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Daily Market Report | June 25, 2021

US FINANCIAL MARKET

S&P 500 Opens Higher to Extend Weekly Gains – Wall Street Journal, 6/25/2021

  • U.S. stocks edged higher Friday, heading for their best week in more than two months amid renewed confidence in a global economic expansion.
  • The S&P 500 climbed 0.2%, a day after the broad stocks gauge posted a record closing high for the 30th time in 2021.
  • The Dow Jones Industrial Average rose 193 points, or 0.6%, to 34390, and the Nasdaq Composite advanced 0.1%.
  • Adding to investors’ optimism about the economy, President Biden and a group of 10 centrist senators agreed to a roughly $1 trillion infrastructure plan Thursday. With a total of $973 billion of investment over five years, the deal will make new investments in the electrical grid, transit, roads and bridges and other forms of infrastructure.
  • Nike shares jumped 13% after the sports apparel maker posted record sales in the three months through May.
  • FedEx shares fell 4.3% after announcing plans to raise spending to add capacity to its network.
  • In bond markets, the yield on 10-year Treasury notes ticked down to 1.483% from 1.486% Thursday.
  • In overseas markets, the Stoxx Europe 600 edged down less than 0.1%.
  • Japan’s Nikkei 225 rose almost 0.7% by the close, China’s Shanghai Composite Index added 1.2% and Hong Kong’s Hang Seng climbed 1.4%.

Nike profit, sales beat estimates on strong demand from Americans leaving lockdown – Reuters, 6/24/2021

  • Nike’s quarterly profit and revenue topped Wall Street estimates on Thursday, as Americans stepping out of pandemic-led lockdowns splurged on footwear and apparel, sending the sneaker maker’s shares 4% higher.
  • Total revenue nearly doubled to $12.34 billion from a year ago, when the pandemic was at its peak.
  • Analysts were expecting revenue of $11.01 billion and earnings of 51 cents per share, according to IBES data from Refinitiv.
  • In Nike’s biggest market, North America, revenue more than doubled to $5.38 billion and beat the average analysts’ estimate of $4.31 billion.
  • In China, a fast-growing market for the company, revenue of $1.93 billion missed expectations of $2.22 billion.
  • Total gross margin increased 850 basis points to 45.8% versus last year, boosted in part by the company’s direct to consumer business and fewer charges related to factory cancellations. Analysts expected gross margin of 43.96%, according to Refinitiv.
  • Net income came in at $1.51 billion, or 93 cents per share, for the quarter ended May 31, compared with a loss of $790 million, or 51 cents per share, a year earlier.

FedEx shares fall as labor woes weigh on 2022 outlook – Reuters, 6/24/2021

  • Shares in U.S. delivery firm FedEx shed 4.2% on Thursday after labor woes tempered its 2022 earnings forecast that missed Wall Street expectations.
  • Revenue increased 30% to $22.6 billion.
  • Analysts expected fourth-quarter earnings of $4.99 per share and revenue of $21.5 billion, according to Refinitiv.
  • Fiscal fourth quarter adjusted net income rose to $1.36 billion, or $5.01 per share, from $663 million, or $2.53 per share, a year earlier.
  • Pandemic-fueled demand for e-commerce services supported higher fees and robust volumes contributed to cost savings.
  • The Memphis-based company’s shares fell $12.79 to $290.90 in extended trading, after it forecast fiscal 2022 earnings, excluding some items, of $18.90 to $19.90 per share – below analysts’ average estimate $20.37, according to Refinitiv data.

Fed Gives Big Banks Clean Bill of Health in Latest Stress Test – Wall Street Journal, 6/25/2021

  • The Federal Reserve gave large U.S. banks a clean bill of health as they emerge from the coronavirus crisis, paving the way for the lenders to boost their payouts to investors after June 30.
  • In a vote of confidence for the banks, including Goldman Sachs Group and Wells Fargo, the Fed on Thursday said it would end temporary limits on dividend payments and share buybacks after all 23 firms performed well in annual stress tests.
  • In a worst-case scenario, featuring a severe global recession in which the U.S. sees double-digit unemployment, the 23 large banks would collectively lose more than $470 billion, the Fed said in a release.
  • Their capital ratios would decline to 10.6%, still more than double their minimum requirements, the release said.
  • Capital returned to investors over the coming year could approach $200 billion, Barclays analysts estimated.
  • They now expect most banks’ payouts to shareholders to exceed their profits.

Amazon, Google Probed in U.K. Over Fake Reviews – Wall Street Journal, 6/25/2021

  • The U.K.’s antitrust regulator launched an investigation into whether Amazon.com and Google are doing enough to crack down on fake reviews, adding a new layer to regulatory scrutiny of U.S. tech giants.
  • The Competition and Markets Authority said Friday the move stems from concerns Amazon and Alphabet’s Google haven’t been doing enough to address fake reviews on their sites, but added that it hasn’t yet reached a view on whether the companies have broken the law.
  • The CMA’s decision follows an initial investigation, opened in May 2020, assessing several platforms’ internal systems and processes for spotting and dealing with fake reviews.
  • The work raised concerns that Amazon and Google weren’t doing enough to detect fake and misleading reviews and suspicious behavior, investigate and promptly remove fake reviews, or impose adequate sanctions on reviewers or businesses to deter them.
  • The CMA also said it was concerned Amazon’s systems were failing to adequately stop or deter sellers from manipulating product listings, like co-opting reviews from other products.

Tesla Shareholder Panasonic Sells Stake for $3.6 Billion – Wall Street Journal, 6/25/2021

  • Tesla’s leading battery supplier is no longer a Tesla shareholder.
  • Panasonic said Friday it has sold its entire stake in Tesla for about $3.6 billion.
  • The move highlights the more arm’s-length relationship that has developed between the Japanese battery maker and the American electric-vehicle maker, which has started working with other battery manufacturers in recent years.
  • Panasonic said the move wouldn’t affect its supply of batteries to Tesla and the two companies maintain a good relationship.
  • It said it completed the share sale during its last fiscal year, which ended in March, and notified Tesla of the transactions.
  • Tesla didn’t respond to a request for comment.

Virgin Galactic Gets FAA Approval to Fly Customers to Space – Wall Street Journal, 6/25/2021

  • Richard Branson’s Virgin Galactic Holdings said Friday the Federal Aviation Administration will allow it to fly customers to space.
  • Mr. Branson plans to join a Virgin Galactic crewed test flight later this year.
  • Earlier this month, Mr. Bezos said he plans to travel to space on July 20 as part of the first crew carried by Blue Origin, the Amazon.com founder’s space company.
  • Friday’s move is an adjustment to Virgin Galactic’s operator’s license, which the company has held since 2016.
  • Virgin Galactic also said that it has completed an extensive review of data gathered from its May 22 test flight and confirmed that it performed well against all flight objectives.

Teamsters Union Votes to Help Organize Amazon Workers – Wall Street Journal, 6/25/2021

  • One of America’s largest labor unions passed a resolution Thursday designed to aid Amazon.com workers in eventually achieving a union contract, a move aimed at putting further labor pressure on the e-commerce giant following a recent failed unionization effort in Alabama.
  • Representatives from the International Brotherhood of Teamsters drafted the resolution after recent years in which Amazon has become a central focus for the group as the company’s impact on blue collar workers has increased.
  • Roughly 99% of more than 1,500 delegates from the Teamsters, which represents more than one million employees across North America that include package delivery, warehouse and trucking workers, voted in favor of the resolution during the union’s 30th annual convention hosted online.
  • The resolution, titled “Building Worker Power at Amazon,” stipulates that the union would “supply all resources necessary” and eventually create a special division to organize workers at the company.

Supply constraints to slow U.S. auto sales growth in June – J.D. Power, LMC Automotive – Reuters, 6/25/2021

  • Growth in U.S. new vehicle retail sales for June is expected to be lower than the previous month, despite strong consumer demand, as supply constraints and chip shortages have led to lean inventories, consultants J.D. Power and LMC Automotive said on Friday.
  • Retail sales for new vehicles in June are estimated to reach 1.1 million units, up 12.4% from last year, the companies said in a statement, lower than their expectations for 34% and 110% growth in May and April, respectively.
  • Total new-vehicle sales for June, including retail and non-retail, are projected to reach 1.3 million units, a 19.5% increase compared with the same period in 2020.
  • Average transaction prices are expected to rise 14.9% to $40,206, the highest on record, while the average incentive spending per unit is expected to fall to $2,492 from $4,349 last year.
  • The total seasonally adjusted annualized rate for the month will be 15.8 million vehicles, up 2.6 million units from 2020 but 1.4 million units less than 2019.

US ECONOMY & POLITICS

Biden, Senators Agree to Roughly $1 Trillion Infrastructure Plan– Wall Street Journal, 6/24/2021

  • President Biden and a group of 10 centrist senators agreed to a roughly $1 trillion infrastructure plan Thursday, securing a long-sought bipartisan deal that lawmakers and the White House will now attempt to shepherd through Congress alongside a broader package sought by Democrats.
  • With $579 billion of spending above expected federal levels and a total of $973 billion of investment over five years and $1.2 trillion if continued over eight, the agreement will make new investments in the electrical grid, transit, roads and bridges and other forms of infrastructure.
  • The cost of the spending will be covered by repurposing existing federal funds, public-private partnerships and revenue collected from enhanced enforcement at the Internal Revenue Service, according to a list distributed by the White House. The list also included sales from the strategic petroleum reserve and wireless-spectrum auction sales among the other revenue raisers.
  • Mr. Biden said Thursday that he was committed to passing an additional package through a dual track, while House Speaker Nancy Pelosi (D., Calif.) said that the House won’t take up the bipartisan agreement until the Senate approves a package through reconciliation.
  • Two centrist Democrats who have emphasized bipartisanship, Sen. Joe Manchin of West Virginia and Arizona Sen. Kyrsten Sinema, indicated Thursday they would be willing to work with party colleagues on helping craft a reconciliation plan.
  • But Mr. Manchin signaled discomfort with its proposed multitrillion-dollar cost, of which half is expected to be paid for with new revenue. “That sounds extremely, extremely high, for us to take on that much debt,” he said.

U.S. Consumer Spending Was Flat in May – Wall Street Journal, 6/25/2021

  • Household spending was flat last month as consumers pulled back on big-ticket goods purchases and spent more on services, in what has been an uneven recovery from the Covid-19 pandemic.
  • Personal income fell 2% in May from April, the Commerce Department said Friday, as the impact faded from government stimulus checks sent out earlier in the year.
  • April spending was upwardly revised to a 0.9% increase from a previously reported 0.5% rise.
  • The core personal-consumption expenditures price index, which excludes often volatile food and energy items, rose 0.5% in May from a month earlier and 3.4% from a year earlier.

Consumer Sentiment in U.S. Increases by Less Than Forecast – Bloomberg, 6/25/2021

  • U.S. consumer sentiment rose in June by less than forecast and longer-term inflation expectations moderated from a month earlier.
  • The University of Michigan’s final sentiment index increased to 85.5 from 82.9 in May, data released Friday showed.
  • The figure was weaker than the median estimate of 86.5 in a Bloomberg survey of economists and down from a preliminary reading of 86.4.
  • The gauge of current conditions eased to 88.6 in June from 89.4, while a measure of expectations climbed to 83.5, according to the survey.
  • Consumers expect inflation to rise 4.2% over the next year, the second-highest in a decade.
  • They expect prices over the longer term to increase 2.8%, compared to 3% last month.

CDC Extends Federal Eviction Moratorium Through July – Wall Street Journal, 6/24/2021

  • The Biden administration has issued a monthlong extension of a moratorium, through July, on the eviction of tenants who have fallen behind on their rent during the pandemic, the Centers for Disease Control and Prevention said on Thursday.
  • It comes as the Supreme Court is weighing an emergency request by landlords and real-estate companies to clear the way for evictions after a federal judge in Washington ruled last month that the moratorium was legally unsupportable.
  • The judge who issued that ruling stayed the effect of the decision while litigation continues.
  • An extension is needed to prevent a wave of evictions before states and local governments can distribute about $47 billion of rental assistance authorized by Congress to cover unpaid back rent, administration officials said. Progress has been slow.
  • About 4.2 million Americans report that it is “very likely or somewhat likely” that they will face an eviction or foreclosure in the next two months, according to recent Census Bureau data.

U.S. and Taiwan Set Date to Revive Trade and Investment Talks – Wall Street Journal, 6/25/2021

  • The U.S. will revive trade and investment talks with Taiwan next week in a move intended to draw Washington and Taipei closer that also is likely to irk Beijing.
  • The de facto U.S. embassy in Taipei, the American Institute of Taiwan, said Friday that its director, Brent Christensen, and Taiwan’s representative in the U.S., Bi-Khim Hsiao, will convene a meeting by videoconference Wednesday with participants from the Office of the U.S. Trade Representative and Taiwan’s trade office.
  • An announcement was anticipated after Secretary of State Antony Blinken said earlier this month that Washington planned to engage with Taiwan soon on trade, without sharing a timeline.

159 Missing, 4 Confirmed Dead in Miami-Area Condo Collapse as Search Enters Second Day – Wall Street Journal, 6/25/2021

  • Search and rescue crews worked through the night under dangerous conditions searching for as many as 159 people who are unaccounted for after the collapse of a condo tower that killed at least four people.
  • President Biden declared a state of emergency and directed federal resources to help, the White House said early Friday.
  • Rescuers pulled 35 occupants out of the building and two from the rubble on Thursday, officials said. They have accounted for more than 100 occupants altogether, officials said.

EUROPE & WORLD

BlackBerry first-quarter revenue beats expectations, shares rise – Reuters, 6/24/2021

  • Canadian security software supplier Blackberry, beat Wall Street estimates for quarterly revenue on Thursday, lifted by a rebound in demand for its QNX operating software and cybersecurity products.
  • Revenue fell to $174 million in the first quarter ended May 31 from $206 million a year earlier, but beat analysts’ average estimate of $171.25 million, according to Refinitiv-IBES data.
  • Net loss in the quarter narrowed to $62 million, or 11 cents per share, from $636 million, or $1.14 cents per share, a year earlier.

Toshiba Shareholders Oust Chairman in Landmark for Foreign Activists – Wall Street Journal, 6/25/2021

  • A revolt by foreign shareholders at Toshiba has ousted the board’s chairman and audit committee, placed foreigners in three key board posts and set an example that will reverberate across Japan’s business world.
  • The upheaval at Friday’s shareholder meeting capped six years of turmoil that began with an accounting scandal and led to foreign shareholders owning a majority of the industrial conglomerate.
  • After years of battling against Toshiba management and Japanese directors with roots in the country’s business culture, those foreign shareholders now have the upper hand.
  • The shake-up Friday removed Toshiba’s board chairman, Osamu Nagayama, and put a former KPMG Hong Kong partner, Paul Brough, in charge of a powerful new strategic review committee on the board.
  • Singapore-based financier G. Raymond Zage III will head the nomination committee while Jerry Black, an American retail veteran, will head the compensation committee.

Sydney Locks Down as Delta Covid-19 Variant Spreads – Wall Street Journal, 6/25/2021

  • Parts of Australia’s largest city will go into a rare lockdown for at least a week as officials seek to stamp out an outbreak of the highly infectious Delta variant of the coronavirus.
  • The size of the recent outbreak is small by global standards. On Friday, officials said the outbreak included 65 cases, with 22 new locally acquired cases having been recorded on the day prior.
  • The last lockdown in Sydney, in December, was confined to the 70,000 residents of Sydney’s Northern Beaches area and lasted three weeks.

Factmonster – TODAY in HISTORY

  • Lt. Col. George A. Custer and all his men were killed by Sioux and Cheyanne Indians at the Battle of Little Bighorn in Montana. (1876)
  • Communist North Korean troops invaded South Korea, beginning the Korean War. (1950)
  • The first commercial color TV program was transmitted by CBS from New York to Baltimore, Philadelphia, Boston, and Washington, DC. (1951)
  • Oceanographer Jacques Cousteau died. (1997)
  • Michael Jackson, lifelong musician, pop singer, and superstar, dies at age 50. (2009)

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