Daily Market Report | June 15, 2021
US FINANCIAL MARKET
Stocks Fall After Retail Sales Data – Wall Street Journal, 6/15/2021
- U.S. stocks slipped on Tuesday, after fresh data showed Americans slowed their spending last month.
- The Dow Jones Industrial Average fell 0.4%, while the S&P 500 dropped 0.2% and the Nasdaq Composite lost 0.5%. The latter two set fresh record highs on Monday.
- Fresh data showed that retail spending fell 1.3% in May.
- Supply-chain disruptions and business reopenings are triggering a consumer spending shift from goods to services.
- In bond markets, the yield on the benchmark 10-year Treasury note was up slightly at 1.506% on Monday.
- Copper prices fell amid jitters about possible Chinese measures to tamp down rising commodity prices.
- The price of copper to be delivered in three months declined 1.3% on the London Metal Exchange to $9,900 a metric ton.
- Overseas, the pan-continental Stoxx Europe 600 ticked up 0.2%.
- The index has closed at a record for the previous seven trading sessions.
- Japan’s Nikkei 225 rose almost 1% by the close of trading, and South Korea’s Kospi Index gained 0.2%.
- China’s Shanghai Composite Index declined 0.9% and Hong Kong’s Hang Seng Index retreated 0.7%.
- Public health officials in the U.K. say they are increasingly confident that vaccines offer significant protection against the Delta variant of coronavirus, a hopeful sign as the highly transmissible strain spreads across the world.
- Separate studies from researchers in England and Scotland published Monday found that while protection against infection was somewhat diminished against Delta compared with more established variants, two doses of vaccine offered considerable protection against severe illness and hospitalization.
- An analysis of more than 14,000 Delta cases by England’s public health agency found a double dose of the shot developed by Pfizer Inc. and BioNTech SE reduces the risk of hospitalization after infection with Delta by 96%.
- Two doses of the vaccine developed by the University of Oxford and AstraZeneca reduces the risk by 92%, Public Health England said.
- A separate study by academics and public health officials in Scotland, published as a letter in the Lancet medical journal, reported a reduction in vaccine effectiveness against infection with Delta compared with earlier strains, but similar levels of protection against severe illness.
- The Covid-19 virus infected people in five U.S. states in December 2019 and early 2020 before those states reported their first cases, according to a large new government study, providing new insights into the first, unseen weeks of the nation’s deadly epidemic.
- Scientists analyzing blood samples taken for a National Institutes of Health research program identified seven people in states from Mississippi to Wisconsin to Pennsylvania who were infected with the new virus days or weeks before the first cases were confirmed in their areas. At least a couple had mild symptoms.
- All told, the researchers found evidence of infection in just nine out of 24,079 participants whose blood samples were taken between Jan. 2, 2020, and March 18, 2020, for the NIH research program.
- Still, the findings provide evidence the new coronavirus was infecting Americans before the world learned that it was causing a deadly outbreak in Wuhan, China.
- Two of the cases also occurred weeks before public-health officials confirmed the virus had arrived in the U.S., and before they started testing people widely.
U.S. and EU Agree to Suspend Airbus-Boeing Trade Fight – Wall Street Journal, 6/15/2021
- The U.S. and the European Union agreed to suspend their trade dispute over government subsidies to Boeing Co. and Airbus SE, significantly easing trade tensions amid a broader effort to improve trans-Atlantic relations.
- The agreement would suspend for five years tariffs that have been authorized by the World Trade Organization, U.S. Trade Representative Katherine Tai told reporters on Tuesday.
- A four-month suspension of the tariffs that’s already in place will be extended starting on July 11, she said.
- European Commission President Ursula von der Leyen said on Twitter that the deal “really opens a new chapter in our relationship because we move from litigation to cooperation on aircraft.”
- Other topics on the day’s agenda include the coronavirus pandemic, health, the economy and foreign policy issues related to China, Russia and Iran, a senior Biden administration official said.
- General Motors will supply electric batteries and hydrogen fuel cell systems for rail supplier Wabtec’s locomotives, in a move extending the No. 1 U.S. automaker’s reach outside the automotive sector.
- Wabtec, based in Pittsburgh, is developing locomotives powered by electric batteries and hydrogen fuel cells in response to rail industry demand to eliminate carbon emissions.
- It has a test electric locomotive model and intends to build a second generation version, with deliveries starting in 2023.
- Under the nonbinding memorandum of understanding, GM will supply Ultium electric batteries and Hydrotec hydrogen fuel cell power cubes. Terms of the deal were not disclosed.
- GM’s Ultium batteries will be built by the company’s joint venture with South Korea battery maker LG Energy Solution, which is building plants in Ohio and Tennessee.
- The hydrogen fuel-cell systems will be assembled by GM’s joint venture with Honda in Brownstown, Michigan.
GM’s Cruise Unit Starts Preproduction on Autonomous Shuttle – Bloomberg, 6/15/2021
- Cruise LLC, the self-driving-car unit majority-owned by General Motors, has started preproduction on its purpose-built battery-electric autonomous shuttle and boosted its access to cash.
- The company has begun assembly of around 100 units of its Origin vehicle — unveiled in January 2020 — at a facility in Warren, Michigan, and expects to complete building them this summer ahead of testing.
- Cruise has also secured a $5 billion credit line from GM Financial, the automotive finance arm of GM.
- The multiyear credit line from GM takes Cruise’s access to capital to more than $10 billion, Cruise Chief Executive Officer Dan Ammann said.
- Longer-term, the shuttles will be built at GM’s more than 4 million-square-foot facility in Hamtramck, Michigan, known as Factory Zero. Full production is due to start in early 2023.
Oil Highest Since 2018 as Traders See Prospect of Rising Prices – Bloomberg, 6/15/2021
- Oil traded above $71 a barrel as some of the most prominent voices in the market said they expect prices to continue to rise.
- Crude has soared this year as vaccination programs have turned the tide against the pandemic in the U.S., Europe and China. Gasoline demand in China last month was 5% higher than during the same period in 2019, according to the median of five estimates from the nation’s top oil companies including China Petroleum & Chemical Corp., better known as Sinopec.
- Meanwhile money continues to rotate into the commodities sector more broadly. A monthly survey of fund managers by Bank of America showed that bullish commodities bets had overtaken Bitcoin as the most crowded trade in markets.
Lumber Prices Are Falling Fast, Turning Hoarders Into Sellers – Wall Street Journal, 6/15/2021
- Futures for July delivery ended Monday at $996.20 per thousand board feet, down 42% from the record of $1,711.20 reached in early May. Futures have declined 14 of the past 15 trading days, the last two by the most allowed by exchange rules.
- Cash lumber prices are also crashing. Pricing service Random Lengths said Friday that its framing composite index, which tracks on-the-spot sales, dropped $122 to $1,324, its biggest ever weekly decline.
- The pullback came just six weeks after the index rose $124 during the first week of May, its most on record.
- Random Lengths described a chaotic rout in which sawmill managers struggled to provide customers with price quotes.
- Copper prices fell Tuesday to their lowest level in eight weeks on concerns that China may tamp down on rising commodity prices and that the metal’s red-hot rally has gone too far.
- Three-month copper forward contracts on the London Metal Exchange dropped 3.8% to $9,582.50 a metric ton Tuesday. The drop puts the industrial metal, which has a variety of uses from electronics to cars and home building, on course for its steepest one-day decline since March.
- Speculation that China’s strategic stockpiling body, the State Reserve Bureau, is planning to gradually release some of its stockpiles of copper, aluminum and zinc over the coming months led to the downturn on Tuesday, analysts said.
- The world’s second-largest nation consumes half of the world’s refined copper. Investors fear such steps could be part of a broader push from Chinese officials to temper rising prices.
US ECONOMY & POLITICS
- Retail sales dropped in May as shoppers shifted more of their spending from goods to services amid business reopenings, supply-chain disruptions and higher prices.
- Consumers cut spending by 1.3% last month, reducing expenditures on autos, furniture, electronics, building materials and other items, the Commerce Department reported Tuesday.
- Retail spending in May was up 28% when compared with the same month a year ago, during widespread restrictions aimed at containing the coronavirus.
- Spending at restaurants and bars rose 1.8% last month, sending sales for this service beyond pre-pandemic levels. Americans also shelled out more on clothing in May, a category of goods they had shunned for much of the pandemic but are likely turning to as they go out again. Online sales dropped as well, signaling a pivot to in-person shopping.
U.S. Producer Prices Accelerated in May, Stoking Price Pressures – Bloomberg, 6/15/2021
- Prices paid to U.S. producers rose more than expected in May, fueling companies to raise prices on American consumers.
- The producer price index for final demand increased 0.8% from the prior month after a 0.6% gain in April, according to data from the Labor Department Tuesday.
- Almost 60% of the May increase in the index for final demand can be traced to a 1.5% advance in prices of goods.
- The costs of nonferrous metals, motor vehicles, and beef and veal all climbed.
- Prices for services rose for a fifth straight month, with more than 40% of the increase attributable to automobile-retailing margins, which surged 27.3%.
- The annual advance in the overall PPI rose to a 6.6% gain, a figure biased higher by the fact that it was compared to the soft reading seen in May of last year. The increase was the largest in data going back to 2010.
- Producer prices excluding food, energy, and trade services — a measure often preferred by economists because it strips out the most volatile components — advanced 0.7% from the prior month and rose 5.3% from a year earlier.
Factory Output in U.S. Increased in May by More Than Forecast – Bloomberg, 6/15/2021
- Output at U.S. factories rose in May by more than forecast, signaling further improvement in the sector despite supply shortages, hiring difficulties and elevated materials prices.
- The 0.9% increase followed a revised 0.1% decrease in April, Federal Reserve data showed Tuesday. Total industrial production, which also includes mining and utility output, climbed 0.8% in May after a revised 0.1% gain a month earlier.
- The median estimate in a Bloomberg survey of economists called for a 0.8% monthly increase in factory production and a 0.7% gain in industrial production.
- Total industrial production is nearing pre-pandemic levels — down less than 1.5% from February 2020 — but restrained capacity continues to limit faster output growth.
- Manufacturing capacity utilization, a measure of plant use, climbed to 75.6%, while total industrial capacity increased to 75.2%.
U.S. homebuilder confidence falls to 10-month low in June – Reuters, 6/15/2021
- U.S. homebuilder confidence in the market for single family homes fell in June to its lowest level since August 2020, dented by higher housing costs and shortages in key materials such as lumber.
- The NAHB/Wells Fargo Housing Market index declined to a reading of 81 this month from 83 in May.
- Economists polled by Reuters had expected the index would be unchanged at 83.
- The NAHB survey’s measure of single-family home sales expectations in the next six months fell 2 points to a reading of 79 in June, while a gauge of current sales conditions decreased 2 points to 86.
- The prospective buyers index fell two points to 71.
- Americans are bracing for a wave of higher inflation over the next year, amid projections of big increases in home prices, rent, food, gasoline and medical costs, the May New York Fed Survey of Consumer Expectations reported Monday.
- One year from now, the public expects inflation to hit 4%, a series high for the New York Fed report, from the projected 3.4% increase reported in April. Three years from now, survey respondents said they expected to see inflation at 3.6%, the second highest reading for the survey, up from April’s 3.1%.
- One year from now, food and rent prices are expected to rise by 8% and 9.7%, respectively, both carving out series highs. Meanwhile, the expected rise in gasoline and medical care costs also increased, with both readings just short of 10%.
- Home prices are expected to rise by 6.2% a year from now, a series high, and up from April’s 5.5% reading, the survey said.
White House Sets Deadline for Bipartisan Infrastructure Talks – Bloomberg, 6/15/2021
- The White House is giving bipartisan talks on a compromise infrastructure package another week to 10 days to bear fruit and is prepared to endorse a Democrat-only route if that effort fails, according to House lawmakers.
- White House counselor Steve Ricchetti told a meeting of House Democrats Tuesday morning that the administration will give the bipartisan effort “a week or 10 days and then we move along to reconciliation,” House Budget Committee Chairman John Yarmuth said.
- A group of five Republican and five Democratic senators has been wrangling in recent days to come up with a compromise to move an infrastructure package through Congress using regular rules.
- But they have yet to release a detailed proposal, with talks continuing on funding mechanisms.
EUROPE & WORLD
Taiwan reports largest incursion yet by Chinese air force – Reuters, 6/15/2021
- Twenty-eight Chinese air force aircraft, including fighters and nuclear-capable bombers, entered Taiwan’s air defense identification zone (ADIZ) on Tuesday, the island’s government said, the largest reported incursion to date.
- While there was no immediate comment from Beijing, the news comes after the Group of Seven leaders issued a joint statement on Sunday scolding China for a series of issues and underscored the importance of peace and stability across the Taiwan Strait, comments China condemned as “slander”.
- Chinese-claimed Taiwan has complained over the last few months of repeated missions by China’s air force near the self-ruled island, concentrated in the southwestern part of its air defense zone near the Taiwan-controlled Pratas Islands.
- The latest Chinese mission involved 14 J-16 and six J-11 fighters, as well as four H-6 bombers, which can carry nuclear weapons, and anti-submarine, electronic warfare and early warning aircraft, Taiwan’s Defense Ministry said.
Factmonster – TODAY in HISTORY
- King John sealed the Magna Carta. (1215)
- George Washington was appointed head of the Continental Army by the Second Continental Congress. (1836)
- Charles Goodyear was granted a patent for rubber vulcanization. (1844)
- Ella Fitzgerald, the ”first lady of song,” died in Beverly Hills, California. (1996)
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