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Daily Market Report | June 09, 2021

Stocks Edge Higher, Led by Tech Shares – Wall Street Journal, 6/9/2021

  • Tech stocks lifted the S&P 500, leaving the broad U.S. stock index hovering just shy of its record close from early May.
  • The benchmark index edged up less than 0.1%, boosted by gains in Microsoft and Amazon.com. The tech-heavy Nasdaq Composite gained 0.2%, while the Dow Jones Industrial Average edged down 0.1%, or about 30 points.
  • The recent volatility in so-called meme stocks, which have gained popularity on online forums, continued Wednesday.
  • Clover Health Investments shares climbed 15% after surging 86% on Tuesday. AMC Entertainment, by contrast, dropped 9.2%.
  • Worries about runaway inflation have abated in recent days, although investors remain on watch for fresh data on inflation in May that is due Thursday.
  • Fresh data showed a higher-than-expected spike in China’s producer prices in May, driven by a rise in commodity prices.
  • The consumer-price index came in below forecasts, signaling that the higher costs haven’t yet been passed onto consumers.
  • In bond markets, the yield on the benchmark 10-year U.S. Treasury note declined to 1.472%, from 1.527% on Tuesday.
  • Overseas, the pan-continental Stoxx Europe 600 was relatively flat after notching a fresh record on Tuesday.
  • The Shanghai Composite Index ticked up 0.3% by the close of trading, while Hong Kong’s Hang Seng Index edged down 0.1%. Japan’s Nikkei 225 slid 0.4%.

U.S. Report Found It Plausible Covid-19 Leaked From Wuhan Lab – Wall Street Journal, 6/8/2021

  • A report on the origins of Covid-19 by a U.S. government national laboratory concluded that the hypothesis claiming the virus leaked from a Chinese lab in Wuhan is plausible and deserves further investigation, according to people familiar with the classified document.
  • The study was prepared in May 2020 by the Lawrence Livermore National Laboratory in California and was drawn on by the State Department when it conducted an inquiry into the pandemic’s origins during the final months of the Trump administration.
  • People familiar with the study said that it was prepared by Lawrence Livermore’s “Z Division,” which is its intelligence arm.
  • Lawrence Livermore has considerable expertise on biological issues. Its assessment drew on genomic analysis of the SARS-COV-2 virus, which causes Covid-19, they said.

Campbell Soup lowers annual profit forecast as costs rise – Reuters, 6/9/2021

  • Campbell Soup on Wednesday slashed its forecast for annual earnings after the company’s quarterly results fell short of estimates, hurt by higher costs related to raw materials and transportation.
  • Net sales fell about 11% to $1.98 billion, compared with estimates of $2.00 billion.
  • The company, which saw an uptick in demand during peak pandemic from consumers staying at home, said sales of snacks fell 8% in the third quarter, while sales of its soups and pasta sauces fell 14%.
  • On an adjusted basis, Campbell earned 57 cents per share, missing estimates of 66 cents, according to IBES data from Refinitiv.
  • Campbell forecast fiscal 2021 adjusted earnings between $2.90 and $2.93 per share, compared with its prior forecast of $3.03 to $3.11 per share. It expects sales to fall at least 3.0%, compared with the minimum 2.5% fall projected earlier.

Lordstown Motors Says It Doesn’t Have Cash to Start Commercial Production – Wall Street Journal, 6/8/2021

  • Electric-truck startup Lordstown Motors disclosed in a new regulatory filing Tuesday that it doesn’t have sufficient cash to start commercial production and has doubts about whether it can continue as a going concern through the end of the year.
  • The company amended its annual report to include the going-concern notice, which can flag survival problems for businesses within the next 12 months. The warning comes as new challenges emerge for the two-year-old company that is trying to convert a former General Motors Co. plant in Ohio to produce electric pickup trucks.
  • In its filing Tuesday, Lordstown Motors disclosed that it had conducted an evaluation while preparing its 2020 financial statements and concluded there were substantial doubts as to the company’s ability to continue as a going concern in 2021.
  • The company’s independent auditors shared the doubts, Lordstown Motors said in the filing.
  • Lordstown Motors also said in the filing that it found material weaknesses in its internal controls over financial reporting that could have led to material misstatements in its financial statements.

UPS expects about $100 billion in total revenue in 2023 – Reuters, 6/9/2021

  • United Parcel Service expects to top $100 billion in total revenue in 2023, the world’s biggest parcel delivery company said on Wednesday as it laid out its three-year financial targets.
  • The company forecast full-year revenue between $98 billion to $102 billion for 2023, compared with the average analyst estimate of $100.19 billion, according to Refinitiv data. It reported a full-year revenue of $84.6 billion in 2020.
  • UPS also said it expects to be carbon-neutral across scope 1, 2 and 3 emissions in its global operations by 2050.

Chipotle raises menu prices as employee costs increase – Reuters, 6/9/2021

  • Chipotle Mexican Grill said it has increased prices for products across its menu by about 4% owing to rising labor costs.
  • Several companies in the retail space, including McDonald’s and Walmart, have increased hourly wages for employees in recent months to retain and hire more workers to keep up with a surge in sales amid a broader economic recovery.
  • “We really prefer not to take pricing. But it made sense in this scenario to invest in our employees and get these restaurants staffed and make sure that we have the pipeline of people to support our growth,” CEO Brian R. Niccol said at the Baird Global Consumer, Technology & Services Conference.
  • The burrito chain said in May it plans to hire 20,000 more employees and will raise the average hourly wage to $15 by the end of June.

Google Should Be Treated as Utility, Ohio Argues in New Lawsuit – Wall Street Journal, 6/9/2021

  • Google’s critics have said for years that it should be treated like a public utility.
  • On Tuesday, Ohio’s attorney general filed a lawsuit asking a judge to rule that the search company is one.
  • The case adds to the legal woes confronting the Alphabet subsidiary, which also faces antitrust lawsuits from the Justice Department and a separate consortium of states led by Colorado and Texas.
  • Amid the array of court challenges, Ohio said that it is the first state in the country to bring a lawsuit seeking a court declaration that Google is a common carrier subject under state law to government regulation.
  • The lawsuit, which doesn’t seek monetary damages, says that Google has a duty to provide the same rights for advertisements and product placement for competitors as it provides for its own services.
  • In a statement alongside a Supreme Court order in April, Justice Clarence Thomas suggested that he believed regulating tech platforms as utilities had merit.

First Solar to Build New Solar-Panel Factory in Ohio – Wall Street Journal, 6/9/2021

  • The biggest American-owned solar-panel maker is set to announce plans Wednesday to invest $680 million in a new Ohio factory, in one of the largest bets on domestic solar manufacturing since China began dominating the industry a decade ago.
  • First Solar, based in Tempe, Ariz., said it plans to begin construction after necessary permits and local incentives have been secured and is aiming to open the plant early in 2023.
  • The factory, which would be the company’s third in Ohio, is expected to initially produce enough solar panels to produce 3 gigawatts of power annually, or enough to power about 570,000 homes.
  • Combined, the three plants by 2025 would produce panels that could generate 6 gigawatts of power annually, or a little more than half of all solar panels the company estimates will be produced annually in the U.S. by then, company chief executive Mark Widmar said.

Banks to Companies: No More Deposits, Please – Wall Street Journal, 6/9/2021

  • U.S. companies are holding on to billions of dollars in cash. Their banks aren’t sure what to do with it.
  • Bankers say they thought the improving economy would reduce companies’ desire for holding cash, but deposit inflows have continued in recent weeks. Chief financial officers and treasurers, many still wary of the pandemic’s impact, say they aren’t ready for big changes, even if they earn little or nothing on their deposits.
  • Bank deposits have continued to surge this year. Between late March and May 26, they rose by $411 billion to $17.09 trillion, according to the latest available data from the Federal Reserve.
  • That is slower than the pace last spring, but still nearly four times the average of the past 20 years, according to the Fed data.
  • High deposits usually aren’t a bad thing for banks, as long as they can use the money to make loans.
  • But bank lending has been slow as many companies prefer to borrow money from investors.
  • For banks, total loans equaled 61% of all deposits as of May 26, down from 75% in February 2020, according to the Fed data.

Digital-Security Startup Backed by Katzenberg Valued at Over $1 Billion – Wall Street Journal, 6/9/2021

  • Aura, a company backed by Hollywood mogul Jeffrey Katzenberg and Silicon Valley investor Sujay Jaswa, raised $150 million to help further its bid to become a one-stop offering for online security.
  • The funding round, led by private-equity firm Warburg Pincus, brings the company’s war chest to $450 million and values the company at more than $1 billion, Aura officials said.
  • Aura this week is rolling out an all-in-one digital-security product that includes antivirus and identity-protection software for consumers, and the company plans to launch an advertising campaign later this year.
  • Previously it offered different products for various digital-security threats. Many of those products came through acquisitions.
  • Aura is on track to generate roughly $220 million in revenue in 2021 from more than 1.7 million customers world-wide and is profitable, the officials said.

U.S. wholesale inventories unrevised in April – Reuters, 6/9/2021

  • U.S. wholesale inventories increased strongly in April as businesses continued to replenish stocks to meet pent-up demand, supporting expectations for robust economic growth this quarter.
  • The Commerce Department said on Wednesday that wholesale inventories rose 0.8% as estimated last month.
  • Stocks at wholesalers advanced 1.2% in March. Wholesale inventories increased 5.2% in April from a year earlier.
  • The component of wholesale inventories that goes into the calculation of gross domestic product also increased 0.8%.
  • Sales at wholesalers rose 0.8% after accelerating 4.3% in March.
  • At April’s sales pace it would take wholesalers 1.22 months to clear shelves, unchanged from March.
  • That is the shortest period since September 2014.

President Biden Ends Infrastructure Talks With Senate GOP Group – Wall Street Journal, 6/9/2021

  • President Biden called off an effort to reach an infrastructure compromise with several Senate Republicans after progress stalled, shifting his focus to a separate set of negotiations with a group of Republicans and Democrats in an effort to salvage a bipartisan deal on the issue.
  • At the same time, Senate Democrats signaled they were preparing to move at least part of an infrastructure package forward through a process relying on only Democratic support.
  • White House press secretary Jen Psaki said that Mr. Biden informed Sen. Shelley Moore Capito (R., W.Va.), the lead Republican negotiator, that the latest offer from the Republican group didn’t meet his threshold for spending on infrastructure, clean energy and job creation.
  • The White House will now turn to a bipartisan group of lawmakers as another possible path toward reaching a compromise.
  • A small group of Republicans and Democrats, including Sens. Rob Portman (R., Ohio), Mitt Romney (R., Utah), and Joe Manchin (D., W.Va.), have been discussing a plan that would spend up to $900 billion over five years, according to people familiar with the talks.
  • That figure includes baseline spending, projections of future spending if current infrastructure programs continue, according to one of the people, and lawmakers involved in the effort said their proposal could still change.
  • Separately on Tuesday night, the bipartisan Problem Solvers Caucus released a more detailed version of its $1.249 trillion physical infrastructure proposal, of which $762 billion would be new spending above the projected baseline.
  • The proposal would direct $582 billion to roads, bridges and highways over eight years and includes funding for transit, electric-vehicle infrastructure, broadband, clean energy and the electric grid. The group is working on ways to raise revenue with the bipartisan Senate group, an aide said

Senate Approves $250 Billion Bill to Boost Tech Research – Wall Street Journal, 6/9/2021

  • The Senate on Tuesday approved a bipartisan, $250 billion bill boosting government spending on technology research and development amid rising competition from China and other nations.
  • The bill passed 68-32. It won approval after being delayed just before the Senate’s Memorial Day recess, as some Republican lawmakers raised last-minute concerns about its size and scope.
  • It would authorize about $190 billion in spending to strengthen U.S. advanced technologies to better compete globally, according to a recent Congressional Budget Office analysis, although not all of that money would represent new spending.
  • The bill also has become a vehicle for a number of other tech-related initiatives.
  • One would authorize about $52 billion for encouraging more semiconductor production in the U.S.
  • An additional $10 billion would be authorized for the Commerce Department to designate regional technology hubs for research, development and manufacturing of key technologies.

Trump’s TikTok, WeChat Actions Targeting China Revoked by Biden – Wall Street Journal, 6/9/2021

  • President Biden on Wednesday revoked executive orders targeting the Chinese-owned TikTok and WeChat apps signed by former President Donald Trump, and signed a new order requiring security reviews of these and other apps in the jurisdiction of foreign adversaries.
  • The new order directs the Commerce Department to instead evaluate software applications connected with foreign adversaries under recent U.S. supply-chain security rules “and take action, as appropriate,” according to a fact sheet.
  • The order also provides criteria for identifying and evaluating apps that may pose an unacceptable risk to U.S. national security and Americans’ data security.
  • The action is the latest sign of the Biden administration’s emerging China policy, which represents a tougher approach acknowledging Beijing’s economic and geopolitical strength.

Surprise Jump in U.S. Wages Gives Inflation Debate a New Twist – Bloomberg, 6/9/2021

  • An unexpected jump in U.S. wages has given financial markets a new reason to worry that higher inflation may be here to stay.
  • Consumer prices are rising quickly as the economy reopens after the pandemic.
  • A closely watched data release on Thursday is expected to show prices rose another 0.4% in May — pushing annual inflation above April’s 4.2%, already the highest in more than a decade.
  • Many policy makers and economists see the price spike as temporary –- partly because they haven’t been anticipating much in the way of wage growth, which has been relatively stagnant for years at the lower end of the pay scale.
  • But last week’s jobs report showed a larger-than-forecast pickup in average hourly wages for a second straight month. It turns out that whatever the unemployment numbers say, there’s a shortage of people ready to work at the going rate of compensation — prompting many employers to boost pay or offer bonuses in order to staff up.
  • For example, by far the biggest job creator last month was leisure and hospitality, which added a net 292,000 people as vaccinations and easing of lockdowns lured Americans back to restaurants or hotels.
  • The average hourly wage in the industry was $18.09 in May, up from $17.86 in April, and over the past three months it’s risen at an annualized pace of 14.5%.

U.S. investigates disclosure of tax records on rich Americans – Reuters, 6/8/2021

  • The Treasury Department has asked law enforcement authorities to investigate the disclosure of tax records cited in a media report that showed that some of America’s richest people paid little to no income taxes, U.S. officials said on Tuesday.
  • U.S. media outlet ProPublica said it obtained “a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years.” The data indicated that billionaires including Amazon founder Jeff Bezos and Tesla founder Elon Musk paid no federal income taxes during some years.
  • Treasury Department spokeswoman Lily Adams said in an emailed statement that the matter has been referred to the FBI, federal prosecutors and two internal Treasury Department watchdogs, “all of whom have independent authority to investigate.”

EUROPE & WORLD

China’s highest producer inflation in over 12 years highlights global price pressures – Reuters, 6/9/2021

  • China’s May factory gate prices rose at their fastest annual pace in over 12 years due to surging commodity prices, highlighting global inflation pressures at a time when policymakers are trying to revitalize COVID-hit growth.
  • China’s producer price index (PPI) increased 9.0%, the National Bureau of Statistics (NBS) said on Wednesday, as prices bounced back from last year’s pandemic lows.
  • On a monthly basis, the PPI rose 1.6%, up from a 0.9% uptick in April.
  • The PPI rise in May – the fastest on-year gain for any month since September 2008 – was driven by significant price increases in crude oil, iron ore and non-ferrous metals, the NBS said.
  • Consumer prices rose 1.3% in May – the biggest year-on-year increase in eight months – but came in below expectations for a 1.6% gain. Consumer inflation remained well below the government’s official target of around 3%.
  • NBS data also showed food inflation rose 0.3% in May from a year earlier on higher prices for freshwater fish and eggs, despite still falling pork prices. That compared with a 0.7% drop in food prices in April.

Factmonster – TODAY in HISTORY

  • China agreed to lease Hong Kong to Britain for 99 years. (1898)
  • Donald Duck made his screen debut in The Wise Little Hen. (1934)
  • Secretariat won the Belmont Stakes and became the first Triple Crown winner in 25 years. (1973)

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