US FINANCIAL MARKET
Stocks Waver as S&P 500 Heads for Fresh Record – Wall Street Journal, 6/11/2021
- U.S. stocks were mixed Friday, with the S&P 500 on track to notch a fresh record and its third consecutive weeks of gains.
- The S&P 500 added 0.2% shortly after the opening bell, a day after the market benchmark closed at a high.
- The Nasdaq Composite was little changed. The Dow Jones Industrial Average added 137 points, or 0.4%.
- The S&P 500 and Nasdaq are on course for modest weekly gains, while the Dow is poised for a slight loss.
- Meme stocks have continued to record sharp swings even as the broader markets have been calmer.
- AMC Entertainment Holdings rallied 4% on Friday morning, and GameStop jumped 5%.
- In bond markets, the yield on the 10-year Treasury note ticked up to 1.460%, from 1.458% Thursday, which was its lowest since March 2.
- Yields had been dragged down for three straight days by tepid economic data and high demand from investors both in the U.S. and elsewhere.
- Overseas, the pan-continental Stoxx Europe 600 rose 0.7% after closing Thursday at an all-time high.
- Major stock indexes in Asia closed on a mixed note. The Shanghai Composite Index declined 0.6%. South Korea’s Kospi Index rose 0.8%, while Hong Kong’s Hang Seng Index added 0.4%.
FDA’s Approval of Alzheimer’s Drug Leads to Third Adviser’s Resignation – Wall Street Journal, 6/11/2021
- A prominent Harvard drug researcher on Thursday became the third member of a Food and Drug Administration advisory committee to resign over the agency’s decision to approve a drug for Alzheimer’s, questioning whether the drug works.
- Harvard Medical School professor Aaron S. Kesselheim called the FDA’s approval of the Biogen drug Aduhelm “probably the worst drug approval decision in recent U.S. history.”
- The outside advisory committee that he served on—the FDA’s panel on peripheral and central nervous-system pharmaceuticals—had rejected supporting the drug, known generically as aducanumab, saying the company needed to conduct further study.
- Dr. Perlmutter said in his resignation letter to Stat, a health news organization, that he was quitting “due to this ruling by the FDA without further discussion with our advisory committee.”
- The resignations follow criticism of the FDA decision from some Alzheimer’s researchers and doctors. The FDA issued the approval over the doubts among some researchers and doctors who questioned its efficacy.
McDonald’s Hit by Data Breach – Wall Street Journal, 6/11/2021
- McDonald’s said hackers stole some data from its systems in markets including the U.S., South Korea and Taiwan, in another example of cybercriminals infiltrating high-profile global companies.
- The burger chain said Friday that it recently hired external consultants to investigate unauthorized activity on an internal security system, prompted by a specific incident in which the unauthorized access was cut off a week after it was identified, McDonald’s said.
- The investigators discovered that company data had been breached in markets including the U.S., South Korea and Taiwan, the company said.
- In a message to U.S. employees, McDonald’s said the breach disclosed some business contact information for U.S. employees and franchisees, along with some information about restaurants such as seating capacity and the square footage of play areas.
- The company said no customer data was breached in the U.S., and that the employee data exposed wasn’t sensitive or personal.
Boeing Offloads Unclaimed MAX Jets as Air Travel Recovers – Wall Street Journal, 6/11/2021
- A faster-than-expected recovery in domestic air travel is helping Boeing find new homes for unclaimed 737 MAX jets whose buyers walked away or collapsed during the pandemic.
- The Covid-19 vaccine-fueled travel rebound in the U.S. and some other parts of the world has left the Chicago-based plane maker with around 10 stored MAX aircraft needing buyers, people familiar with the matter said.
- Last July, it counted around 100.
- Major U.S. carriers such as United Airlines Holdings and Alaska Air Group are among recent buyers of the unclaimed MAX planes.
- United said the carrier’s earlier order for 25 MAX jets, announced in March, includes planes from Boeing’s built inventory as well as planes to be produced later.
- An Alaska Airlines spokeswoman said nine MAX jets it secured in a December deal had been built for other carriers.
PG&E Warns of More Blackouts During California’s Wildfire Season – Wall Street Journal, 6/11/2021
- PG&E said it is likely to proactively cut power to customers in Northern California more frequently this fall in anticipation of extreme wildfire risk.
- The company said it has been rushing to trim trees away from power lines and inspect poles and towers ahead of wildfire season, which starts in the summer and peaks in the fall. But it is behind on some of that work and recently agreed to implement more stringent safety recommendations.
- California is in the middle of a crippling drought that is expected to heighten fire risk throughout the summer and fall.
- About 85% of the state faces extreme drought conditions, according to the U.S. Drought Monitor, up from less than 3% this time last year.
- Southern California Edison, a unit of Edison International, also faces extreme fire risk throughout its service territory and relies on proactive shut-offs to mitigate it. The company, which serves about 15 million people throughout the southern part of the state, anticipates fewer of them this fall as a result of its efforts to make its power lines less prone to sparking.
Archer’s flying taxi makes splashy debut in heated market – Reuters, 6/11/2021
- Archer Aviation unveiled its first electric flying taxi “Maker” in a Tesla-style debut on Thursday as an increasing number of investors and aviation companies pile into the hot but yet-to-be-approved urban air mobility space.
- Interest in zero-emission aircraft that take off and land like helicopters but fly like planes is growing as aerospace companies look for new markets and face pressure to help decarbonize their industry though the battery-operated vehicles.
- Maker’s debut, staged at a hangar using XR technology to simulate a ride, followed news on Thursday of two separate deals involving electric Vertical Take-Off and Landing (eVTOL) aircraft companies based in Britain and Brazil.
- Archer expects Maker’s commercial launch in 2024 in Los Angeles and Miami and is in the process of certifying the piloted four-passenger aircraft with the Federal Aviation Administration, co-founder and co-CEO Brett Adcock told Reuters.
- The taxis can fly at 150 miles per hour (240 km per hour) for distances up to 60 miles (100km) at an entry level price between $3 and $4 per passenger mile.
Cheap Dollars Attract Foreign Investors to Treasurys – Wall Street Journal, 6/11/2021
- The cheapest dollars in years are spurring a rise in foreign investment in U.S. government bonds at the same time that pension funds are boosting their holdings—and that demand pickup could weigh on Treasury rates even as the economy strengthens.
- The WSJ Dollar Index, which measures the greenback against a basket of currencies, is down 2.9% this quarter so far and hovering close to the lowest level in about five months.
- The benchmark 10-year government bond yield slipped below 1.5% earlier this week, closing at 1.458% on Thursday—the lowest level since March 2. Prices rise when yields fall.
- A 5-year debt sale on May 26 received the most bids from overseas investors since August at over 64%.
- A 7-year issuance in the same week saw the most since January.
- The latest data from the U.S. Treasury Department showed that major foreign investors upped their holdings of longer-maturity U.S. government bonds in March.
How ESG Stocks Perform Depends on Who Ranks Them – Wall Street Journal, 6/11/2021
- Money is pouring into stocks that get good grades on issues like building a diverse workforce and reducing carbon emissions.
- But figuring out how high- and low-rated companies perform is nearly impossible because of inconsistencies in the way they are rated.
- A close look at the ratings and performance of stocks ranked by the three major providers of data on environmental, social and governance criteria shows that companies can have widely different ratings.
- Depending on the time period and the provider, top-ranked ESG stocks either beat the market or lag behind it.
- Low-ranked stocks, which are generally deemed to pollute more and treat their workers less well, can outperform top-ranked ESG stocks, and the market overall.
- Ratings are getting new attention now because the Securities and Exchange Commission is weighing regulations around disclosure on areas like exposure to climate change and carbon emissions.
US ECONOMY & POLITICS
U.S. consumer sentiment rebounds in early June – survey – Reuters, 6/11/2021
- U.S. consumer sentiment rebounded in early June as inflation fears subsided and households grew more optimistic about future economic growth and employment, a survey showed on Friday.
- The University of Michigan said its preliminary consumer sentiment index increased to 86.4 in the first half of this month from a final reading of 82.9 in May. Economists polled by Reuters had forecast the index rising to 84.
- The survey’s gauge of current economic conditions edged up to a reading of 90.6 from 89.4 in May.
- Its measure of consumer expectations rose to 83.8 from 78.8.
- The survey’s one-year inflation expectations fell to 4.0 from 4.6%, while its five-to-10-year inflation outlook dropped to 2.8% from 3.0% in May.
Bipartisan Group of Senators Reaches Agreement on Infrastructure Proposal – Wall Street Journal, 6/11/2021
- Members of a bipartisan group of senators said they had reached an agreement on an infrastructure proposal that would be fully paid for without tax increases, pitching the plan to other lawmakers and the White House as they try to craft compromise legislation on the issue.
- While the group of 10 senators didn’t reveal details of the plan in its statement, people familiar with the agreement said it called for $579 billion above expected future federal spending on infrastructure.
- The overall proposal would spend $974 billion over five years and $1.2 trillion if it continued over eight years, according to some of the people.
- Sen. Mitt Romney (R., Utah), another member of the group, said earlier Thursday that the group was looking at indexing the gas tax to inflation. The federal gasoline tax hasn’t been increased since 1993.
- The White House told the negotiators that raising revenue through indexing the gas tax for inflation, or through an electric vehicle mileage tax, would violate Mr. Biden’s red line of not raising taxes on those earning less than $400,000 a year and couldn’t be part of any package, according to people familiar with the discussions.
- The new proposal is also expected to be paid for in part by repurposing funds from previous Covid-aid packages, said Sen. Shelley Moore Capito (R., W.Va.), who led the last round of negotiations with Mr. Biden and has spoken with members of the bipartisan group.
- The support of five Republicans for $579 billion in spending above the baseline brings the two parties closer together on the scope of the package.
- But in a Senate evenly divided between Republicans and Democrats, at least 10 Republicans would need to join every Democrat to pass the bill through regular order, and it is unclear if the bipartisan agreement will attract that much support from both Republicans and Democrats.
U.S. Budget Deficit Grew to Record $2.1 Trillion in Fiscal Year’s First Eight Months – Wall Street Journal, 6/11/2021
- The U.S. budget deficit grew to a record $2.1 trillion during the first eight months of the fiscal year as spending continued to outpace tax receipts that are rising as the economy recovers from the damage inflicted by the Covid-19 pandemic.
- Federal revenue for the eight-month period ending in May rose 29%, to a record $2.6 trillion, primarily due to higher receipts from individual and corporate income taxes, the Treasury Department said Thursday.
- Outlays rose 20%, to a record $4.7 trillion, driven by payments for jobless benefits, nutrition assistance and Covid-19 relief programs including emergency small-business loans and stimulus checks to households.
- For the month of May, the deficit was $132 billion, roughly a third of what it was a year earlier.
- Revenue rose 167% to $464 billion, while spending increased 4% to $596 billion.
- Changes in tax-payment deadlines because of the pandemic contributed to the monthly revenue fluctuation.
Biden Meets With G-7 Leaders in England, Hoping to Repair Frayed Ties – Wall Street Journal, 6/11/2021
- World leaders gathered in southwestern England for a summit of the Group of Seven leading economies, where wealthy countries planned to collectively donate one billion Covid-19 vaccine doses to poorer nations and President Biden hoped to marshal the world’s democracies against authoritarian states.
- Mr. Biden, on his first international trip as president, met with the leaders of Canada, France, Germany, Italy, Japan and the U.K. under a leaden sky on a beach in Cornwall.
- The first face-to-face gathering of the G-7 since the start of the Covid-19 pandemic is set to be dominated by how the club of rich nations can pool resources to help stem the virus’s spread in developing economies and reaffirm the soft power of democratic nations in the process.
- Leaders from other major democracies—South Korea, South Africa and Australia—will later attend the summit while Indian Prime Minister Narendra Modi will participate via video link because of the Covid-19 pandemic raging through his country.
U.S. Inflation Expectations Build in June Survey of Economists – Bloomberg, 6/11/2021
- Economists’ inflation expectations keep rising as a variety of key metrics underscore building price pressures.
- Forecasters raised their estimates for the consumer price index and for a key inflation gauge favored by the Federal Reserve, known as the personal consumption expenditures price index, every quarter through the first half of next year, according to the latest monthly survey of economists by Bloomberg.
- Compared to a year earlier, the CPI is now forecast to remain above 3% through March 2022, peaking at a 4.3% year-over-year gain in the current quarter, according to the median forecast in a June 4-9 survey of 77 economists.
- The PCE price index is expected to rise 3.5% in the April to June period, up from the 3% estimate in the May survey and well above the Fed’s 2% goal.
- So far, economists surveyed by Bloomberg also appear to see the pop in prices as somewhat temporary. Expectations for annual gains in both CPI and PCE are holding near 2% in the second half of next year.
Fed may opt for faster phase-out of housing-backed bond purchases – Reuters, 6/11/2021
- The Federal Reserve could stop adding to its holdings of mortgage-backed securities (MBS) several months before it finishes increasing its stockpile of Treasuries, if the findings of a Reuters poll of economists are a guide.
- The expectation the U.S. central bank could reduce its MBS purchases by a relatively larger proportion than its purchases of Treasuries coincides with a growing debate about the need for any buying of housing-backed assets, given the red-hot real estate market.
- The results of the Reuters survey, which was released on Friday, showed economists expect the Fed to unveil its plans to taper its monthly purchases of $80 billion of Treasuries and $40 billion of MBS in the third quarter, perhaps as early as its annual policy retreat in August.
- Moreover, the poll showed the median view of economists pointed to the Fed scaling back its buying of Treasuries and MBS at an initial pace of $10 billion each, likely starting in January 2022.
- That would represent a 12.5% cut in Treasury purchases but a 25% reduction in MBS purchases.
EUROPE & WORLD
German economy set for post-pandemic bounce in growth and prices, Bundesbank says – Reuters, 6/11/2021
- German output is rebounding from its pandemic-induced slump and inflation could rise faster than currently expected, potentially affecting behaviour in the economy, the German central bank said on Friday.
- It now expects the German economy to reach pre-pandemic levels as soon as next quarter, growing by 3.7% this year, 5.2% next year and 1.7% in 2023.
- It now saw inflation at 2.6% this year, which would be the highest since 2008 and well above the European Central Bank’s target of price growth “below but close to 2%”.
- But the Bundesbank played down the significance of the surge, blaming it mainly on energy prices and tax effects.
- Without those, inflation would stand at just 1%, in line with last year and well below 2019’s level, the BuBa said.
- But it still warned that the sudden surge in prices, which will see inflation touch 4% in late 2021, might affect perceptions after a long period of low inflation.
Didi Chuxing, China’s Ride-Hailing Giant, Unveils U.S. IPO Filing – Wall Street Journal, 6/11/2021
- Didi Chuxing Technology, the Chinese ride-hailing behemoth, made its IPO papers public on Thursday, setting the company up to raise billions and begin trading publicly in the U.S. in July.
- Didi, which filed under its formal name of Xiaoju Kuaizhi Inc., could fetch a valuation upward of $70 billion, people familiar with the matter said, a number that could stretch even higher amid investors’ ravenous appetite for newly public, high-growth companies.
- The company is expected to raise roughly 8% to 10% of the valuation amount in the offering, people familiar with the matter said, money the company says it will use to invest in technology, grow its business outside of China and introduce new products.
- For the full year 2020, the filing shows the company posted revenue of 141.74 billion Chinese yuan, equivalent to $21.63 billion, down 8.4% from a year earlier as the coronavirus pandemic led to quarantines, travel restrictions and limitations on public gatherings.
- For 2020, it posted a net loss of 10.68 billion yuan, equivalent to $1.63 billion, and it also lost money in the full years 2018 and 2019.
- In comparison, Uber posted full-year revenue of $11.14 billion in 2020, with a loss of $6.77 billion.
South Korea Can Now Build Missiles Able to Reach Beijing, With U.S. Blessing – Wall Street Journal, 6/11/2021
- For decades, the U.S. kept tight limits on how far and how potent South Korea’s ballistic missiles could be, reflecting concerns that Seoul might unilaterally raise tensions with nearby China, North Korea and Russia.
- But last month, the Biden administration removed the final limits on Seoul’s missile program, abolishing what had been a roughly 500-mile cap on South Korea’s ballistic-missile range.
- It is a key change: Seoul’s missiles, in theory, can now fly far enough to strike Beijing, Moscow or anywhere else.
Socialist in Peru Has All But Won Presidential Vote as Pandemic Fuels Despair – Wall Street Journal, 6/11/2021
- Five days after a presidential election, socialist labor leader Pedro Castillo will likely clinch Peru’s presidency even as his right-wing rival challenges thousands of votes in a last-ditch effort to flip the outcome amid mounting tension.
- With 99.6% of ballots counted as of Friday, political scientists and pollsters say Mr. Castillo, a teacher’s union leader and head of a Marxist party, is expected to defeat his right-wing opponent Keiko Fujimori after he took 50.2% of the votes in Sunday’s election, a razor-thin lead of about 60,000 votes, according to the election agency.
- If the count holds, the son of poor Andean farmers will take office on July 28 amid a grueling pandemic that has pushed 3 million Peruvians back into poverty and killed more than 187,000 people, the world’s worst per capita death toll.
- Ms. Fujimori has yet to concede her third presidential bid and is asking election officials to throw out about 200,000 votes, most of which come from the poor highlands that overwhelmingly backed Mr. Castillo. Election officials are expected to rule on that in the coming days.
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