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Daily Market Report | June 03, 2021

Stocks Fall, Led by Retreat in Technology Stocks – Wall Street Journal, 6/3/2021

  • U.S. stocks fell Thursday, pulled lower by tech stocks, as fresh weekly data showed a continued recovery in the labor market.
  • The S&P 500 fell 0.7% after it ticked 0.1% higher on Wednesday. The Dow Jones Industrial Average dropped 0.5% and the Nasdaq Composite lost 1.1%, dragged down by tech stocks that had run higher when the economy was weaker.
  • Two reports on Thursday painted a picture of an improving labor market. The latest figures on initial jobless claims showed that 385,000 people applied for unemployment insurance last week, a new pandemic low.
  • The U.S. nonfarm private sector added 978,000 jobs in May, compared with 742,000 in April, according to a report Thursday from ADP. This was significantly higher than economists had expected at 623,000.
  • Investors get another major labor reading on Friday, when the monthly jobs report offers fresh insights into the recovery in the labor market, which Fed officials have said they remain concerned about.
  • A Federal Reserve report on Wednesday noted a pickup in growth as consumers return to restaurants and stores, but also said supply-chain disruptions and acute labor shortages are leading to price increases.
  • The market churn hit the meme stocks as well. AMC Entertainment Holdings slid 23%, erasing its premarket gains, after the company filed with regulators to sell more than 11 million new shares.
  • In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 1.609% from 1.591% on Wednesday.
  • Overseas, the pan-continental Stoxx Europe 600 pulled back from a record, easing down 0.2%.
  • In Asia, the major benchmarks were mixed. The Shanghai Composite Index slipped 0.4%, while Japan’s Nikkei 225 advanced 0.4%. Hong Kong’s Hang Seng Index declined 1.1%.

Israel sees probable link between Pfizer vaccine and myocarditis cases – Reuters, 6/3/2021

  • Israel’s Health Ministry said on Tuesday it had found the small number of heart inflammation cases observed mainly in young men who received Pfizer’s COVID-19 vaccine in Israel were likely linked to their vaccination.
  • In Israel, 275 cases of myocarditis were reported between December 2020 and May 2021 among more than 5 million vaccinated people, the ministry said in disclosing the findings of a study it commissioned to examine the matter.
  • Most patients who experienced heart inflammation spent no more than four days in the hospital and 95% of the cases were classified as mild, according to the study, which the ministry said was conducted by three teams of experts.
  • The study found “there is a probable link between receiving the second dose (of Pfizer) vaccine and the appearance of myocarditis among men aged 16 to 30,” it said in a statement.
  • According to the findings, such a link was observed more among men aged 16 to 19 than in other age groups.

GM Sees Brighter Profit Outlook as It Fends Off Computer-Chip Crunch – Wall Street Journal, 6/3/2021

  • General Motors expects profits to be better in the first half of the year than it previously projected, citing steps it is taking to blunt the impact of the computer-chip shortage that has hampered global vehicle production for months.
  • GM on Thursday said it expects pretax profit for the first half of the year to be significantly better than guidance it issued a month ago. The auto maker said it is working to boost vehicle deliveries to dealerships, which have seen inventory fall to the lowest levels in decades.
  • GM said the chip situation remains fluid and will continue to disrupt production. It said it is optimistic it can make up ground in the second half of the year and continues to prioritize production of large pickup trucks and sport-utility vehicles, its biggest money makers.
  • GM said it has begun shipping about 30,000 midsize pickup trucks that it had built and set aside awaiting needed chips, many parked in lots around its St. Louis-area assembly plant.
  • It aims to deliver that backlog to U.S. dealerships by around the July 4 weekend.

AMC Files to Sell More Than 11 Million Shares, Sending Meme Stock Spinning – Wall Street Journal, 6/3/2021

  • Investors began backpedaling from AMC Entertainment Holdings after the movie-theater operator said it plans to sell shares—even as it cautioned buyers that they may lose all their money—a day after the meme stock almost doubled in value.
  • Shares of AMC dropped over 30%, erasing big gains from earlier in the morning.
  • The company filed with regulators to sell more than 11 million shares, and warned against investing in its Class A stock.
  • In a filing, the company said, “Our current market prices reflect market and trading dynamics unrelated to our underlying business.”
  • AMC shares have rocketed in recent days—extending their advance this year to 2,850% by Wednesday’s close—after the company sold a chunk of new shares to hedge fund Mudrick Capital Management LP.
  • The company had leaned into its sudden popularity with individual investors by offering popcorn to shareholders who attend an AMC cinema this summer.

Ford says it could face $1.3 billion in new penalties after court ruling – Reuters, 6/3/2021

  • Ford Motor said Thursday it could face up to $1.3 billion in penalties in a long running dispute over import duties paid on Ford Transit Connect vehicles.
  • The No. 2 U.S. automaker said after the Supreme Court declined to hear its appeal in 2020 it paid increased duties for some prior imports, plus interest.
  • U.S Customs and Border Protection is now seeking additional duties of $181 million and is considering seeking a monetary penalty of “as much as $652 million to $1.3 billion,” Ford said, adding it would vigorously defend its actions.

United Plans to Buy 15 Supersonic Planes – Wall Street Journal, 6/3/2021

  • United Airlines Holdings took a step toward returning supersonic flying to passenger travel, unveiling an agreement to buy faster-than-sound airliners from Boom Technology Inc., an upstart aerospace company that says its planned aircraft could carry travelers by the end of the decade.
  • United’s agreement to buy 15 of Boom’s Overture aircraft is conditional on whether the design—which hasn’t yet been built—can meet safety, operational and sustainability standards, the companies said Thursday.
  • Even so, the announcement suggests that one of America’s largest airlines sees the potential for a return of supersonic air travel, which disappeared with the retirement of the Concorde almost 20 years ago.
  • A spokeswoman for Boom declined to disclose the financial terms of the deal, but said that the agreement includes a non-refundable industry-standard upfront payment from United, as well as an option for United to buy 35 additional aircraft for a pre-negotiated price.

Boeing offers new 777X freighter as Qatar eyes order, airline says – Reuters, 6/3/2021

  • Qatar Airways is weighing a multibillion-dollar investment with a potential order for 30 or more freighters, attracting interest from Boeing, which has begun offering a freight version of its future 777X jetliner, the airline’s chief executive said.
  • In April, the Gulf carrier said it was interested in a 777X freighter but had not been told by Boeing of any plans to launch one. But speaking to Reuters on Thursday, Chief Executive Akbar Al Baker said a cargo 777X was now on the table as the airline ponders a freighter order from Boeing or Airbus.

Walmart to give 740,000 U.S. store workers free Samsung phones – Reuters, 6/3/2021

  • Walmart said on Thursday it would give nearly half its U.S. employees free Samsung phones by the end of the year so they can use an app the company has developed to manage shifts, clock in and stay in “constant communication.”
  • The world’s largest retailer, which employs nearly 1.6 million people in the United States, said more than 740,000 workers would receive Samsung Galaxy XCover Pro smartphones, cases and protection plans.
  • Currently, most people share company devices.
  • Walmart declined to share financial details, but the phone sells at $499.99 on Samsung Electronics’ website.
  • It is common for big companies to strike heavily discounted deals with carriers and device makers when buying corporate phones in bulk.

Lockheed aims to produce 169 F-35 fighter jets in 2022 – Reuters, 6/3/2021

  • Lockheed Martin aims to produce and deliver about 169 F-35 fighter jets in 2022, the U.S. weapons maker said on Wednesday at a conference hosted by brokerage Bernstein.
  • The company said it expects the production rate for the jets to eventually plateau at about 175 aircraft per year after 2022, based on the demand by the United States government and partner countries.
  • Lockheed’s decision to enter full rate production for the jets has been delayed as the COVID-19 pandemic disrupted operations at aircraft manufacturers and their supply chains. The company is expected to deliver between 133 and 139 jets in 2021.

Jobless Claims Drop to Another Pandemic Low – Wall Street Journal, 6/3/2021

  • Worker filings for initial jobless claims have dropped by 35% since late April, adding to signs of a healing labor market as the U.S. economy ramps up.
  • Weekly unemployment claims, a proxy for layoffs, fell to 385,000 last week from a revised 405,000 the prior week, the Labor Department said Thursday.
  • Last week’s decline in claims marked the fifth straight week that new filings fell, from 590,000 the week ended April 24.
  • Thursday’s reading brings the four-week average of initial claims—which smooths out volatility in the weekly figure—to 428,000, the lowest point since the pandemic began, though still well above pre-pandemic levels.
  • The claims data also suggest millions of potential workers are still on the sidelines. In mid-May, some 15.4 million Americans received unemployment benefits through regular state aid and federal emergency programs put in place in response to the pandemic.
  • A Census Bureau survey conducted between May 12 and May 24 found that 7.3 million people hadn’t worked in the past seven days because they were caring for children not in school or daycare, while 3.8 million were sidelined due to worries about getting or spreading the virus on the job.

U.S. Services Gauge Climbs to Record, Showcasing Faster Recovery – Bloomberg, 6/3/2021

  • U.S. service providers expanded at the fastest pace on record in May, highlighting the rapid improvement in business activity across the economy.
  • The Institute for Supply Management’s services index rose to 64 last month — the highest in data back to 1997 — from 62.7 in April, data showed Thursday.
  • Readings above 50 signal growth, and the gauge exceeded the median projection in a Bloomberg survey of economists.
  • All 18 services industries reported growth in May, led by retailers, wholesalers, construction firms and entertainment and recreation providers.
  • The index of prices paid for materials advanced to the second-highest level on record as the gauge of order backlogs at service providers climbed to a record. Supplier delivery times lengthened.
  • The ISM’s measure of services employment slipped in May to a still-strong 55.3 from 58.8 a month earlier. Earlier this week, the group said its factory employment index fell to a six-month low.
  • At the same time, the ISM’s gauge of business activity — which parallels the group’s factory production measure — rose to 66.2 in May, close to a record high.

Labor Shortage Draws Attention of U.S. Lawmakers – Wall Street Journal, 6/3/2021

  • With millions of Americans still out of work and job openings at a record high, policy makers are dealing with an unexpected problem: How to coax people back into the labor force.
  • Congressional lawmakers from both parties are considering incentives such as providing federal funding to pay for hiring bonuses for workers and expanded tax credits for employers. A handful of states are moving to implement such programs on their own, without waiting for action from Washington.
  • A group of House Democrats introduced a proposal last month to expand a tax credit for employers who hire disadvantaged workers, including the long-term unemployed and people who receive federal benefits such as nutrition assistance.
  • On the Republican side, Rep. Kevin Brady of Texas and Sen. Mike Crapo of Idaho have proposed allowing states to use federal jobless aid to make one-time payments of between $600 and $1,200 for people who find a job after receiving unemployment benefits.

Half of U.S. states to end Biden-backed pandemic unemployment early – Reuters, 6/3/2021

  • Half of U.S. states, all of them led by Republican governors, are cutting off billions of dollars in unemployment benefits for residents, rebuffing a key part of President Joe Biden’s response to the coronavirus recession.
  • Maryland on Tuesday became the 25th state to announce it would stop the $300-per-week benefits before the federal program lapses in September.
  • Governor Larry Hogan said that while the program gave “important temporary relief” during the pandemic, it was no longer needed now that “vaccines and jobs … are in good supply.”
  • Hogan is following 24 other GOP state leaders and business lobbying groups, who say the benefits mean people are turning down good jobs, leaving companies without the workers they need to reopen.
  • The United States is about to undergo a real-time test of the issue.
  • The 25 states turning down the federal cash have announced different end dates for the program.
  • Benefits expire June 12 in Alaska, Iowa, Mississippi and Missouri, with the other 21 states falling off through July 10.

U.S. Economic Activity Picked Up in Spring, Fed Beige Book Says – Wall Street Journal, 6/3/2021

  • The U.S. economy continued to pick up speed in the spring, as consumers, many of them newly vaccinated and flush with federal stimulus cash, returned to restaurants, hotels and retail stores, the Federal Reserve said Wednesday.
  • But businesses told the Fed that ongoing supply-chain disruptions and an acute labor shortage have made it difficult for them to meet demand and have caused them to raise prices.
  • Prices rose more rapidly than earlier in the year, the Fed said, as businesses passed on rising material and freight prices to consumers.
  • Some companies said labor and inventory shortages were holding back business. In the Philadelphia area, “manufacturers have stated that their production would be higher but for labor shortages and supply-chain disruptions,” the report said.
  • A chain of convenience stores in the Cleveland Fed region had to cut back hours of operation for lack of workers.
  • Overall, the report suggested Americans are eager to leave their homes and spend money, particularly on trips, meals and houses. Restaurants and hotels said demand from domestic leisure travelers was getting stronger.
  • Realtors said they had seen bidding wars for homes. Construction companies said they were struggling to meet demand.
  • In the Dallas area, some builders had stopped building completed houses and were instead selling empty lots or partly built houses to the highest bidder. Some even worried about running out of land.
  • Rents were also starting to pick up, following declines during the height of the pandemic.

Biden Floats New Infrastructure Spending Offer of $1 Trillion – Wall Street Journal, 6/3/2021

  • President Biden told a top Senate Republican that he wants $1 trillion in new spending in infrastructure legislation, according to people briefed on the matter, a proposal that still leaves the White House far apart from GOP lawmakers ahead of a deadline to show progress in the talks.
  • During a Wednesday afternoon White House meeting with Sen. Shelley Moore Capito (R., W.Va.), Mr. Biden laid out his $1 trillion proposal and signaled he remained committed to paying for the plan with corporate tax increases, the people said.
  • Any new spending would be on top of $400 billion in projected federal spending over five years if current programs continued, one of the people said.
  • Mrs. Capito and other Senate Republicans working on the compromise infrastructure legislation are discussing making a counteroffer to the White House on Friday, when Mr. Biden and Mrs. Capito are planning to speak again.
  • “If Republicans don’t want to cooperate and help us seriously address the many crises we’re facing today, then, yes, we have to move forward without them,” Sen. Bernie Sanders (I., Vt.) tweeted Wednesday.
  • Top Democrats have said they are open to using reconciliation, though the entire party would need to be on board.
  • Vice President Kamala Harris could act as the tiebreaking vote.
  • Democrats already used reconciliation to pass a $1.9 trillion coronavirus relief package earlier this year using the budget tied to fiscal year 2021, which ends Sept. 30.
  • Although the Senate parliamentarian, the nonpartisan official who gives guidance about what is permitted, has indicated that lawmakers could technically use the same budget resolution to pass additional legislation, her subsequent guidance has indicated that could be cumbersome and run into procedural challenges, according to a copy of the ruling viewed by The Wall Street Journal.

EUROPE & WORLD

Euro zone business growth soared in May as restrictions eased -PMI – Reuters, 6/3/2021

  • Euro zone business activity surged in May as the easing of some coronavirus related restrictions injected life into the bloc’s dominant services industry, a survey showed, echoing data on Tuesday which showed factories had their best month on record.
  • That meant IHS Markit’s final composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, jumped to 57.1 last month from April’s 53.8, its highest level since February 2018.
  • An index covering the service industry soared to a near three-year high of 55.2 from 50.5, just beating the 55.1 flash estimate.
  • Suggesting the upswing would continue, the services new business index was the highest since early 2018 the overall composite new orders reading bounced to a near record 58.4 from 53.4 – its highest since June 2006 – as pent-up demand was released.
  • The services business expectations index rose to 71.2 from 68.4, its highest since January 2004.

China’s services activity growth slows in May – Caixin PMI – Reuters, 6/3/2021

  • China’s services sector expansion slowed in May, a private sector survey showed on Thursday, with weaker overseas demand and increased costs putting pressure on businesses.
  • The Caixin/Markit services Purchasing Managers’ Index (PMI) fell to 55.1 in May, down from 56.3 in April but still well in expansionary territory. The 50-mark separates growth from contraction on a monthly basis.
  • The Caixin China General Composite PMI came in at 53.8 in May, weaker than 54.7 the previous month.
  • Growth in total new orders slipped and services firms increased their staffing levels for the third straight month, but at a slower pace, the Caixin survey showed.
  • Inflation pressures worsened with input costs rising at a sharper rate in May and reports of more expensive raw materials, energy, staff and transport, the survey found.
  • Even though firms were able to raise selling prices for the 10th straight month, the increases have yet to catch up with the inflation in input costs.

Factmonster – TODAY in HISTORY

  • Edward White became the first U.S. astronaut to walk in space, during the Gemini 4 mission. (1965)
  • The world’s worst oil spill occurred when an exploratory oil well, Ixtoc 1, blew out, spilling over 140 million gallons of oil into the Bay of Campeche off the coast of Mexico. (1979)
  • Chinese army troops head to Beijing to crush student-led pro-democracy demonstrations. (1989)

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