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Daily Market Report | Apr. 16, 2021

Stocks Rise After S&P 500 Hits Record – Wall Street Journal, 4/16/2021

  • U.S. stocks inched higher and toward new records amid another volley of blue-chip earnings and more signs of economic growth.
  • A strong start to earnings season from banks and other financial companies has combined with data showing the economy is growing at a rapid clip to propel stocks higher this week.
  • Adding to the momentum: A drop in yields on U.S. government bonds that has surprised some investors in its size and speed.
  • The yield on 10-year Treasury notes rose to 1.569%, up from 1.531% Thursday but still down from 1.664% at the end of last week. Yields move in the opposite direction to bond prices.
  • Data out Friday showing the Chinese economy grew at a record rate of 18.3% in the first quarter will add to optimism about the U.S.’s economic prospects.
  • Asian indexes rose on the back of the data.
  • China’s Shanghai Composite Index climbed 0.8%, and Japan’s Nikkei 225 edged up 0.1%.
  • Overseas, the Stoxx Europe 600 rose 0.6%, led by shares of banks and makers of cars and car parts.
  • Daimler gained 2.5% after the German auto maker said sales of Mercedes-Benz cars would push first-quarter results above analysts’ forecasts.

Covid-19 Live Updates: U.S. Daily Case Count Down Slightly – Wall Street Journal, 4/16/2021

  • Newly reported Covid-19 cases in the U.S. were down slightly from a day earlier, as Pfizer’s chief said vaccinated people will probably need booster shots within a year and then annual shots after that.
  • The U.S. reported more than 73,000 new cases for Thursday, according to data compiled by Johns Hopkins University, though the figure might be updated later. That compares with more than 75,000 cases a day earlier and a peak daily number above 300,000, hit Jan. 2.
  • Thursday’s U.S. death toll was 902, down from 956 a day earlier, according to Johns Hopkins. World-wide, nearly 138.9 million people have tested positive for Covid-19 and almost 3 million people have died since the beginning of the pandemic.
  • The Centers for Disease Control and Prevention has identified about 5,800 cases of Covid-19 infection among the 66 million-plus Americans who have completed a full course of vaccination. That’s a rate of 0.009%, and in line with expectations, officials said.
  • Deaths linked to Covid-19 in Europe have topped one million, though vaccinations appear to be reducing deaths among people aged over 80, according to the World Health Organization.
  • While cases and transmission of the disease remains high, the proportion of deaths among people over 80 has fallen almost 30% since February, WHO Director for Europe Hans Kluge said on Thursday.

Morgan Stanley Books Archegos Loss, but Profit Hits New High – Wall Street Journal, 4/16/2021

  • Morgan Stanley lost $911 million when Archegos Capital Management imploded last month, tarnishing a record-setting quarter for the Wall Street firm.
  • The New York-based bank on Friday reported quarterly profit of $4.1 billion, or $2.19 a share, on revenue of $15.7 billion.
  • That beat the consensus estimates of analysts polled by FactSet of per-share earnings of $1.72 on revenue of $14.1 billion.
  • Stock- and bond-trading revenue rose 29% to $5.8 billion.
  • Fees from advising on deals and underwriting stock and bond offerings more than doubled to $2.6 billion.
  • Morgan Stanley’s E*Trade business also benefited from the burst of trading activity among individual investors.
  • The number of retail-trading clients at Morgan Stanley increased 7% from the end of 2020 to 7.2 million, and the average daily number of retail trades the company handled for the quarter exceeded 1.6 million.
  • Revenue at Morgan Stanley’s wealth-management division, which includes E*Trade, increased 47% to roughly $6 billion.
  • Its profit margin reached 27% before taxes, up slightly from the first quarter of 2020.
  • Unlike other banks that have reported weak demand for loans among their consumer and commercial clients, Morgan Stanley boosted lending by 15% to $303.4 billion outstanding.

Apple Music Reveals How Much It Pays When You Stream a Song – Wall Street Journal, 4/16/2021

  • Apple Music told artists it pays a penny per stream in a letter reviewed by The Wall Street Journal.
  • Apple’s penny-per-stream payment structure—which music-industry experts say can dip lower—is roughly double what Spotify, the world’s largest music-streaming service, pays music-rights holders per stream.
  • Spotify pays an average of about one-third to one-half penny per stream, though its larger user base generates many more streams. Apple’s payments come out of monthly subscription revenue from users.
  • Apple last reported more than 60 million Music subscribers in June 2019.
  • Spotify leads the industry in subscriptions with 155 million, out of 345 million total active users including those who listen for free to the ad-supported tier. Amazon said early last year that its music subscription offerings had 55 million subscribers.

Cable Companies Emerge as Force in Cellphone Business – Wall Street Journal, 4/16/2021

  • More than five million Americans now pay for mobile-phone service through their cable-TV providers, enticed by low prices and the ability to easily adjust their phone plans, a flexibility that proved particularly useful during the pandemic.
  • Cable operators such as Comcast and Charter Communications joined the wireless sector in recent years with one goal in mind, executives and analysts say: Give their customers another reason not to leave, especially because pay-TV service businesses have been quickly losing subscribers as consumers turn to streaming services and internet-based TV bundles for entertainment.
  • Comcast on Thursday introduced a new slate of mobile plans in a push to undercut traditional wireless companies. Those companies remain dominant, with nearly 50 times as many mobile-phone subscribers as their cable counterparts at the end of 2020.

GM, LG Energy Solution to build 2nd U.S. battery plant in Tennessee – Reuters, 4/16/2021

  • General Motors and South Korean joint-venture partner LG Energy Solution on Friday said they will build a second U.S. battery cell manufacturing plant, revealing plans for a $2.3 billion factory in Spring Hill, Tennessee.
  • The planned 2.8 million-square-foot plant, scheduled to open in late 2023, will employ 1,300 people and is expected to have a production capacity similar to the companies’ Ultium Cells joint-venture plant in Lordstown, Ohio, of about 35 gigawatt-hours as they move to respond to the growing demand in the electric vehicle market.
  • GM and LG Energy Solution will use a different, less-expensive battery chemistry in Tennessee than the one from the Lordstown plant that opens next year, sources previously told Reuters.
  • Sources have said the No. 1 U.S. automaker will need more battery plants beyond Tennessee to meet aggressive EV targets, including the projected sales of more than 1 million EVs globally in 2025.
  • GM’s longer-range target includes halting sales of light-duty gasoline and diesel-powered vehicles by 2035.

U.S. housing starts race to 15-year high; building permits rise moderately – Reuters, 4/16/2021

  • U.S. homebuilding surged to nearly a 15-year high in March, but soaring lumber prices amid supply constraints could limit builders’ capacity to boost production and ease a shortage of homes that is threatening to slow housing market momentum.
  • Housing starts surged 19.4% to a seasonally adjusted annual rate of 1.739 million units last month, the highest level since June 2006. Economists polled by Reuters had forecast starts would rise to a rate of 1.613 million units in March.
  • Starts soared 37.0% on a year-on-year basis in March.
  • Homebuilding slumped in February as large parts of the country reeled from unseasonably cold weather, including winter storms in Texas and other parts of the densely-populated South region.
  • Permits for future home building rose 2.7% to a rate of 1.766 million units last month, recouping only a fraction of February’s 8.8% plunge. They jumped 30.2% compared to March 2020.
  • Single-family homebuilding, the largest share of the housing market, surged 15.3% to a rate of 1.238 million units in March. Single-family building permits increased 4.6% to a rate of 1.199 million units.
  • Starts for the volatile multi-family segment soared 30.8% to a pace of 501,000 units. Building permits for multi-family housing projects fell 1.2% to a pace of 567,000 units.
  • Softwood lumber, which is used for frames and trusses of houses, surged by a record 83.4% on a year-on-year basis in March, according to the latest producer price data published last week.

U.S. Consumer Sentiment Rises Along With Inflation Expectations – Bloomberg, 4/16/2021

  • U.S. consumer sentiment improved in April following another round of fiscal stimulus and as job growth accelerated. At the same time, inflation expectations surged to the highest in nine years.
  • The University of Michigan’s preliminary sentiment index rose to 86.5 from 84.9 in March, data released Friday showed.
  • While the figure was softer than the 89 forecast in Bloomberg’s survey of economists, it remains at a pandemic high.
  • Consumers expect inflation to rise 3.7% over the next year, the highest since March 2012.
  • They expect prices over the next five years to increase 2.7%, compared to 2.8% last month.
  • The gauge of current conditions rose to 97.2, while a measure of expectations held at 79.7, according to the survey conducted March 24 to April 14.

Lawmakers Look Into Bipartisan Compromise on Infrastructure – Wall Street Journal, 4/16/2021

  • Lawmakers began feeling out the possibility of reaching a compromise on an infrastructure package, as a bipartisan group held a call Thursday to discuss the issue and some Republicans began working on an alternative to President Biden’s $2.3 trillion plan.
  • The virtual meeting Thursday involved a group of roughly 20 lawmakers in both parties who helped kickstart negotiations on a roughly $900 billion coronavirus aid package late last year.
  • The bipartisan meeting on Thursday was largely a preliminary discussion of where lawmakers could find common ground, according to Sen. John Hickenlooper (D., Colo.), one of the attendees.
  • Many Republicans have criticized the scope and size of Mr. Biden’s plan, calling for a narrower piece of legislation that doesn’t include major tax increases.

EUROPE & WORLD

Chinese Economy Grew More Than 18% in First Quarter – Wall Street Journal, 4/16/2021

  • China’s economy surged 18.3% in the first quarter from a year earlier, a record rate of growth that reflected the recovery from a deep coronavirus-induced trough in early 2020 and the continued momentum of the world’s second largest economy.
  • The rate of gross domestic product growth in the first three months of 2021 was sharply higher than the 6.5% year-over-year growth recorded in the final quarter of 2020, though it fell short of the 19.2% growth expected by economists polled by The Wall Street Journal.
  • Analysts had anticipated GDP growth in the first three months of the year to jump sharply when compared with the year-earlier period, when the Chinese economy suffered a historic 6.8% contraction as the coronavirus’ initial emergence forced Beijing to shut down large swaths of the country.
  • But stripping out the statistical distortion from last year’s low base of comparison, economists at HSBC in Hong Kong estimate that underlying year-over-year GDP growth in the first three months of 2021 was about 5.4%, lower than the pre-coronavirus trend of roughly 6% growth.
  • China’s fixed-asset investment rose 25.6% from a year earlier in the first quarter, slowing from 35% in the January to February period.
  • Home sales by volume, a major indicator of demand, soared 95.5% in the first three months of 2021 from a year earlier, though the pace was slower than the 143.5% year-over-year gain in the first two months of the year.
  • Real-estate investment in China rose 25.6% in the January-to-March period, compared with a 38.3% gain for the January-to-February period.

Bitcoin Payments to Be Banned in Turkey After Confidence Drops in Lira – Wall Street Journal, 4/16/2021

  • Turkey will ban the use of cryptocurrencies as a form of payment following months of economic turbulence that spurred locals to swap the local currency for bitcoin and foreign currencies.
  • Turkey’s central bank said Friday that cryptocurrencies are excessively volatile and can be used for illegal activities.
  • The bank also said crypto assets are “neither subject to any regulation and supervision mechanisms nor a central regulatory authority.”
  • Cryptocurrencies such as bitcoin, which are independent of central banks and created by so-called computer miners, are seen as a threat to government issued currencies.
  • China keeps a tight leash on bitcoin trading.
  • Nigerian officials said recently that the increasing use of bitcoin could erode the value of the local currency, the naira.

The Chip Shortage Is Bad. Taiwan’s Drought Threatens to Make It Worse. – Wall Street Journal, 4/16/2021

  • The worst drought in half a century is hitting Taiwan, adding strain to an island that is home to two-thirds of the world semiconductor manufacturing capacity during the worst global chip shortage in recent memory.
  • The drought’s impact on semiconductor producers, which require voluminous quantities of water to churn out chips, is so far modest as the government creates exceptions for these manufacturers.
  • But companies are starting to make adjustments, and officials have warned that the water shortage could worsen without adequate rainfall.
  • Taiwan’s semiconductor wafer-fabrication factories, or fabs, account for 65% of global production, according to the research firm TrendForce. Most of that capacity belongs to Taiwan Semiconductor Manufacturing Co., the world’s biggest contract chip maker.

Hong Kong Newspaper Tycoon Jimmy Lai Jailed Over Role in Peaceful Protests – Wall Street Journal, 4/16/2021

  • A Hong Kong judge sentenced newspaper publisher Jimmy Lai to 14 months in jail after he was convicted on charges related to his involvement in two large but peaceful protests in 2019.
  •  Martin Lee, the 82-year-old founder of the city’s democracy movement, received a suspended sentence for his role in one of the mass protests.
  • The prosecutions, involving a total of nine prominent pro-democracy campaigners, carry symbolic weight some 10 months into China’s sweeping crackdown on the former British colony, which has drawn stern rebukes from the U.S. and other Western governments.

Factmonster – TODAY in HISTORY

  • Lenin returned to Russia after 10 years in exile in Switzerland. (1917)
  • China sent President Nixon two giant pandas as a gift. (1972)
  • Hockey great Wayne Gretzky announced his retirement. (1999)

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