coronavirus pandemic is likely behind it, as the airline anticipates that travel demand will continue to gain steam in the coming months.
  • Adjusted for one-time charges, Delta incurred a $2.26 billion loss in its latest quarter.
  • The loss of $3.55 a share compared with the loss of $3.17 a share that analysts expected.
  • With domestic leisure bookings at 85% of pre-pandemic levels, Delta believes it is on track to potentially turn a profit this summer.
  • Delta expects revenue to be down by as much as 55% in the second quarter from pre-pandemic levels.
  • Delta ended the year with $16.6 billion in liquidity and expects to receive $2.7 billion more from a third round of government aid aimed at covering workers’ salaries.

PepsiCo bets on vaccine-led reopenings for soda sales boost – Reuters, 4/14/2021

  • PepsiCo on Thursday predicted an acceleration in organic revenue growth in the second quarter, betting on a boost to soda sales from the gradual reopening of restaurants and theaters following the speedy rollout of coronavirus vaccines.
  • That helped net revenue gain 6.8% to $14.82 billion, beating market expectation of $14.55 billion, according to IBES data from Refinitiv.
  • Sales of snacks under its Frito-Lay North America unit rose 4% in the first quarter, while those of sodas and other beverages rose 5% in North America.
  • On an adjusted basis, Pepsi earned $1.21 per share, well above the expectation of $1.12.

American Eagle forecasts sales above estimates on full-price selling – Reuters, 4/14/2021

  • American Eagle Outfitters on Wednesday forecast first-quarter revenue of more than $1 billion as strong demand helped the apparel retailer sell more products of its eponymous and Aerie labels at full price.
  • The Pittsburgh, Pennsylvania-based company’s shares rose about 5% in extended trading as its forecast came in above market estimates of $904.1 million, according to IBES data from Refinitiv.
  • American Eagle also forecast operating income of about $120 million for the first quarter, compared with $48 million in 2019.

Ford details new production cuts due to global chip shortage – Reuters, 4/14/2021

  • Ford Motor on Wednesday outlined another series of plant shutdowns due to the global semiconductor chip shortage, with five facilities in the United States and one in Turkey affected.
  • The No. 2 U.S. automaker did not outline how many vehicles would be lost in the latest actions, and reiterated it intends to provide an update on the financial impact of the chip shortage with its quarterly earnings on April 28, suggesting the hit could be bigger than initially forecast.
  • Ford said in addition to the chip shortage, other factors driving the shutdowns included the previously reported fire at Renesas Electronics’ chip-making factory in Japan and prior severe winter storms in Texas.

Dell Plans Spinoff of $52 Billion Stake in VMware – Wall Street Journal, 4/15/2021

  • Dell Technologies said Wednesday it would spin off its stake valued at $52 billion in cloud-software company VMware, in a deal the personal-computer maker said would strengthen its financial position as it looks at new markets and works to reach clients revamping their digital strategies.
  • Dell said VMware would pay a special cash dividend tied to the spinoff of $11.5 billion to $12 billion to the company’s shareholders, including $9.3 billion to $9.7 billion for Dell itself. Dell holds roughly an 81% stake in VMware.
  • Shareholders in Dell will receive roughly 0.44 shares of VMware for each share of Dell they own.

Almost half of Shopify’s top execs to depart company: CEO – Reuters, 4/15/2021

  • Three of e-commerce platform Shopify’s seven top executives will be leaving the company in the coming months, chief executive officer and founder of Canada’s most valuable company Tobi Lutke said in a blog post on Wednesday.
  • The company’s chief talent officer, chief legal officer and chief technology officer will all transition out of their roles, Lutke said, adding that they have been “spectacular and deserve to take a bow.”
  • The trio follow the departure of Craig Miller, chief product officer, in September. Lutke took on the role in addition to CEO.

U.S. retail sales surge; weekly jobless claims drop to one-year low – Reuters, 4/15/2021

  • U.S. retail sales rebounded more than expected in March as Americans received additional pandemic relief checks from the government and increased COVID-19 vaccinations allowed broader economic re-engagement, cementing expectations for robust growth in the first quarter.
  • Retail sales increased 9.8% last month, the Commerce Department said.
  • Data for February was revised higher to show sales dropping 2.7% instead of 3.0% as previously reported.
  • The broad-based rebound was led by motor vehicles, with receipts at auto dealerships surging 15.1% after falling 3.5% in February. Sales at clothing stores soared 18.3%.
  • Consumers also boosted spending at restaurants and bars, leading to a 13.4% jump in receipts.
  • Sales at building material stores vaulted 12.1%. Online retail sales increased 6.0%.
  • In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 193,000 to a seasonally adjusted 576,000 for the week ended April 10, the lowest level since mid-March 2020.
  • Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment insurance programs, 744,894 people filed claims last week, pushing further below 1 million.

U.S. Factory Output Rises in March, Shaking Off Winter Weakness – Bloomberg, 4/15/2021

  • Production at U.S. factories increased in March by the most in eight months as manufacturing returned to a path of solid growth following a weather-related setback in February.
  • The 2.7% increase in output followed a downwardly revised 3.7% decline in February, Federal Reserve data showed Thursday.
  • Total industrial production, which also includes mining and utility output, rose 1.4% in March after a revised 2.6% decrease a month earlier.
  • Furthermore, regional Fed surveys out earlier on Thursday showed continued strength in April.
  • A gauge of manufacturing in New York rose in April to the highest level since 2017, while the Philadelphia Fed’s general activity index was the strongest since 1973.

Mortgage Rates in the U.S. Slide to the Lowest Level in a Month – Bloomberg, 4/15/2021

  • The average for a 30-year loan was 3.04%, down from 3.13% last week and the lowest since early March.
  • The decline gives Americans another shot at borrowing costs near the lowest on record — either for purchasing homes or refinancing current loans.
  • Rates plunged last year as the Covid-19 pandemic took hold, with the 30-year average hitting a low of 2.65% in January.
  • They shot up since then, as optimism increased for an economic rebound.

U.S. Puts Fresh Sanctions on Russia Over Hacking, Election Interference – Wall Street Journal, 4/15/2021

  • The Biden administration announced a range of retaliatory measures against Russia on Thursday, including financial penalties, sanctions and diplomatic expulsions, in response to Moscow’s alleged election interference, a widespread hacking campaign and other malign activity.
  • In a new executive order, the U.S. expanded existing prohibitions on U.S. financial firms trading in Russian government debt, according to the Treasury Department. Previous prohibitions targeting portions of Russian sovereign debt shook Russia’s markets and added to its economic woes.
  • That order, previously reported by The Wall Street Journal, prohibits U.S. financial institutions from buying new bonds directly from Russia’s central bank, finance ministry and the country’s massive sovereign-wealth fund after June 14.
  • Among other measures, 10 Russian diplomats will be expelled, including some over allegations that Russia offered to pay bounties to militants in Afghanistan to kill U.S. military service members.
  • The Biden administration also formally accused Russia’s foreign intelligence service, the SVR, of carrying out the so-called SolarWinds hack of U.S. government and corporate computer systems, a massive espionage campaign that officials have said could take years to fully recover from.

Democratic Lawmakers to Present Plan to Expand Supreme Court – Wall Street Journal, 4/15/2021

  • Democratic lawmakers plan to introduce legislation on Thursday that would add four seats to the Supreme Court, an initiative that has slim hopes of passage but reflects progressives’ impatience with President Biden’s cautious approach toward overhauling a court that turned to the right during the Trump administration.
  • Last week, Mr. Biden signed an executive order establishing a 36-member commission to report back within six months on possible changes to the Supreme Court’s membership, jurisdiction and lifetime terms.
  • “We need more than a commission to restore integrity to the court,” said Sen. Ed Markey of Massachusetts, who is co-sponsoring the legislation with the House Judiciary Committee chairman, Rep. Jerrold Nadler of New York, and Reps. Hank Johnson of Georgia and Mondaire Jones of New York.
  • The sponsors plan to announce the legislation with a Thursday press conference outside the Supreme Court, but there’s little chance the bill will make headway. Republicans are united in opposition to a plan that would undo the conservative majority on the Supreme Court, and even many Democrats critical of the court are reluctant to prejudge the issue while Mr. Biden’s commission is at work.

Census Data to Reveal Which States Lose, Gain U.S. House Seats – Wall Street Journal, 4/15/2021

  • After months of delays, the once-in-a-decade fight over the contours of congressional seats will officially begin later this month, when the Census Bureau releases the first round of data determining which states will gain or lose House seats.
  • New maps for both House and state legislative districts are drawn at the state level, with the process varying by state and Republicans in control in more states than Democrats are.
  • For both parties, the official guidance on which states will gain or lose a seat is likely to usher in a wave of new decisions based on the emerging political reality: lawmakers announcing retirements or statewide runs and candidates deciding to jump into races.
  • Both sides agree that Republicans enter the process with an advantage: They control the state legislatures in Texas, Florida, North Carolina and Georgia, which are expected to gain a collective six seats.

EUROPE & WORLD

TSMC Sets Up for Soaring Chip Demand – Wall Street Journal, 4/15/2021

  • Taiwan Semiconductor Manufacturing said it would raise its capital spending budget and revenue growth forecast for 2021, a sign of confidence from the world’s biggest contract chip maker that soaring global demand for semiconductors will persist.
  • Revenue increased 17% from a year earlier to NT$362.41 billion.
  • Automotive chips and high-performance computing were drivers of growth during the quarter, rising 30% and 14% respectively, while revenue from smartphones fell 11%.
  • TSMC’s net profit for the first three months of the year rose 19% from the same period a year earlier to 139.69 billion New Taiwan dollars, equivalent to $4.91 billion, beating analyst estimates, boosted by continued strong demand for chips during the pandemic.
  • The chip maker said Thursday while reporting its quarterly earnings that it would raise its capital expenditures to $30 billion this year, from an earlier range of $25 billion to $28 billion announced in January. The Hsinchu, Taiwan-based company also raised its revenue growth forecast to 20% for the year, from an earlier estimate of 15% growth.
  • TSMC’s upward revision in capital spending for 2021 effectively pulls forward some of the planned investment the semiconductor giant had announced earlier this month, when it announced a record spending spree of $100 billion over the next three years to build out more of its production capacity.
  • The chip maker’s heftier investment budget comes as its global competitors also move to beef up production capacity amid a global chip shortage that TSMC expects to extend into 2022.

Qantas forecasts domestic capacity will soon leap beyond pre-pandemic levels – Reuters, 4/15/2021

  • Qantas Airways said it expected domestic travel would top pre-pandemic levels next financial year as it raised its forecast for the current quarter on the back of strong demand in a country nearly free of COVID-19.
  • Growth in domestic capacity is expected to continue into fiscal 2022, with low-cost brand Jetstar reaching 120% of pre-COVID levels and Qantas projected to be at 107%, the airline said.
  • A return to 90% of pre-pandemic domestic capacity in the fourth quarter ending June 30 will allow it to report positive cashflow and begin repairing a balance sheet burdened by extra debt that helped get it through the pandemic, Chief Executive Alan Joyce said on Thursday.
  • Joyce said the international arm was burning through about A$5 million ($3.86 million) of cash a week.
  • The recent rebound in demand now that state borders are open has also benefited Virgin Australia, which said on Thursday that 10 leased Boeing 737 planes would return to its fleet as part of plans that would see it reach more than 80% of pre-pandemic domestic capacity by mid-June.

ABB stock hits 13 year high after upping sales guidance – Reuters, 4/15/2021

  • ABB, which provides power and automation technologies, raised its full-year sales forecast on Thursday, citing a recovery from last year’s pandemic-driven downturn, sending its stock to its highest level in nearly 13 years.
  • Ahead of full first-quarter results on April 27, ABB said revenues in the three months had risen by 11% from a year earlier to $6.90 billion. On a like-for-like basis, which excludes the impact of currency swings, revenues rose by 7%.
  • First-quarter orders were up 1% to $7.75 billion, while the operational profit margin (EBITA) increased to 13.5% from 10.2% a year earlier.
  • ABB also said it expected a recovery in process industries, which include oil and gas, in the second half of the year.

Factmonster – TODAY in HISTORY

  • In response to the attack on Fort Sumter three days earlier, President Abraham Lincoln declared a state of insurrection and called out Union troops. (1861)
  • Titanic sank off the coast of Newfoundland on its maiden voyage after it struck an iceberg. (1912)
  • Two bombs exploded at the Boston Marathon in Boston, Massachusetts, killing 3 and injuring at least 170 others. (2013)

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