Stocks Edge Up But Remain on Track for Weekly Declines – Wall Street Journal, 4/23/2021
- U.S. stocks edged up Friday, on pace to recover some of Thursday’s losses, as investors continued to digest reports that President Biden is considering nearly doubling capital-gains taxes on the wealthy.
- The S&P 500 ticked 0.4% higher, reversing some of the 0.9% drop that the index suffered on Thursday.
- Still, the index is on track to end the week lower, which would break a four-week streak of gains.
- Stocks have been choppy this week as sentiment wavered between concerns about fresh waves of Covid-19 infections around the world and optimism prompted by promising economic data.
- Money managers are looking to companies’ projections and other key indicators to gauge whether the economic recovery will stay on track and justify high valuations for stocks.
- Investors on Friday also looked to other encouraging data. U.S. private sector output growth hit a fresh series record in April, IHS Markit said. Similar surveys indicated that Europe is starting to participate in the recovery.
- In corporate news, Intel declined 6.4% after the semiconductor company on Thursday posted a moderate drop in revenue.
- The CEO said the global chip shortage could last for another two years.
- Snap, developer of social-media app Snapchat, jumped 7.9% after reporting a 66% rise in quarterly revenue and strong user growth.
- Bitcoin fell more than 10% and traded below $50,000, according to data from CoinDesk.
- The cryptocurrency has been dropping since last weekend. It had risen above $63,000 and hit a record last week.
- Overseas, the pan-continental Stoxx Europe 600 pulled back 0.6%, weighed down by the reports of Mr. Biden’s tax plans.
- The Shanghai Composite Index rose 0.3%, and Hong Kong’s Hang Seng Index added 1.1%.
- Japan’s Nikkei 225 ticked down 0.6%.
- India’s benchmark stock index declined 0.4%, shedding 2% for the week.
- The country reported the world’s biggest daily jump in Covid-19 cases on Thursday.
Covid-19 Live Updates: Panel Meets on J&J Vaccine – Wall Street Journal, 4/23/2021
- Newly reported Covid-19 cases in the U.S. were up slightly from a day earlier but maintained their downward trend.
- The U.S. reported 67,257 new cases for Thursday, according to the latest data compiled by Johns Hopkins University. It was higher than the 62,857 reported a day earlier but lower than the 74,289 reported a week earlier, and brought the national total to more than 31.9 million.
- Hospitalizations remain elevated, with 46,339 Covid-19 patients in hospitals across the country, according to the latest data posted by the Department of Health and Human Services.
- Deaths rose from a day earlier, with the U.S. reporting 943 for Thursday, according to updated Johns Hopkins data. That was higher than the 842 reported a day earlier and the 887 reported a week earlier.
- The seven-day average of daily vaccine doses administered fell slightly to 2.9 million from three million a day earlier, according to data from the Centers for Disease Control and Prevention. With nearly 27% of the U.S. population fully vaccinated, the country is on track to reach 75% vaccination by July 15, the data show.
- The U.S. State Department has added more than 100 countries to its Level Four: Do Not Travel advisory list, citing “unprecedented risks” posed by the Covid-19 pandemic as cases rise again globally. The new additions include Canada, Israel, Germany, Mexico, France, India and the U.K, among others.
- Johnson & Johnson’s Covid-19 vaccine could be back in circulation in the U.S. this weekend—albeit with possible restrictions—depending on a recommendation by a federal advisory panel.
Intel CEO Sees Prolonged Chip-Supply Constraints – Wall Street Journal, 4/23/2021
- Intel’s new chief executive said a global chip-supply shortage could stretch two more years as the U.S. semiconductor giant posted weaker quarterly earnings.
- Intel on Thursday said first-quarter sales fell 1% to $19.7 billion, beating Wall Street estimates.
- Net income, weighed down by costs of a legal settlement, was $3.4 billion.
- Excluding the pending sale of its memory business and other items, Intel said revenue was $18.6 billion and net income was $5.7 billion.
- Intel had $5.6 billion in sales in the data-center business, missing analysts expectation of $5.9 billion.
- Sales for the segment including laptop chips rose more than 8% to $10.6 billion, driven by the boom in remote learning and working from home during the pandemic. “We see no signs of PC demand slowing,” Mr. Gelsinger said.
- Mr. Gelsinger, who is fast-tracking efforts to re-energize the company, said the outlook projecting sales of $77 billion this year, $500 million higher than previously expected, is a “supply-constrained guide” for the year.
Snap’s Revenue Rose 66% in Latest Quarter – Wall Street Journal, 4/23/2021
- Snap’s revenue surged in the latest quarter as the company gained more Snapchat users, continuing its streak as social-media use remains high during the coronavirus pandemic.
- The social-media company’s first-quarter revenue rose 66% from a year earlier to $769.6 million, topping analysts’ expectations of $744 million, according to FactSet.
- Snapchat ended the quarter with 280 million daily average users, compared with 265 million in the prior quarter and 229 million a year earlier. The user growth was stronger than analysts had predicted.
- In the first quarter, Snap narrowed its losses to $286.9 million from $305.9 million in the same period last year.
- It posted a per-share loss of 19 cents, compared with 21 cents a year earlier.
- The company expects second-quarter revenue in the range of $820 million to $840 million. Analysts had forecast $826 million.
- The company noted that it ended the quarter with positive free cash flow, a first since going public in March 2017.
- It reported free cash flow of $126 million.
AmEx credit spending slump eclipses profit beat, shares fall – Reuters, 4/23/2021
- American Express said travel and entertainment-related spending on its cards halved in the first quarter as customers stayed at home due to the COVID-19 crisis, overshadowing a better-than-expected profit and sending its shares down 4%.
- Total revenue, excluding interest expense, fell 12% to around $9 billion, primarily reflecting a decline in spending by card holders and lower loan volumes.
- The credit card issuer reported a six-fold surge in net income to $2.2 billion earlier in the day, as it freed up more than $1 billion of funds that it had set aside to cover credit losses from the pandemic.
- Excluding that benefit, earnings were $1.74 per share, higher than a Refinitiv IBES estimate of $1.61 per, thanks to a rebound in non-travel spending.
- “Our baseline assumption remains that by the fourth quarter of this year, global T&E (travel and entertainment) spending will be at around 70% of 2019 levels. But travel for large and global corporations is going to rebound slower,” Campbell said.
Honeywell raises full-year outlook as profit beats on warehouse equipment demand – Reuters, 4/23/2021
- Honeywell International raised its full-year sales and profit outlook as it posted a better-than-expected quarterly profit on Friday, helped by robust demand for its warehouse automation equipment from customers including Amazon.com.
- Net sales fell to $8.45 billion from $8.46 billion.
- Sales in the warehouse automation business jumped 49% to $2.12 billion in the first quarter ended March 31, beating analysts’ average estimate of $1.79 billion, according to IBES data from Refinitiv.
- Net income attributable to Honeywell fell to $1.43 billion, or $2.03 per share, in the first quarter ended, from $1.58 billion, or $2.21 per share, a year earlier.
- Honeywell said it now expects full-year sales between $34 billion and $34.8 billion, up from its prior forecast of $33.4 billion to $34.4 billion.
Bitcoin sinks below $50,000 as cryptos stumble over Biden tax plans – Reuters, 4/23/2021
- Bitcoin and other cryptocurrencies suffered hefty losses on Friday on concern that U.S. President Joe Biden’s plan to raise capital gains taxes will curb investment in digital assets.
- Bitcoin, the biggest and most popular cryptocurrency, slumped 5% to $48,8867, falling below the $50,000 mark for the first time since early March, while smaller rivals Ether and XRP fell around 7%.
- The tax plans jolted markets, prompting investors to book profits in stocks and other risk assets, which have rallied massively on hopes of a solid economic recovery. Levies on investment gains were reported to be in line for record increases.
- Shares of cryptocurrency exchange Coinbase also fell around 4% to $282 in U.S. pre-market trading, marking the lowest level since its listing earlier this month. The listing had driven bitcoin prices to $65,000, before pulling back 25% in the following days.
U.S. equity funds see lowest inflow in seven weeks on virus worries: Lipper – Reuters, 4/23/2021
- U.S. equity funds received their lowest inflows in seven weeks in the week ended April 21, pressured by rising coronavirus cases, which have cast doubts over global economic recovery.
- According to Refinitiv Lipper data, U.S. equity funds took in $878 million in the week, the lowest since the week ended March 3.
- Among sector funds, tech and healthcare had outflows of $732 million and $663 million respectively.
- On the other hand, the financial sector had inflows of $550 million.
- U.S. money market funds took in $17.6 billion, after seeing big outflows in the previous two weeks, underscoring investors’ preference for safer assets.
- U.S. bond funds also had net purchases of $8.4 billion, resulting in a decline in U.S. Treasury yields.
- U.S. taxable bond funds had $6.2 billion in inflows, while municipal bond funds had inflows of $1.7 billion.
SPAC Surge Pumps Up Junk-Bond Market – Wall Street Journal, 4/23/2021
- The wave of cash raised by special-purpose acquisition companies is rolling into the junk debt market, aiding distressed companies and rewarding investors who own their bonds and loans.
- SPACs, also known as blank-check companies, have issued roughly $100 billion of stock this year, a record, to buy private companies and take them public.
- Some SPACs are targeting companies with below-investment-grade credit ratings, hoping to use their cash piles to pay down debt and grow the businesses.
- Not since the dot.com-boom two decades ago has stock-market enthusiasm been hot enough to fuel such activity in debt markets, bond investors and analysts say.
- Funds raised in IPO and SPAC transactions hit about $250 billion this year through April 20, the same amount raised in all of 2020, according to data from Dealogic.
- They have also exceeded the $180 billion of high-yield bonds raised year-to-date, the first time new stock sales outpaced junk-bond issuance since 2000, when soaring tech stock valuations stoked a market bubble.
U.S. manufacturing activity accelerates in early April; supply constraints worsening – Reuters, 4/23/2021
- U.S. factory activity powered ahead in early April, but manufacturers increasingly struggled to source raw materials and other inputs as a reopening economy leads to a boom in domestic demand.
- Data firm IHS Markit said on Friday its flash U.S. manufacturing PMI increased to 60.6 in the first half of this month.
- That was the highest reading since the series started in May 2007 and followed a final reading of 59.1 in March.
- The IHS Markit survey’s measure of prices paid by manufacturers jumped to the highest level since July 2008.
- It attributed the higher input prices to “severe supplier shortages and marked rises in transportation fees.”
- The IHS Markit flash services sector PMI jumped to 63.1, the highest since the series started in October 2009, from a final reading of 60.4.
- The survey’s flash composite PMI output index, which tracks the manufacturing and services sectors, rebounded to 62.2. That was also the highest reading since the series started in October 2009 and followed 59.7 in March.
U.S. new home sales rebound exceeds expectations in March – Reuters, 4/23/2021
- Sales of new U.S. single-family homes rebounded more than expected in March, likely boosted by an acute shortage of previously owned houses on the market.
- The Commerce Department said on Friday that new home sales surged 20.7% to a seasonally adjusted annual rate of 1.021 million units last month.
- Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, increasing to a rate of 886,000 units in March.
Biden Eyeing Tax Rate as High as 43.4% in Next Economic Package – Bloomberg, 4/23/2021
- President Joe Biden will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6% to help pay for a raft of social spending that addresses long-standing inequality, according to people familiar with the proposal.
- For those earning $1 million or more, the new top rate, coupled with an existing surtax on investment income, means that federal tax rates for wealthy investors could be as high as 43.4%.
- The new marginal 39.6% rate would be an increase from the current base rate of 20%, the people said on the condition of anonymity because the plan is not yet public.
- For $1 million earners in high-tax states, rates on capital gains could be above 50%.
- For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%.
- For Californians, it could be 56.7%.
- The capital gains increase would raise $370 billion over a decade, according to an estimate from the Urban-Brookings Tax Policy Center based on Biden’s campaign platform.
- Other measures that the administration has discussed in recent weeks include enhancing the estate tax for the wealthy.
- Biden has warned that those earning over $400,000 can expect to pay more in taxes.
Bipartisan Group Backs Gas-Tax Increase to Fund Infrastructure – Wall Street Journal, 4/23/2021
- A bipartisan group of House lawmakers endorsed raising the gasoline tax to pay for infrastructure spending, lending support to a measure that both Republican and Democratic proposals have avoided in the debate about how to cover the cost of an infrastructure package.
- The group of 58 lawmakers, dubbed the Problem Solvers Caucus, proposed indexing gas and diesel taxes to inflation, highway construction costs, fuel-economy standards, or some combination of the three in a report on infrastructure released Friday.
- The report lays out other possible fee increases, including a vehicle-miles traveled tax that would collect revenue from electric vehicles. Congress hasn’t raised the gas tax, which stands at 18.4 cents a gallon, since 1993.
- The White House has repeatedly said it is opposed to raising user fees like the gas tax to pay for infrastructure, arguing that it would disproportionately impact lower-income Americans, instead proposing a series of corporate tax increases to cover the cost of the package.
GOP Senators Release Outline of $568 Billion Infrastructure Plan – Wall Street Journal, 4/23/2021
- A group of Senate Republicans released the outline for a $568 billion infrastructure plan, putting out a GOP alternative to President Biden’s $2.3 trillion plan as lawmakers seek a bipartisan compromise on the issue.
- Of the $568 billion in the outline, $299 billion would go toward roads and bridges, an increase from the $115 billion the Biden administration’s plan proposes. The GOP plan also dedicates $61 billion to public transit systems, $20 billion to rail and $65 billion for broadband.
- The two-page Republican plan—which includes spending on roads, transit systems, and broadband internet over five years—doesn’t provide specifics on how it would cover the cost of the bill, a central issue in the talks.
- The GOP proposal calls for collecting user fees for electric vehicles and repurposing existing federal spending, while opposing Mr. Biden’s proposed tax increases on companies.
EUROPE & WORLD
Global Economy Sees Pickup as Services Revive and Factories Boom – Wall Street Journal, 4/23/2021
- The global economy is showing signs of stronger growth as its factories continued to boom and service providers began to see the benefits of vaccination programs.
- Many European countries retain restrictions on services that require close physical proximity and most forms of international travel. But the surveys recorded the first expansion of activity in its dominant services sector since August 2020, while its manufacturing sector continued to enjoy strong growth.
- Businesses appear to be preparing for a pickup in activity, with purchasing managers reporting the strongest new hiring since November 2018, driven by factories that saw new orders rise at a record pace.
- In the eurozone, businesses reported the largest rise in waiting times for delivery of supplies in the survey’s 23-year history, while the prices they paid for their inputs rose at the fastest pace in a decade.
- The surveys also pointed to a pickup in Japan, where activity in the services sector has also been subdued. Indeed, the composite Purchasing Managers Index for the country—which measures activity in the services and manufacturing sector—rose to 50.2 in April from 49.9 in March, pointing to an expansion for the first month since the pandemic struck.
- Australia has contained the pandemic more tightly than Japan and Europe, and the surveys point to strong growth in its economy during April. The composite PMI rose to 58.8 from 55.5 in March, the highest reading since the series began in 2016.
Daimler raises profit outlook, sees potential Q2 sales hit from chip shortage – Reuters, 4/23/2021
- Mercedes-Benz car maker Daimler on Friday raised its profit outlook for 2021, but said the global semiconductor chip shortage may continue to impact sales in the second quarter.
- Daimler now expects an adjusted margin from its Mercedes cars and van business of between 10% and 12%, up from its previous outlook of between 8% and 10%.
- But the German carmaker still expects its operating profit this year to be significantly above 2020 as the global economy recovers from the coronavirus pandemic.
- The company also raised its outlook for China, saying it expected more than 7.5% growth in 2021, up from its previous estimate of between 2% to 7.5%.
- Mercedes-Benz sales rose 60% in China in the first quarter. Unable to travel abroad, wealthier Chinese consumers have used their disposable income to splash out on luxury items.
Panasonic to buy U.S. supply-chain software firm Blue Yonder for $7.1 billion – Reuters, 4/23/2021
- In its biggest acquisition in a decade, Panasonic on Friday said it will buy U.S. supply-chain software company Blue Yonder in a deal worth $7.1 billion, to tap growing demand from companies as the COVID pandemic tests their resilience to disruption.
- Panasonic, which bought a 20% stake in Blue Yonder for 86 billion yen ($797 million) last year, will acquire the rest of the stock from shareholders including Blackstone Group and New Mountain Capital, in an agreement, including debt, that values Blue Yonder at $8.5 billion, the company said in a press release.
- Panasonic will use cash for half of the acquisition cost with the remaining covered by a bridge loan that will be refinanced with subordinated bonds and other hybrid finance, it said.
Baidu’s Jidu Auto to invest $7.7 billion in ‘robot’ smart cars – Reuters, 4/23/2021
- Jidu Auto, an electric vehicle venture between China’s tech giant Baidu and Chinese automaker Geely, aims to plough 50 billion yuan ($7.7 billion) into producing smart cars over the next five years, its chief executive told Reuters.
- Xia Yiping said on Friday that the funding would come from Baidu (9888.HK) and other investors and Jidu would aim to launch its first electric vehicle (EV) in three years, as is standard for the industry, but would make efforts to speed this up.
- Its first EV would look like a “robot” and would target young customers, Xia said, adding that Jidu would analyse big market data before deciding on a final model.
- Jidu plans to release a new model every one or one-and-a-half years after its first launch, Xia said, without giving a sales target. It plans to hire 2,500 to 3,000 people over two to three years, including 400 to 500 software engineers.
- Playwright William Shakespeare died in Stratford-on-Avon, England. (1616)
- Sirhan Sirhan was sentenced to death (later reduced to a life sentence) for the assassination of Robert F. Kennedy. (1969)
- James Earl Ray, convicted of assassinating Dr. Martin Luther King, Jr., died. (1998)
- The U.S. resumed diplomatic relations with Libya. (2004)