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Daily Market Report | June 17, 2021

US FINANCIAL MARKET

U.S. Stocks Waver, Dollar Extends Rally on Fed’s Rate Outlook – Wall Street Journal, 6/17/2021

  • U.S. stocks flitted between small gains and losses Thursday, kept under pressure by declines among shares of materials and financial companies.
  • The Dow Jones Industrial Average rose 9 points, or less than 0.1%, to 34043.
  • The S&P 500 fell less than 0.1% and the Nasdaq Composite lost 0.1%.
  • Investors’ risk appetite ebbed after Federal Reserve officials Wednesday gave the clearest signals yet of their plans to gradually pull back the monetary policies that helped propel markets to record highs.
  • Their median projection showed they see lifting their benchmark rate to 0.6% by the end of 2023, sooner than previously forecast.
  • While stocks drifted in a relatively narrow range, gold prices fell over 4% Thursday, the most in over 10 months.
  • The precious metal, which doesn’t offer any income to investors, generally becomes less attractive to investors compared to yield-bearing investments when rates look set to rise.
  • The WSJ Dollar Index, which tracks the U.S. currency against a basket of others, advanced 0.3%.
  • That added to its 0.8% gain Wednesday, which was its biggest climb in more than a year.
  • Materials shares fell alongside gold prices, with mining company Barrick Gold dropping 3.2% and Newmont dropping 3%.
  • Overseas, the pan-continental Stoxx Europe 600 slipped 0.1% after closing Wednesday at a record.
  • Japan’s Nikkei 225 closed down 0.9%, and South Korea’s Kospi Composite index edged 0.4% lower. The Shanghai Composite ticked up 0.2% and Hong Kong’s Hang Seng rose 0.4% each.

Higher prices boost Lennar profit in tight U.S. housing market – Reuters, 6/17/2021

  • Lennar beat quarterly profit on Wednesday, helped by higher prices due to a tight supply of homes in the United States.
  • Total revenue rose 21.6% to $6.43 billion and was ahead of expectation of $5.91 billion.
  • The homebuilder said its quarterly home deliveries increased by about 14% to 14,493 homes, topping Wall Street’s estimate of 14,326. Average price for homes delivered rose by about 6% to $413,000.
  • Lennar’s homebuilding gross margin rose by 450 basis points to 26.1% in the three months ended May 31, a record for the second quarter, helped by higher-than-expected sales price per home.
  • Excluding items, Lennar earned $2.95 per share, above analysts’ average estimate of $2.36.
  • Lennar’s orders, an indicator of future revenue, rose 32% to 17,157 homes in the quarter, beating analysts’ average estimate of 16,715 homes, according to IBES data from Refinitiv.
  • The No. 2 U.S. homebuilder also raised its average sales price forecast by 5% to $420,000, while reaffirming its outlook for annual deliveries of between 62,000 homes and 64,000 homes.

Kroger lifts annual forecasts as online grocery investments click – Reuters, 6/17/2021

  • Kroger raised its forecast for annual profit on Thursday, betting that its quick pickup and delivery services will encourage consumers to order groceries online even as they begin dining out again.
  • Revenue came in above pre-pandemic levels at $41.3 billion, above estimates of $39.78 billion.
  • In the first quarter ended May 22, Kroger’s digital sales jumped 16%.
  • Excluding items, Kroger earned $1.19 per share, beating estimates of $1.01.
  • Kroger forecast 2021 adjusted profit per share between $2.95 and $3.10, compared with its prior range of $2.75 to $2.95.
  • The company expects 2021 adjusted same-store sales to fall between 2.5% and 4%, while it had earlier projected a decline of up to 5%.

Ford sees higher operating profit on strong vehicle demand – Reuters, 6/17/2021

  • Ford Motor said on Thursday it expected operating earnings in the second quarter to be better than its previous estimate, helped by higher demand for its pickup trucks and sports utility vehicles.
  • Adjusted earnings before interest and taxes for the quarter will also be better than the previous year, it said, despite the continuing semiconductor crunch that has made automakers forecast billions in losses.
  • However, net income for the quarter is expected to be significantly lower, as the prior year included a $3.5 billion gain on investment in self-driving startup Argo AI, the automaker said.
  • Dearborn, Michigan-based Ford said customer demand for its recently launched vehicles including Bronco sports utility vehicle and electric F-150 Lightning pickup were strong.

JPMorgan Buys Nutmeg to Bolster Digital Banking Push in U.K. – Wall Street Journal, 6/17/2021

  • JPMorgan Chase agreed to buy digital wealth manager Nutmeg Saving and Investment, part of a push to establish a retail banking presence in the U.K.
  • Nutmeg, founded in 2012, has more than 140,000 customers and £3.5 billion under management, the equivalent of around $5 billion.
  • A price for the acquisition wasn’t disclosed but people familiar with the transaction said it was between £500 million and £1 billion.
  • Nutmeg’s savings and investment products won’t initially be offered through the retail banking project, the bank said.

Lordstown Motors says it has no binding purchase orders from customers – Reuters, 6/17/2021

  • Lordstown Motors, which recently raised concerns about its ability to remain in business, said on Thursday it did not have any binding purchase orders or commitments from customers.
  • The U-turn comes after President Rich Schmidt on Tuesday said at an Automotive Press Association event in Detroit the company had firm and binding orders for the first two years of production of its electric pickup truck.
  • “Although these vehicle purchase agreements provide us with a significant indicator of demand for the Endurance, these agreements do not represent binding purchase orders or other firm purchase commitments,” the company said in a filing with the U.S. securities regulator.
  • In a filing on Thursday, the company said it pushed its annual meeting of stockholders until Aug. 19 from June 17.

OnlyFans Seeks New Funding at Valuation Above $1 Billion – Bloomberg, 6/17/2021

  • OnlyFans, a site where celebrities and adult-film stars charge admirers for access to videos and photos, is in talks to raise new funding at a company valuation of more than $1 billion, according to people with knowledge of the matter.
  • The startup, which is profitable, is working with an adviser to solicit interest from investors, said one of the people, who asked not to be identified because the discussions are private.
  • OnlyFans handled more than $2 billion in sales last year.
  • Since the site takes a 20% fee, that means it had over $400 million in revenue.
  • This year, the London-based company is growing at a rate of over 100%, according to the person familiar with the situation.
  • OnlyFans has said it’s paid out over $3 billion to the more than 1.25 million creators on its platform.
  • It has over 130 million registered users.

Google’s cloud taps AMD for new service as chip wars heat up – Reuters, 6/17/2021

  • Advanced Micro Devices and Alphabet’s Google Cloud on Thursday said Google will offer cloud computing services based on AMD’s newest data center chip, a move likely to intensify AMD’s push to grab market share from rival Intel.
  • Cloud computing providers such as Google, Amazon.com and Microsoft are some of the biggest buyers of data center chips. They build services on top of the chips to rent the computing power out to millions of customers.
  • Google said on Thursday it will start offering services based on AMD’s “Milan” server chip, which AMD released in March. Google said customers such as Snap and Twitter are testing the new AMD-based services.

US ECONOMY & POLITICS

Fed Pencils In Earlier Interest-Rate Increase – Wall Street Journal, 6/17/2021

  • Federal Reserve officials signaled they expect to raise interest rates by late 2023, sooner than they anticipated in March, as the economy recovers rapidly from the effects of the pandemic and inflation heats up.
  • Their median projection showed they see lifting their benchmark rate to 0.6% from near zero by the end of 2023.
  • In March they had expected to hold it steady through that year.
  • Fed officials also discussed an eventual reduction, or tapering, of the central bank’s bond-buying program, Chairman Jerome Powell said in a press conference Wednesday after the central bank’s two-day policy meeting.
  • The timing of such a move remains uncertain, he added.
  • In updated projections released Wednesday 13 of 18 Fed officials indicated they expect to lift short-term rates by the end of 2023, up from seven who expected that outcome in March. In March, most anticipated holding rates steady through 2023.
  • Seven officials expected to raise rates by the end of 2022, up from four in March. None projected lifting rates this year.
  • Policy makers now expect the Commerce Department’s personal-consumption expenditures price index—their preferred measure of inflation—to rise 3.4% in the fourth quarter of 2021 from a year earlier, up from a March forecast of 2.4%.
  • They revised up their projection for fourth-quarter-to-fourth-quarter economic growth to 7% from 6.5%.
  • Officials left their forecast for unemployment in the fourth quarter of this year at 4.5%, unchanged from their March projection. The jobless rate stood at 5.8% in May.

Jobless Claims Rose Last Week, Pausing Downward Trend – Wall Street Journal, 6/17/2021

  • Worker filings for initial unemployment benefits rose by 37,000 to 412,000 last week, marking the first increase since late April and pausing what had been a steady downward trend in filings.
  • The four-week moving average, which smooths out week-to-week volatility, reached a new pandemic low of 395,000.
  • This is the lowest average level since March 2020, when the pandemic first took hold in the U.S.
  • Thursday’s report showed unemployment rolls shrank late last month. The number of ongoing benefit claims—a proxy for those receiving payments—fell by more than 500,000 to 14.8 million the week ended May 29.
  • The total number of workers collecting unemployment benefits through regular state programs for the week ended May 29 was 3.5 million, a pandemic low but still more than double levels in late 2019.
  • With federal pandemic-related programs included, the number of so-called continuing claims was 15.3 million in the week ended May 22.

U.S. Mortgage Rates Slip to Lowest Level in Four Months at 2.93% – Bloomberg, 6/17/2021

  • The average for a 30-year loan was 2.93%, down from 2.96% last week and lowest since Feb. 18, Freddie Mac said Thursday.
  • Cheaper borrowing costs have fueled the pandemic housing rally for the past year, giving Americans searching for properties more buying power. After hitting a record low at 2.65% in January, rates have been hovering near 3% for about two months.
  • Even with borrowing costs at historic lows, potential buyers are struggling to find homes they can afford as an inventory shortage and frenzied demand drive up prices.

Manchin’s Compromise Voting Legislation Faces Bipartisan Wariness – Wall Street Journal, 6/17/2021

  • Sen. Joe Manchin (D., W.Va.) laid out what he would like to see in sweeping elections legislation, aiming to stake out a position he hopes could draw bipartisan support while including provisions each party has long opposed.
  • His proposal, which he has shared with Senate Majority Leader Chuck Schumer (D., N.Y.) and other Democrats, reflects support for some core measures of Democrats’ “For the People Act”—which faces a test vote on the Senate floor next week—such as mandating at least 15 days of continuous, early voting and automatic voter registration for anyone with a driver’s license.
  • He also endorsed making Election Day a national holiday and forcing the disclosure of large donations to politically active groups that currently aren’t subject to such disclosure requirements.
  • Mr. Manchin’s plan is at odds with some core features of the Democratic bill, a version of which passed the House in March almost entirely on party lines.
  • Mr. Manchin wants to preserve the ability of states to require voters to verify their identities, while Democratic legislation would greatly loosen voter ID requirements by allowing a voter to sign a statement attesting to his or her identity instead of presenting an identification card.

Supreme Court Leaves Affordable Care Act Intact – Wall Street Journal, 6/17/2021

  • The Supreme Court on Thursday rejected a challenge to the Affordable Care Act, the third time it has preserved the 2010 healthcare law.
  • Texas and other Republican-leaning states, backed by the Trump administration, sought to strike down the law on technical arguments after Congress reduced to zero the tax penalty for failing to carry health insurance.
  • Thursday’s 7-2 decision, written by Justice Stephen Breyer, found that none of the plaintiffs suffered any injury from zeroing out the penalty and thus they lacked legal standing to bring the lawsuit at all.
  • Joining the majority were Chief Justice John Roberts and Justices Clarence Thomas, Sonia Sotomayor, Elena Kagan, Brett Kavanaugh and Amy Coney Barrett.

House to Vote on Repealing 2002 Iraq War Law – Wall Street Journal, 6/17/2021

  • The House is expected to vote Thursday to revoke the 2002 law that authorized war in Iraq, reviving a long-simmering debate over Congress’s constitutional power to declare war and the commander in chief’s latitude to send American troops into combat abroad.
  • The measure is expected to pass with bipartisan support, reflecting the growing unpopularity among American voters with the so-called forever wars.
  • The Biden administration said in a statement Monday that it supported termination of the 2002 authorization for the use of military force, or AUMF.
  • Similar legislation in the Senate is expected to get a vote on June 22 in the Committee on Foreign Relations.
  • An even tougher legislative fight looms this year over the 2001 AUMF that Congress passed in reaction to the 9/11 terrorist attacks. That authorization is broader and more frequently used than either the 2002 or 1991 AUMFs.

U.S., EU Forge Closer Ties on Emerging Technologies to Counter Russia and China – Wall Street Journal, 6/17/2021

  • The U.S. and European Union plan to cooperate more on technology regulation, industrial development and bilateral trade following President Biden’s visit, in a bid to help Western allies better compete with China and Russia on developing and protecting critical and emerging technologies.
  • Central to the increased coordination will be a new high-level Trade and Technology Council the two sides unveiled Tuesday.
  • The aim of the TTC is to boost innovation and investment within and between the two allied economies, strengthen supply chains and avert unnecessary obstacles to trade, among other tasks.
  • In a sign of both sides’ aspirations for the council, it will be co-chaired on the U.S. side by Secretary of State Antony Blinken, Commerce Secretary Gina Raimondo and U.S. Trade Representative Katherine Tai.
  • The EU side will be co-chaired the Ms. Vestager, the bloc’s top competition and digital-policy official, and fellow Executive Vice President Valdis Dombrovskis, who handles trade.

EUROPE & WORLD

TikTok Owner ByteDance’s Annual Revenue Jumps to $34.3 Billion – Wall Street Journal, 6/17/2021

  • ByteDance, the owner of popular short-video app TikTok, told employees that its revenue last year more than doubled to $34.3 billion, underscoring why the Chinese technology giant is one of the world’s hottest startups.
  • ByteDance said its total revenue grew 111% from a year ago, while gross profit rose 93% to $19 billion, according to excerpts of a company memo viewed by The Wall Street Journal.
  • ByteDance had about 1.9 billion monthly active users across all its platforms as of December 2020, according to the memo.
  • At the end of 2019, ByteDance had about 1.5 billion monthly active users.
  • Its net loss for 2020 totaled $45 billion, due largely to an accounting adjustment the company made for an increase in the fair value of its convertible redeemable preferred shares.

Energy, services boost euro zone inflation in May as expected – Reuters, 6/17/2021

  • A sharp spike in energy prices and more expensive services boosted euro zone consumer inflation in May as expected, data confirmed on Thursday, taking the rate of price growth just above the European Central Banks target.
  • The European Union’s statistics office Eurostat confirmed inflation in the 19 countries sharing the euro rose 0.3% month- on-month for a 2.0% year-on-year increase, as estimated earlier. The ECB wants to keep inflation below, but close to 2%.
  • Energy prices added 1.19 percentage point to the overall year-on-year figure and services 0.45 point, while food, alcohol and tobacco added 0.15 point.
  • Without the most volatile components of energy and food, or what the ECB calls core inflation, prices rose 0.2% on the month and only 0.9% year-on-year.

Hong Kong Police Arrest Apple Daily Editor Under China National Security Law – Wall Street Journal, 6/17/2021

  • Authorities sent shudders through Hong Kong media outlets after police arrested the top editor of a popular daily newspaper and the city’s security chief warned of severe punishment for anyone who uses news to challenge China’s national security.
  • More than 500 officers on Thursday searched the newsroom of Apple Daily, founded by jailed Beijing critic Jimmy Lai, and arrested five executives, including its editor-in-chief Ryan Law, who was led away in handcuffs from his home.
  • Police said the arrests were related to more than 30 unspecified Apple Daily articles published since 2019 that played a crucial part in a conspiracy to encourage foreign sanctions against Hong Kong and China.
  • Beijing’s representative office in Hong Kong said in a statement that “press freedom is no shield for illegal activities.”

Factmonster – TODAY in HISTORY

  • The Battle of Bunker Hill took place during the American Revolution. (1775)
  • The Statue of Liberty arrived in New York City aboard the French ship Isere. (1885)
  • U.S. Supreme Court ruled that no locality may require recitation of Lord’s Prayer or Bible verses in public schools. (1963)
  • Burglary of Democratic Party headquarters in Washington, DC, started the Watergate political scandal. (1972)
  • O. J. Simpson’s slow-speed chase by the police, watched by millions on TV, ended in his arrest. (1994)

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