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Daily Market Report | May 12, 2021

Stocks Slide on Inflation Data, Extending Decline – Wall Street Journal, 5/12/2021

  • U.S. stocks fell Wednesday, extending their recent declines after fresh data that showed the rise in consumer prices picked up speed in April.
  • The S&P 500 dropped 0.7%, after starting the week with its biggest two-day decline since early March. The Dow Jones Industrial Average slipped 0.5%, or about 181 points, while the tech-heavy Nasdaq Composite retreated 1.1%.
  • The consumer-price index jumped 4.2% in April from a year before, the Labor Department said Wednesday, the highest 12-month level since the summer of 2008.
  • Core prices, which exclude the volatile categories of food and energy, rose 3% from a year earlier.
  • Bond yields rose in response to the inflation data. The yield on 10-year U.S. Treasury notes climbed to 1.670%, from 1.623% Tuesday. Yields rise as bond prices fall.
  • Overseas markets were mixed. Gains for telecom stocks helped to push the Stoxx Europe 600 up 0.5% after the index on Tuesday posted its biggest fall since December.
  • In Asian markets, Taiwan’s Taiex tumbled 4.1% after the government tightened coronavirus restrictions. Japan’s Nikkei 225 fell 1.6%, while China’s Shanghai Composite rose 0.6%.

Covid-19 Live Updates: New U.S. Case Count Edges Down – Wall Street Journal, 5/12/2021

  • Newly reported coronavirus cases in the U.S. fell slightly, as Biden administration officials said children under 12 could be eligible for vaccinations later this year.
  • The U.S. reported more than 33,000 new cases for Tuesday, according to data compiled by Johns Hopkins University that was published early Wednesday. The data may update later.
  • Tuesday’s figure was down from Monday’s total of 36,898 and marked the fourth day in a row that newly reported cases were below 40,000.
  • The nation’s death toll rose to more than 582,800 with 684 fatalities reported for Tuesday, according to Johns Hopkins data.
  • The pace of vaccinations edged up from earlier in the week, while remaining below the levels seen last month. An average of 2.2 million doses of Covid-19 vaccines were administered each day over the past week, according to a Journal analysis of data from the Centers for Disease Control and Prevention.
  • Some 44.7% of adults in the U.S. are now fully vaccinated, according to CDC data. Among the elderly, the levels are higher, with 71.6% of people age 65 and older fully vaccinated.

EA signals gaming boom extending run with upbeat annual forecast – Reuters, 5/12/2021

  • Electronic Arts on Tuesday forecast annual adjusted revenue above analysts’ estimates, betting that demand for its titles, including “FIFA 21” and “Apex Legends,” would stay strong even as COVID-19 restrictions ease.
  • Revenue of $1.49 billion also exceeded estimates of $1.39 billion.
  • Net income for the quarter ended March 31 fell to $76 million, or 26 cents per share, from $418 million, $1.43 per share, a year earlier.
  • Excluding one-time items, the company earned $1.23 per share, beating expectations of $1.05 per share.
  • EA on Tuesday signaled it expected the momentum to continue, estimating full-year adjusted revenue to be $7.30 billion, higher than a Refinitiv IBES estimate of $6.61 billion.

Bacon-loaded breakfast menu fuels Wendy’s profit forecast – Reuters, 5/12/2021

  • Wendy’s raised its annual forecast for earnings on Wednesday, betting that its revamped, bacon-loaded breakfast menu would bring in more customers as restaurants reopen for dining after coronavirus restrictions were eased.
  • Wendy’s U.S. same-store sales rose 13.5% in the quarter, beating estimates of 9.84%, according to IBES data from Refinitiv.
  • On an adjusted basis, it earned 20 cents per share, 5 cents more than estimates.
  • For the year, Wendy’s expects adjusted earnings between 72 cents and 74 cents per share, up from its prior projection of 67 cents to 69 cents.
  • It hiked its quarterly dividend by 11% to 10 cents per share and increased its share repurchase program by $50 million.

Chesapeake Energy posts profit after bankruptcy exit, declares dividend – Reuters, 5/12/2021

  • Chesapeake Energy on Tuesday reported a quarterly profit of $295 million in its first earnings after emerging from bankruptcy in February.
  • Chesapeake said it achieved an average net production rate of about 436,000 boepd during the first quarter.
  • Chesapeake on Tuesday also declared an annual dividend on its common shares of $1.375 per share. The first quarterly dividend will be paid on June 10.
  • The company expects 2021 production to be between 410,000 barrels of oil equivalent per day (boepd) and 420,00 boepd, with total capital expenditure ranging between $670 million and $740 million.
  • Total production levels in 2022 is expected to remain flat to 2021, the company added, with natural gas increasing to about 85% of the total production mix for 2022.

Pentagon Backs Off Xiaomi Blacklisting After Legal Challenge – Wall Street Journal, 5/12/2021

  • The U.S. Defense Department agreed to remove Xiaomi from a blacklist banning U.S. investment in the Chinese tech giant, opting against further defending a Trump administration action that alleged ties between the smartphone maker and the Chinese military.
  • The retreat comes two months after Xiaomi won a key victory in a federal lawsuit challenging the listing, in which a Washington, D.C., judge criticized the Pentagon’s rationale for the move and ordered a temporary halt against its enforcement.
  • In agreeing to delist Xiaomi, the Pentagon signaled a willingness to walk away from a sustained fight over one of the Trump administration’s final actions against a major Chinese tech company.
  • Xiaomi joins a small but growing list of Chinese tech companies including the owners of Chinese social-media apps TikTok and WeChat that have successfully won courtroom reprieves against Trump-era actions.

China Threatens Retaliation Against Ericsson if Sweden Doesn’t Drop Huawei 5G Ban – Wall Street Journal, 5/12/2021

  • Beijing is giving Sweden one last chance to reverse its ban on telecommunications-equipment giant Huawei Technologies, a Chinese state media outlet said, before it could retaliate against rival Ericsson.
  • Ericsson’s participation in the next round of China’s massive 5G build-out is linked to whether Stockholm changes its stance on Huawei, according to the Global Times, a Chinese Communist Party publication.
  • Swedish regulators banned wireless carriers from using the Chinese company’s 5G equipment in October, citing national-security concerns. Huawei is challenging the decision in Swedish courts, with a ruling expected in the coming weeks.

Amazon Wins Appeal Over $300 Million EU Tax Bill – Wall Street Journal, 5/12/2021

  • Amazon.com struck a new blow to European Union efforts to wring more tax from big tech companies when the bloc’s second-highest court sided with the company over a $300 million tax bill.
  • The EU court on Wednesday annulled a 2017 decision from the European Commission, the EU’s top antitrust authority, that had ordered Amazon to pay 250 million euros in taxes to Luxembourg, the latest of several big EU tax decisions to be overturned.
  • In its decision, the court backed Amazon, saying that EU regulators had failed to prove that the company got an illegal advantage from tax rulings issued by Luxembourg, and saying that the commission’s analysis had been “incorrect in several respects.”

Oil Glut Returns to Near Pre-Pandemic Levels – Wall Street Journal, 5/12/2021

  • The oil supply glut that built up after the pandemic forced producing countries to slash output has almost returned to normal levels, the International Energy Agency said Wednesday.
  • But in its monthly report, the IEA cut its 2021 global demand growth forecast by 270,000 barrels to 5.4 million barrels a day. Demand in Europe and the Americas in the first quarter was weaker than previously thought, the IEA said.
  • The supply stocks held by the wealthy nations of the Organization for Economic Cooperation and Development slipped to 1.7 million barrels above the five-year average of 2016-20, the IEA said.
  • “Anticipated supply growth through the rest of this year comes nowhere close to matching our forecast for significantly stronger demand beyond the second quarter,” it said.

Pipeline Shutdown Has East Coast Drivers Making a Run on Gas – Wall Street Journal, 5/12/2021

  • Drivers along parts of the East Coast piled into gas stations on Tuesday, resulting in long lines and shortages as motorists reacted to what could be a weeklong shutdown of the nation’s largest fuel pipeline because of a cyberattack.
  • Colonial Pipeline, operator of a 5,500-mile conduit for gasoline, diesel and refined products, said Monday it hoped to substantially restore service by the end of the week.
  • It shut the pipeline late last week after a ransomware attack that U.S. officials have linked to a criminal gang known as DarkSide.
  • The Colonial pipeline runs from Texas to New Jersey and carries about 45% of the fuel consumed on the East Coast, according to the company’s website. The shutdown is particularly worrisome for Southeastern states, including North and South Carolina, Virginia and Georgia; they have fewer sources of fuel than do states farther up the Atlantic Coast.
  • Gasoline demand Monday across the U.S. was up about 20% from a week earlier, according to data collected by price and fuel tracker GasBuddy. Across five Southeastern states—Florida, Georgia, South Carolina, North Carolina and Virginia—demand for gasoline jumped 40%, the figures showed.
  • The national average gasoline price Tuesday morning was up about 2 cents at $2.985 a gallon, according to AAA.

Waymo, Cruise seek permits to charge for autonomous car rides in San Francisco – Reuters, 5/12/2021

  • Alphabet’s Waymo and rival Cruise have applied for permits needed to start charging for rides and delivery using autonomous vehicles in San Francisco, state documents reviewed by Reuters showed, setting the stage for the biggest tests yet of their technology in a dense urban environment.
  • Neither company revealed when they intend to launch services. But they detailed contrasting deployment plans, with Waymo starting with “drivered operations” and Cruise expecting to deploy vehicles without humans behind the wheel.
  • California’s Department of Motor Vehicles (DMV) has yet to decide on the previously unreported applications made by Waymo on Jan. 19 and Cruise on March 29, according to the documents. The agency said it is still reviewing the applications.

Consumer Prices Jumped as Economic Recovery Picked Up – Wall Street Journal, 5/12/2021

  • U.S. consumer prices surged in April as the economic recovery picked up, reflecting surging demand as the pandemic eased and higher prices due to supply bottlenecks.
  • The Labor Department reported its consumer-price index jumped 4.2% in April from a year earlier, up from 2.6% for the year ended in March. That is the highest 12-month level since the summer of 2008.
  • Consumer prices increased a seasonally adjusted 0.8% in April from March.
  • The so-called core price index, which excludes the often-volatile categories of food and energy, climbed 3% in April from a year before.
  • Some 36% of small businesses indicated that they had raised selling prices in April, the highest share since 1981, according to a survey conducted by the National Federation of Independent Business.

U.S. Tariffs Drive Drop in Chinese Imports – Wall Street Journal, 5/12/2021

  • U.S. tariffs have led to a sharp decline in Chinese imports and significant changes in the types of goods Americans buy from China, new data show, with purchases of telecommunications gear, furniture, apparel and other goods shifting to other countries.
  • Nearly two-thirds of all imports from China—or roughly $370 billion in annual goods—were covered by tariffs imposed by the U.S. in 2018 and 2019. Tariffs now cover just half of Chinese exports to the U.S., or about $250 billion in goods annually, as U.S. companies buy more from other countries, according to a Wall Street Journal analysis of information from Trade Data Monitor.
  • Vietnam has been an especially big beneficiary. It now ranks No. 6 globally for imports to the U.S., up from 12th as recently as 2018.
  • Imports of non-tariffed items from China have begun to pick up in recent months, after a global downturn in trade triggered by the Covid-19 pandemic. Even so, imports from China overall were at $472 billion for the 12 months ended March 31, compared to a peak of $539 billion in 2018.

Housing-Market Surge Is Making the Cheapest Homes the Hottest – Wall Street Journal, 5/12/2021

  • The red-hot U.S. housing market is giving an extra boost to the cheapest houses, including many in historically stagnant neighborhoods that have suffered from a lack of investment.
  • U.S. ZIP Codes where the median home cost less than $100,000 in early 2018 have had a 42% rise in prices in the three years since then, according to a CoreLogic analysis for The Wall Street Journal.
  • That is about double the rise for ZIP Codes where the median was between $150,000 and $200,000, and triple the rise in locales with $300,000-plus price tags.

More States to Reject Extra $300 Payment for Unemployed – Wall Street Journal, 5/12/2021

  • A growing number of Republican-led states are rejecting enhanced federal Covid-19 pandemic unemployment payments, saying the extra $300-a-week supplement is providing an incentive for some people to avoid work at a time when employers are struggling to find labor.
  • On Tuesday, Iowa and Tennessee joined the list of at least nine states that are moving toward the elimination of the extra benefits ahead of the program’s scheduled expiration in September. The U.S. Chamber of Commerce has also called for an end to the bonus.
  • Iowa, Mississippi, Missouri, Montana, North Dakota and South Carolina have sent letters to the Labor Department asking to end their participation in federal programs including the $300 supplemental benefit and extended payments and benefits for gig-economy and other workers not typically eligible for unemployment benefits.
  • Alabama, Arkansas and Tennessee have announced publicly they plan to opt out of the programs early, but the states hadn’t sent letters to the Labor Department as of Tuesday.

House Republicans Oust Liz Cheney From Leadership in a Voice Vote – Wall Street Journal, 5/12/2021

  • House Republicans ousted Rep. Liz Cheney of Wyoming from their leadership ranks in a closed-door meeting Wednesday morning, according to GOP aides, in an effort by the party to extinguish the most visible fight over former President Donald Trump and his role in the party’s future.
  • Ms. Cheney, the House GOP’s most prominent critic of Mr. Trump, had clashed publicly with House Minority Leader Kevin McCarthy (R., Calif.) and other senior Republicans by pushing back on Mr. Trump’s baseless claims that the 2020 election had been stolen from him.
  • GOP lawmakers said the public struggle put Ms. Cheney out of step with the majority of House Republicans, who wanted to avoid disputes over Mr. Trump’s comments and actions surrounding the 2020 election and focus on regaining the House majority in next year’s midterm elections.

EUROPE & WORLD

Death Toll Rises as Israel, Hamas Fighting Intensifies – Wall Street Journal, 5/12/2021

  • Israel intensified its airstrikes against Hamas-ruled Gaza early Wednesday in response to a fresh barrage of rockets targeting the country’s densely populated center, in the heaviest exchange of fire since the two sides fought a war in 2014.
  • The airstrikes and rockets have so far killed 43 Palestinians, including 13 children, and five Israelis, according to Palestinian and Israeli officials. Prime Minister Benjamin Netanyahu said Israel has killed dozens of Hamas and Palestinian Islamic Jihad operatives.
  • Since Monday, Israel has struck over 500 targets in Gaza, including overnight raids targeting what Israel’s military said were senior Hamas and Palestinian Islamic Jihad officials, some inside their houses.
  • Hamas has launched more than 1,000 rockets toward Israel, including 200 that fell short and landed inside Gaza, according to Lt. Col. Jonathan Conricus, an Israeli military spokesman.

SoftBank Reports Highest-Ever Annual Profit For a Japanese Company – Wall Street Journal, 5/12/2021

  • SoftBank Group smashed profit records in its home country, riding a series of blockbuster initial public offerings to an annual net income of 4.99 trillion yen, equivalent to $45.9 billion—the highest ever for any Japanese company.
  • The results, which include a record profit of ¥1.93 trillion for the quarter that ended in March, cap a wild year in which the Japanese technology investor rode roller-coaster stock markets from the lows at the beginning of the pandemic to recent highs.
  • The numbers were driven largely by an annual investment gain of ¥6.29 trillion at its $100 billion Vision Fund and its successor, whose portfolio companies have been listing in droves as the stock market soars.
  • The Vision Fund’s biggest win was a ¥2.6 trillion investment gain from its nearly 40% stake in South Korean e-commerce company Coupang, which listed in March. SoftBank also logged ¥945.9 billion in gains from the sale last year of a controlling stake in U.S. telecom company Sprint Corp. as well as a rise in the value of its remaining holdings.
  • SoftBank said it has tripled the size of the capital it has pledged to its second Vision Fund, to $30 billion, amid the strong returns.

Germany’s Merck sees boost from labs supplies earnings – Reuters, 5/12/2021

  • Germany’s Merck on Wednesday said its Life Science business, a leading maker of biotech lab supplies and gear, saw core earnings jump more than 43% in the first quarter, driven by the pharma industry’s efforts to fight the coronavirus pandemic.
  • Adjusted earnings before interest, tax, depreciation and amortization at the division rose to 793 million euros ($961 million).
  • At the time it said it expected 2021 adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of 5.4-5.8 billion euros, up from 5.2 billion last year. It reaffirmed that guidance on Wednesday.

Toyota unfazed by chip shortage, forecasts rebound in profit – Reuters, 5/12/2021

  • Toyota Motor forecast its profit would bounce back to pre-pandemic levels this year, as the world’s biggest automaker exuded confidence it can tackle a global chip shortage that has stung its rivals.
  • Japan’s top automaker, which has been stockpiling the semiconductors that are used in everything from engine maintenance to car safety and entertainment systems, said on Wednesday it is not seeing any major short term impact from the shortage which has been baked into its forecasts.
  • Toyota, the maker of the RAV4 SUV crossover and Prius hybrid vehicles, almost doubled its fourth-quarter operating profit to 689.8 billion yen, beating an estimate of 641.5 billion yen from 10 analysts compiled by Refinitiv.
  • It forecast a 14% jump in profit to 2.50 trillion yen for the fiscal year that began on April 1 against an 8.4% profit decline for the year that just ended.
  • Toyota also announced a $2.3 billion share buyback, a one-to-five stock split and set bigger targets for electric vehicles (EVs) production.

Factmonster – TODAY in HISTORY

  • The body of Charles and Anne Lindbergh’s kidnapped baby was found. (1932)
  • Axis forces in North Africa surrendered. (1943)
  • Former president Jimmy Carter became the first U.S. president (in or out of office) to visit Fidel Castro’s Cuba. (2002)

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