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Daily Market Report | Apr. 20, 2021

Stocks Slip As Earnings Season Ramps Up – Wall Street Journal, 4/20/2021

  • U.S. stocks slipped Tuesday, on track to extend their losses as investors assess blue-chip companies’ profits and sales prospects.
  • The Dow Jones Industrial Average dropped 0.3%, while the S&P 500 fell 0.2% and the Nasdaq Composite lost roughly 0.1%. All three indexes declined Monday, breaking a recent winning streak.
  • After the opening bell, Kansas City Southern jumped 14% after Canadian National Railway said it plans to offer $30 billion for the railway operator, likely sparking a bidding war.
  • Abbott Laboratories fell 3.2% after saying it expected earnings for the year to be slightly below analysts’ forecasts. United Airlines fell nearly 5% after reporting weaker-than-expected results for the first quarter.
  • Tobacco giant Altria Group fell nearly 6%, extending losses into a second day, after The Wall Street Journal reported that the Biden administration is considering a rule forcing tobacco companies to reduce nicotine in cigarettes to levels at which they are no longer addictive.
  • In the bond market, the 10-year U.S. Treasury yield was largely unchanged from 1.599% on Monday. Yields fall as prices rise.
  • Dogecoin, the cryptocurrency created as a joke, pared gains after climbing more than 8,000% this year. It fell almost 4% to 39 cents, according to CoinDesk. Some users of online forums have said they plan to push the cryptocurrency to $1 by Tuesday, in what some have called “Doge Day.”
  • Overseas, the pan-continental Stoxx Europe 600 fell 1.1%. The U.K.’s FTSE 100 retreated 1.2% as tobacco companies dropped.
  • In Asia, major stock indexes were mixed. Japan’s Nikkei 225 fell 2%, while Hong Kong’s Hang Seng ticked up 0.1%. The Shanghai Composite Index edged down 0.1%.

Covid-19 Live Updates: Newly Reported U.S. Cases Rise Even as Vaccinations Gather Pace – Wall Street Journal, 4/20/2021

  • Newly reported Covid-19 cases and deaths in the U.S. rose from a day earlier, but even with all American adults now eligible for vaccines, federal health officials warned the U.S. faces a critical phase in the fight against the coronavirus.
  • There were more than 67,000 new cases reported for Monday, according to data compiled by Johns Hopkins University and published early Tuesday morning Eastern time. That number might update later. Monday’s initial tally was up from 42,018 reported for Sunday but down from 70,230 reported a week earlier.
  • The nation reported 473 deaths for Monday, according to Johns Hopkins data, up from Sunday’s tally of 315 but roughly even with the 475 reported a week earlier.
  • As of Monday, all American adults are eligible to receive a Covid-19 vaccine, with every state meeting the April 19 deadline set by President Biden. More than a quarter of the U.S. population has been fully vaccinated and half of adults have received at least one shot.

Lockheed Martin raises outlook, beats earnings estimates – Reuters, 4/20/2021

  • U.S. weapons maker Lockheed Martin increased its outlook for 2021 sales and profit as it reported better-than-expected quarterly profits on Tuesday, helped by higher sales and profits at its unit which makes ships and helicopters.
  • Though net sales in the quarter rose 3.9% to $16.26 billion, they were below analysts’ expectation of $16.33 billion.
  • The company’s Aeronautics segment reported 17 deliveries of its F-35 jets in the quarter, down from 22 a year earlier. Lockheed plans to deliver between 133 and 139 of the jets this year, said Possenriede.
  • Net earnings for the quarter which ended on March 28 rose from $1.7 billion in the same period a year ago, to $1.8 billion, or $6.56 per share, beating analyst estimates of $6.31 per share.
  • Though the maker of the F-35 fighter jet increased the midpoint of its full-year revenue outlook slightly to $68 billion, the estimate is below Wall Street’s average estimate of $68.17 billion.
  • The Bethesda, Maryland-based company said it now expects full-year earnings per share to be in the range of $26.40 per share to $26.70 per share, a range with a midpoint that would beat analysts’ expectation of $26.31 per share, according to IBES data from Refinitiv.

Johnson & Johnson’s Covid-19 Vaccine Adds $100 Million to Quarterly Sales – Wall Street Journal, 4/20/2021

  • Johnson & Johnson’s Covid-19 vaccine contributed $100 million to the company’s sales growth in the latest quarter, as U.S. health authorities re-evaluate the vaccine during a pause amid safety concerns.
  • The New Brunswick, N.J.-based company logged first-quarter revenue of $22.32 billion, compared with $20.69 billion in last year’s first quarter. Analysts’ consensus forecast was for revenue of $21.98 billion, as compiled by FactSet.
  • Johnson & Johnson’s pharmaceutical revenue grew 10% year over year. Revenue from drugs such as Darzalex, for multiple myeloma, Stelara, for inflammatory diseases, and Erleada, for prostate cancer, helped drive the improvement.
  • Revenue from medical devices grew 11%, a recovery from the early days of the pandemic when many people put off elective medical procedures. Meanwhile, sales of consumer-health products declined by 2.3% compared with the same stretch last year, when shoppers were stocking up on health supplies to prepare for coronavirus lockdowns.
  • The company’s net earnings were $6.2 billion, or $2.32 a share, compared with $5.8 billion, or $2.17 a share, a year earlier. Accounting for one-time items, Johnson & Johnson’s adjusted earnings were $2.59 a share. Analysts had forecast adjusted earnings of $2.34 a share.

Cloud Business Helps IBM’s Revenue Edge Higher – Wall Street Journal, 4/20/2021

  • International Business Machines Corp. posted higher revenue ahead of a landmark split of the business this year that is part of Chief Executive Arvind Krishna’s plan to revive growth at the veteran tech company.
  •  IBM on Monday said first quarter sales rose about 1% to $17.73 billion, generating net income of $955 million. Wall Street on average expected sales of $17.32 billion and net income of $1.28 billion, according to FactSet.
  • Mr. Krishna said he would focus IBM on the booming field of cloud-computing and artificial intelligence. In the latest quarter, total cloud revenue rose about 21% to $6.5 billion.
  • The company is preparing to spin off a major part of its information-technology services operations.
  • IBM still expects revenue to grow this year and anticipates $11 billion to $12 billion in adjusted free cash flow for the year.

Procter & Gamble Will Raise Prices in September – Wall Street Journal, 4/20/2021

  • Procter & Gamble this fall will start charging more for household staples from diapers to tampons, the latest and biggest consumer-products company to announce price hikes.
  • During the quarter, P&G’s net sales rose 5% to $18.1 billion, above the consensus forecast of $18 billion from analysts polled by FactSet. Volume was flat for the first time in years, while price and mix both increased 2%.
  • P&G said organic sales grew 4% in the quarter ended March 31, with the biggest gains in the company’s beauty and fabric and home-care units.
  • P&G posted net income of $3.27 billion, or $1.26 a share, up from $2.92 billion, or $1.12 a share, a year earlier. Analysts expected net income of $3.09 billion.
  • The company maintained its forecast of organic sales growth of 5% to 6% for the fiscal year that ends June 30.

United Outlines Traffic Needed for Profit as Losses Pile Up – Bloomberg, 4/20/2021

  • United Airlines Holdings spelled out the travel milestones needed for a return to profitability after posting a bigger-than-expected loss in the first quarter and offering limited insight into its expectations for the summer flying season.
  • Sales tumbled 60% to $3.22 billion, slightly less than the $3.25 billion expected by Wall Street. The revenue decline since the same period of 2019 was 66%.
  • The company’s adjusted loss — its fifth in a row — worsened to $7.50 a share in the first quarter, trailing the average shortfall of $7.02 that analysts had predicted. Higher fuel costs added to expenses even as the Chicago-based company continued to grapple with a severe lack of demand.
  • For the second quarter, the carrier forecast an adjusted Ebitda margin of around minus 20%. United airline plans to operate more than half its pre-pandemic capacity in the three-month period, which will be 45% lower than the same period in 2019. First-quarter capacity was 54% below 2019 levels.

AutoNation CEO Says Chip Shortage Could Drag On for a Year – Bloomberg, 4/20/2021

  • The global semiconductor shortage that’s crippling the auto industry could drag on for as long as a year, according to Mike Jackson, chief executive officer of AutoNation, the largest car-dealer chain in the U.S.
  • AutoNation posted adjusted earnings from continuing operations of $2.79 a share in the first quarter, more than triple a year ago and ahead of analysts’ estimates. Revenue from existing stores grew 27% to $5.9 billion, also beating projections.
  • More than half of AutoNation’s sales now originate online, Jackson said, helping to cut costs and juice profit as vehicle demand has rebounded.
  • AutoNation expects the industry’s vehicle shipments in the second quarter to be double what they were a year ago, but that’s barely enough to keep dealer lots full, Jackson, 72, said in an interview.
  • “I see it continuing for at least the next year, the extraordinary demand, and I see no resolution on the microchip side for six to nine months, or a year,” Jackson said.

Canadian National Makes $30 Billion Topping Bid for Kansas City Southern – Wall Street Journal, 4/20/2021

  • Canadian National Railway made a roughly $30 billion topping bid for Kansas City Southern, likely kicking off a bidding war for a railroad operator that has already agreed to a sale to another Canadian rival.
  • Canadian National offered $325 for each Kansas City Southern, including $200 a share in cash and 1.059 Canadian National shares. The offer represents a 21% premium to Canadian Pacific Railway’s agreement to pay $275 a share including $90 in cash for Kansas City Southern, a roughly $25 billion deal reached last month.
  • Both deals would create the first freight-rail network linking the U.S., Mexico and Canada by connecting ports in the three countries.
  • The company believes it is better positioned than Canadian Pacific given a larger footprint and minimal route overlap with Kansas City Southern. It also owns a route that bypasses Chicago congestion, which can save days of travel time.

Apple Spring Event Expected to Reveal Latest iPad Pro, Subscription Podcasts – Wall Street Journal, 4/20/2021

  • Apple on Tuesday is expected to reveal its annual update to high-end iPads, among other new products, and introduce a paid subscription option within its podcast app.
  • The spring event, to be held at 1 p.m. New York time via the company’s website, comes after Apple’s best fiscal year for iPads in six years fueled by students and workers stuck at home amid the global coronavirus pandemic.
  • The latest iPad Pro offerings will come with a comparably faster processor than last year’s version, and the addition of a mini-LED screen and optional 5G cellular connectivity, according to a person familiar with the plans.

Elon Musk Weighs In on Fatal Tesla Crash as Safety Officials Investigate – Wall Street Journal, 4/20/2021

  • U.S. safety officials are investigating a fatal weekend crash involving a Tesla vehicle, adding to a series of probes into incidents involving the electric-vehicle maker.
  • Local authorities believe the Tesla Model S sedan was operating without anyone in the driver’s seat when it crashed into a tree Saturday night north of Houston, killing the two men inside.
  • On Monday, Tesla Chief Executive Elon Musk injected additional uncertainty into the situation. Mr. Musk tweeted, “Data logs recovered so far show Autopilot was not enabled.” The car didn’t have the upgraded version of the driver-assistance system that the company calls “full self-driving,” he added.
  • The NTSB said on Twitter that it was sending two people to investigate, adding that its probe would focus on the vehicle’s operation and the fire that local officials said engulfed the car for roughly four hours. Authorities on Monday were still investigating whether the vehicle’s advanced driver-assistance system, known as Autopilot, was engaged at the time of the crash.

Daily Mail Owner Files Antitrust Suit Against Google, Citing Royals Coverage – Wall Street Journal, 4/20/2021

  • The Daily Mail’s owner filed an antitrust suit against Alphabet’s Google on Tuesday, alleging the tech giant manipulates search results and advertising auctions in ways that harm online publishers.
  • The suit, filed in Manhattan federal court, alleges that Google punishes publishers in search rankings if they don’t sell enough advertising space through Google’s marketplace.
  • The Daily Mail’s concerns stem in part from its assessment that its coverage of the U.K.’s royal family in 2021 has been played down in Google’s search results, a spokesman for the publisher said.
  • In the suit brought by the Mail’s owner, Associated Newspapers, and its U.S. unit, Mail Media, the publisher alleges Google linked its search engine and ad-sales platform to put pressure on publishers, abusing its market power.

Peloton Faces Mounting Pressure to Recall Treadmills After One Death, Dozens of Injuries – Wall Street Journal, 4/20/2021

  • Pressure mounted on Peloton Interactive on Monday when the chair of a House consumer-protection subcommittee called on the company to recall its treadmills.
  • The move comes days after a federal safety agency told people with young children or pets to stop using the treadmills and urged a recall of the product, which it says is responsible for dozens of injuries and at least one death.
  • The company had no immediate response to Monday’s statement by U.S. Rep. Jan Schakowsky (D., Ill.), who chairs the Consumer Protection and Commerce Subcommittee.
  • “The videos and reports of children being sucked under Peloton treadmills are harrowing, and they graphically illustrate the grave and immediate risks these products pose to users and their families,” Ms. Schakowsky said.

Smaller Corporate Tax Increase Floated at White House Infrastructure Meeting – Wall Street Journal, 4/20/2021

  • President Biden and a bipartisan group of lawmakers discussed alternative ways to pay for infrastructure spending, including a smaller increase in the corporate tax rate, as Republicans and Democrats aired possible changes to the size and scope of the package.
  • Rep. Charlie Crist (D., Fla.) said lawmakers discussed the potential for some “compromise wiggle room” on raising the corporate rate to help pay for the plan. “You could see a 2 or 3% increase—maybe not all the way to 28 but 25,” he said of the percentage rate.
  • “I am prepared to compromise, prepared to see what we can do and what we can get together on,” Mr. Biden said in the Oval Office as the meeting with 10 lawmakers and Transportation Secretary Pete Buttigieg got under way. “It’s a big package, but there are a lot of needs,” he said.
  • Some Senate Republicans, critical of the corporate tax increases and the broad scope of Mr. Biden’s infrastructure plan, have started discussing making a counteroffer in the realm of $600 billion to $800 billion. A group of Republicans met Monday to discuss that possibility, with lawmakers aiming to release their own plan soon.

SALT Cap Revolt Led by N.Y. Democrats Snarls Biden Spending Plan – Bloomberg, 4/20/2021

  • President Donald Trump’s 2017 tax law disproportionately targeted Democrats in high-tax states by eliminating a popular federal deduction. Now Trump’s legislative triumph has put President Joe Biden in a bind.
  • Newly released Internal Revenue Service data show the politically lopsided impact of the $10,000 cap on deducting state and local taxes, or SALT — and why Democrats from the hardest-hit SALT states may be willing to cost Biden the crucial victory of passing his $2.25 trillion infrastructure and social services plan if he continues to insist on keeping Trump’s cap in place.
  • In some New York congressional districts, the average deduction lost because of the SALT cap can be more than $100,000 a year, according to the IRS data. And of the 40 congressional districts with the largest SALT deductions disallowed under the Trump tax law, 39 are represented by Democrats.
  • Democrats have a 218-212 majority in the House. With no Republicans likely to vote for a Biden-led tax increase, they can’t afford to lose more than three votes.

Covid-19 Slashed Carbon Emissions. Now They’re Climbing Again. – Wall Street Journal, 4/20/2021

  • Soaring carbon emissions this year are on track to reverse a big chunk of last year’s sharp reduction, which some climate researchers had hoped might be an environmental silver lining of the pandemic.
  • The International Energy Agency estimates emissions fell 5.8% in 2020, the steepest percentage decline since World War II.
  • Now, they are climbing again sharply. The IEA, in a report published Tuesday, said emissions are expected to jump 4.8% this year, the biggest annual gain since 2010’s record-setting increase, when the world was bouncing back from the global economic crisis.
  • Developing countries such as China will help drive overall global energy demand above 2019 levels this year, according to the IEA, a Paris-based energy watchdog. It cited a surge in coal use in the developing world, in particular, for a big chunk of the forecast increase in emissions. China alone will account for more than 50% of 2021’s new coal use, the agency said.


Europe Inc eyes record first quarter earnings jump as economy recovers – Reuters, 4/20/2021

  • Europe Inc earnings are expected to have risen a record 61% in the first quarter of 2021, Refinitiv IBES data showed on Tuesday, as the global economy recovers from the severe downturn caused by the coronavirus pandemic.
  • That would mark the best quarter for Europe Inc since IBES records began around nine years ago and also represents a big improvement compared to last week’s forecast for a 55.7% jump.
  • The forecasts, which track companies listed on the pan European STOXX 600 equity benchmark, point to revenues rising 2.8% in the first quarter, compared to 2.7% a week ago.
  • The rise in profits would also place Europe on course for a rare outperformance versus corporate America. Earnings for the S&P 500 are expected to have risen 30.9% in the first quarter of this year.

Weak Lending in Europe Hampers Covid-19 Recovery – Wall Street Journal, 4/20/2021

  • Demand for business loans in the eurozone fell and banks tightened credit standards in the first quarter of this year, a toxic combination that challenges the bloc’s slow economic recovery from the pandemic.
  • According to the European Central Bank’s latest lending survey released Tuesday, demand from companies for loans and credit lines fell for the third quarter in a row. The ECB said businesses seem to be postponing investments, as the pandemic triggers fresh lockdowns and other restrictions in many parts of Europe.
  • The central bank’s survey showed banks tightened their lending guidelines and approval criteria for new loans to businesses in the first quarter, although the tightening was less sharp than in the previous two quarters.
  • The dour survey weighed on financial markets Tuesday. An index of eurozone bank shares dropped by more than 2%. Yields on benchmark German 10-year bunds slipped to minus 0.25% from minus 0.24% a day earlier.

India’s New Delhi Locks Down as Covid-19 Stretches Healthcare System to Its Limits – Wall Street Journal, 4/20/2021

  • India imposed a lockdown on its capital city and said it would expand its vaccination program to all adults, as the country struggled to keep the world’s fastest-growing surge of Covid-19 infections from overwhelming its healthcare system.
  • India has sought to avoid the strict lockdowns that punished its economy last spring, but the New Delhi Chief Minister Arvind Kejriwal said on Monday that the step was necessary to avoid an even bigger disaster: a complete breakdown of its hospitals. Already, some were turning away patients and running low on oxygen and other supplies.
  • The latest wave of cases has risen much faster than the country’s monthslong surge last year, moving the country to the center of a pandemic that has killed at least three million people world-wide. India has reported more than 200,000 new daily infections for five days straight, with the number surpassing 270,000 on Monday.
  • On Monday, Delhi reported 25,463 infections in the past 24 hours, nearly three times its biggest daily tally of 8,500 cases during a November peak.

Factmonster – TODAY in HISTORY

  • Marie and Pierre Curie isolated radium. (1902)
  • The U.S. Supreme Court upheld the practice of busing for racial desegregation. (1971)
  • Danica Patrick won the Indy Japan 300, becoming the first woman to win an IndyCar race. (2008)
  • An explosion on a BP oil drilling rig off the coast of Louisiana kills 11 people and injures 17. Experts estimate that 13,000 gallons of crude oil per hour are pouring into the Gulf of Mexico. (2010)

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