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Daily Market Report | June 21, 2021

US FINANCIAL MARKET

Stocks Rebound as Dow Gains 500 Points – Wall Street Journal, 6/21/2021

  • U.S. stocks rose Monday, attempting to regain ground after a tumultuous drop last week.
  • The Dow Jones Industrial Average gained 1.6%, or 528 points, to 33818 morning trading, chipping away at losses following its largest decline since the week through Oct. 30. The S&P 500 gained 1.2% and the Nasdaq Composite increased 0.5%.
  • Stock trading has been wobbly since Federal Reserve officials signaled that they may raise interest rates sooner than they had previously anticipated.
  • Some investors say that, despite Monday’s gains, they anticipate further volatility in the market as money managers parse signals on the trajectory of rates and monetary policy.
  • Among individual stocks, cryptocurrency exchange Coinbase fell 3.7%, following bitcoin and ether lower.
  • The digital assets have come under pressure in recent weeks as China has intensified a clampdown on bitcoin mining.
  • In bond markets, the yield on the 10-year U.S. Treasury note ticked up to 1.494%, from 1.449% Friday, reversing an earlier decline. Bond yields rise as prices fall.
  • The 10-year yield had dropped for five consecutive weeks, its longest stretch of losses since August 2019.
  • Overseas, the pan-continental Stoxx Europe 600 edged up 0.3%.
  • Japan’s Nikkei 225 fell 3.3%, while Australia’s S&P/ASX 200 dropped 1.8% and Hong Kong’s Hang Seng decreased by 1.1%.
  • China’s Shanghai Composite was little changed, ticking up 0.1%.

WeWork Reports Best Sales Since Dropping IPO Plans in 2019 – Bloomberg, 6/21/2021

  • As vaccination rates rise and workers start to trickle back into offices, WeWork is having its best months in almost two years.
  • The global co-working company said Monday that it sold enough desks in April and May — and had fewer cancellations — to record its best net desk sales since September 2019.
  • At its peak, WeWork reported 662,000 memberships in December 2019, which dropped to 490,000 a year later, in the midst of the pandemic. The metric is climbing again: At the end of May, WeWork had 505,000 memberships, which is getting close to where it was around the time of the IPO attempt.
  • WeWork’s occupancy rate, which used to hover above 70%, dropped to 47% late last year.
  • It has since risen to 53% at the end of May, the company said.

Lordstown Executives Sold Stock Ahead of Reporting Results and Before Troubles Came to Light – Wall Street Journal, 6/21/2021

  • Several top executives at Lordstown Motors sold off chunks of stock in the electric-truck startup ahead of reporting financial results, according to regulatory filings disclosing the transactions.
  • In all, five top executives, including the company’s president and its former chief financial officer, sold more than $8 million in stock over three days in early February, according to the filings.
  • Securities lawyers and accountants say such trades raise questions about the company’s internal controls, especially in light of its recent troubles.
  • One of its executives, Chuan “John” Vo, who oversees Lordstown Motors’ propulsion division, sold almost all of his vested equity—99.3%—on Feb. 2, leaving him with 717 shares and proceeds of more than $2.5 million, the filings show.

U.S. Economy Is Bouncing Back From Covid-19. Now Foreign Investors Are Rushing In. – Wall Street Journal, 6/21/2021

  • The extraordinary recovery of the U.S. economy is likely to make the country the world’s top destination for overseas investment this year and next, according to new United Nations projections, with foreign businesses drawn by the prospect of a rapid and sustained rebound in consumer spending and the Biden administration’s multitrillion-dollar infrastructure plans.
  • According to U.N. figures published Monday, overseas investments by businesses around the world fell by a third in 2020 from the previous year.
  • The U.S. recorded a 40% fall in investment but narrowly held on to its long-held position as the top destination ahead of China.
  • The U.N. in January estimated that the U.S. had lost the top slot.
  • For 2021 and 2022, the U.N. expects the U.S. to cement its leading position, with China in the second spot, as overseas investors expand capacity to meet huge post-pandemic demand.
  • With the U.S. and the wider global economy recovering at a faster pace than many expected at the start of the year, the U.N. Conference on Trade and Development, or Unctad, expects businesses around the world to increase foreign investments by 10-15% this year and a further 20-30% in 2022.

Chip Shortages Are Starting to Hit Consumers. Higher Prices Are Likely. – Wall Street Journal, 6/21/2021

  • The global chip shortage is pushing up prices of items such as laptops and printers and is threatening to do the same to other top-selling devices including smartphones.
  • Price increases are snowballing their way through suppliers and key materials in chip making as the industry rushes to meet rising demand and plug supply holes. As a result, many of the world’s large chip makers are raising prices they charge to the brands that make PCs and other gadgets. Industry officials say the increases may continue.
  • Consumers are starting to feel the pinch. Prices of popular models of some laptop computers have crept up over the past two months, among other electronics becoming more expensive at retailers.
  • HP has raised consumer PC prices by 8% and printer prices by more than 20% in a year, according to Bernstein Research.
  • HP Chief Executive Enrique Lores said the increases are driven by component shortages and that the company may adjust prices further to reflect cost increases.

Flipkart tells Indian court it offers lower fee if sellers cut prices – Reuters, 6/21/2021

  • Walmart’s Flipkart sees nothing wrong in offering to cut charges for sellers on its platform if they lower product prices, its lawyer told an Indian court on Monday, drawing protest from a retailer group challenging the practice.
  • Flipkart and Amazon are in a court battle against the Competition Commission of India’s (CCI) bid to restart an investigation into their business practices, after a judge in early June dismissed the companies’ pleas.
  • Both Flipkart and Amazon have for years battled accusations from brick-and-mortar Indian retailers that they bypass the foreign investment law by favoring some sellers and influencing prices of products, which are prohibited.
  • The companies say they comply with all laws.
  • A Reuters investigation in February based on internal Amazon documents showed the U.S. firm has for years given preferential treatment to a small group of sellers, doling out discounted fees and lowering the platform fees for some to enable them to offer more competitive prices.

Big U.S. retailers line up deals to take on Amazon Prime Day frenzy – Reuters, 6/21/2021

  • Amazon.com will face challenges from big retailers during its annual Prime Day promotion, as more merchants piggyback on the multibillion-dollar online sales event.
  • Target, Walmart, Bed, Bath & Beyond, Macy’s and Kohl’s are some top American retail chains offering big discounts and promotions to coincide with Prime day, which takes place on Monday and Tuesday this year.
  • The two-day sales event, which generated $10.4 billion in gross merchandise sales for Amazon last year, is taking place earlier than its traditional July run date, as the e-commerce giant looks to boost spending in what are historically slow sales days in the quarter.
  • Adobe expects Prime Day to top $11 billion in total online spend for U.S. retailers this year, surpassing sales generated on Black Friday and Cyber Monday last year.

US ECONOMY & POLITICS

Bipartisan Infrastructure Bill Could Lose Gas-Tax Rise, Senator Says – Wall Street Journal, 6/21/2021

  • A proposed infrastructure spending plan may be hammered out without a measure raising the gasoline tax, a key Republican lawmaker said Sunday, suggesting the removal of an obstacle to a nearly $1 trillion infrastructure plan pushed by a bipartisan group of lawmakers.
  • Sen. Rob Portman (R., Ohio), one of the lead Republicans in the group, said a higher gasoline tax may not be in the final package, citing opposition from the Biden administration.
  • According to a draft version of the plan, $579 billion of the money would represent new funding above expected baseline levels.
  • Continued over eight years, the plan would dedicate $1.2 trillion to roads and bridges, broadband and water projects, among other forms of infrastructure.
  • During a previous round of negotiations with a group of Senate Republicans, Mr. Biden said he wanted to see at least $1 trillion in spending above baseline levels, still well above the $579 billion in new spending the bipartisan group is discussing.

Fed officials: Faster bond taper could keep options open on rate hike – Reuters, 6/21/2021

  • Two regional Federal Reserve officials said Monday that a faster withdrawal from the central bank’s bond purchase program could give it more leeway in deciding when to raise interest rates.
  • The discussion of how fast to end the Fed’s $120 billion monthly bond purchase program is only just beginning, but should keep in mind how it affects the debate that will follow it over interest rates.
  • “Creating optionality for the committee will be really useful and that will be part of the taper debate as we think about how much signaling we are doing about future rate policy,” St. Louis Fed president James Bullard said.
  • Dallas Federal Reserve president Robert Kaplan noted the central bank’s new strategic framework does not mention bond purchases, and “moderating that sooner than later” might give the Fed more flexibility over the rate discussion.

EUROPE & WORLD

Iran’s New Hard-Line President Poised for Pivotal Role in Nuclear Talks – Wall Street Journal, 6/21/2021

  • When Iranian diplomats resume talks with Western officials to revive a battered nuclear deal, one name will stand out on the list of individuals Tehran wants removed from the U.S. sanctions list: Ebrahim Raisi, Iran’s president-elect.
  • The 60-year-old hard-line judge, who won Friday’s presidential election in Iran, was sanctioned two years ago by the Trump administration for his close ties to Iranian Supreme Leader Ali Khamenei. As Iran’s president-elect, Mr. Raisi has emerged in a pivotal role that could determine the fate of the 2015 multination accord.
  • Mr. Raisi, as a high-ranking judiciary official, is accused of overseeing violent crackdowns on protesters in 2009 and 2019 and the arrests of activists, lawyers and journalists. Mr. Raisi hasn’t commented publicly on the allegations.
  • Mr. Raisi’s political ascent has alarmed Iran’s regional adversary Israel, a close U.S. ally. Israeli Prime Minister Naftali Bennett during his new government’s first cabinet meeting Sunday said the election of Mr. Raisi should serve as “a signal for the global powers to wake up” before returning to the Iran nuclear agreement.
  • “What is clear to all of us is that a regime of hangmen must not possess weapons of mass destruction,” Mr. Bennett said.

Germany Raises Net Borrowing Next Year to 99.7 Billion Euros – Bloomberg, 6/21/2021

  • German Finance Minister Olaf Scholz is targeting 99.7 billion euros ($114 billion) in additional borrowing next year to bolster the country’s recovery from the coronavirus pandemic.
  • The projected new debt represents a 22% increase from the 81.5 billion euros foreseen in an earlier federal budget plan, according to two senior government officials, who asked not to be identified in line with protocol.
  • The borrowing would take the total for this year and next to more than 340 billion euros.
  • The officials said that Germany plans to invest around 51 billion euros a year through 2025. They noted that there was a potential budget gap of 6.2 billion euros in 2025.

Chinese Junk Bonds Flash Warning Signs – Wall Street Journal, 6/21/2021

  • Yields on Chinese junk bonds have jumped to levels last hit during the tail end of last year’s market turbulence, signaling growing investor concern about defaults.
  • Last week, the yield on an ICE BofA index of Chinese junk bonds in dollars topped 10% for the first time since May 2020.
  • It closed Friday at 9.93%.
  • In contrast, the equivalent index for global sub-investment grade debt ended the week at 4.57%. That was only 0.04 percentage point off a trough hit three days earlier, which was the lowest yield in a data set that goes back to 1997. Bond yields move inversely to prices.
  • The divergence means that Chinese junk bonds yield 5.36 percentage points over the global index. Apart from a brief period in March 2020, this spread, or gap, hasn’t been above that level since early 2012, ICE BofA data shows.

Tokyo Olympics to Allow Spectators at Summer Games – Wall Street Journal, 6/21/2021

  • The Summer Olympics in Tokyo will include up to 10,000 Japanese spectators at each event, organizers said, despite advice by leading doctors that the Games would be safer without crowds.
  • Monday’s decision clears up the final major uncertainty about the Games ahead of the opening ceremony on July 23.
  • Officials said in March that foreign spectators wouldn’t be permitted to travel to Japan to attend the Olympics.
  • Guidelines released by the International Olympic Committee and Tokyo organizers said venues could be filled up to 50% capacity, with a maximum of 10,000 spectators at each event.
  • Plans could change if infections in Japan rise sharply, they said.

Hong Kong’s Apple Daily Considers Closing Unless Government Releases Funds – Wall Street Journal, 6/21/2021

  • The publisher of the popular pro-democracy Apple Daily newspaper said it may cease publishing after authorities froze its assets and charged senior executives including its top editor under the national-security law.
  • Its closure would herald the biggest blow to press freedom in the city since Beijing imposed a national-security law in June 2020 to crush dissent in the Chinese territory. Apple Daily and its jailed founder, Jimmy Lai, have been frequent targets for the city’s authorities.
  • Board members of Next Digital, the newspaper’s publisher, met on Monday and set a Friday deadline to decide whether to close down operations, Apple Daily reported.
  • The board voted to request that the government release portions of its assets so that it can pay its employees.

Europe’s Wizz Air expects to fully recover from pandemic next year – Reuters, 6/21/2021

  • European budget carrier Wizz Air expects to fully recover from the coronavirus crisis as travel demand rebounds from the pandemic, its chief executive said on Monday.
  • Speaking at the virtual Paris Air Forum, Jozsef Varadi repeated recent comments that the Hungary-based airline would fly more seats this summer than it was flying two years ago before the pandemic struck.
  • “From my perspective, 2022 should be a fairly robust year in terms of delivering not just the volume of traffic but also the financial performance attached to it,” he said.
  • Speaking alongside Varadi, Air France-KLM CEO Ben Smith said he had been pleasantly surprised at the demand among travelers visiting friends and family.
  • “We are hoping to run about 60-65% of capacity this summer.”

Factmonster – TODAY in HISTORY

  • The U.S. Constitution went into effect when New Hampshire became the 9th state to ratify it. (1788)
  • John Hinckley was found not guilty by reason of insanity for the attempted murder of President Ronald Reagan. (1982)
  • The U.S. Supreme Court decided that burning the U.S. flag was protected under the First Amendment. (1989)
  • The WNBA made its debut. (1997)

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