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Daily Market Report | June 28, 2021

US FINANCIAL MARKET

Nasdaq Moves Toward New Record – Wall Street Journal, 6/28/2021

  • The Nasdaq Composite climbed towards a new record on Monday, adding to its gains from last week.
  • The technology-heavy index was up 0.7% in morning trading. The S&P 500 wobbled between small gains and losses.
  • Last week, the S&P posted its biggest weekly advance since February and closed Friday at a record.
  • In the bond market, the yield on 10-year Treasury notes edged down to 1.492% from 1.535% Friday.
  • Shares of Boeing dropped 2.9%, weighing on the Dow.
  • The Seattle Times reported over the weekend that federal regulators told the plane maker an updated version of its 777 long-haul airliner was not ready for certification, and likely wouldn’t be until late 2023.
  • Futures on Brent crude oil, the benchmark in international energy markets, fell 1.1% to $74.56 a barrel. Traders are awaiting a meeting of the Organization of the Petroleum Exporting Countries and its allies on Thursday. The cartel is expected to discuss a modest increase in production.
  • In overseas markets, the Stoxx Europe 600 was recently down 0.3%.
  • Major Asian indexes posted modest declines. Both Japan’s Nikkei 225 and China’s Shanghai Composite Index fell less than 0.1%.

Microsoft Discloses New Customer Hack Linked to SolarWinds Cyberattackers – Wall Street Journal, 6/28/2021

  • Microsoft said hackers, linked by U.S. authorities to Russia’s Foreign Intelligence Service, installed malicious information-stealing software on one of its systems and used information gleaned there to attack its customers.
  • The hackers compromised a computer used by a Microsoft customer support employee that could have provided access to different types of information, including ”metadata” of accounts and billing contact information for the organization, a Microsoft spokesman said.
  • Microsoft is aware of three customers that were affected by the recent activity, the company said in a blog post.
  • The incident was part of a broader campaign—which involved other hacking techniques beyond leveraging the information taken from its support system—that primarily targeted technology companies and government agencies in 36 countries.

Venmo to Charge Users for Selling Goods and Services – Wall Street Journal, 6/28/2021

  • Venmo, the payments app owned by PayPal, will soon allow users to sell products and services on their personal accounts, for a fee.
  • Under the app’s previous rules, users were prohibited from receiving money for business transactions through personal Venmo profiles. Users suspected of violating the policy could have their accounts suspended.
  • The new policy, disclosed in a letter to users about terms-of-service updates, will take effect on July 20.

Johnson & Johnson Settles New York Opioid Case for $230 Million – Wall Street Journal, 6/28/2021

  • Johnson & Johnson has agreed to pay $230 million to the state of New York to resolve an opioid lawsuit slated to go to trial Tuesday, as negotiations intensify with the company and three drug distributors to clinch a $26 billion settlement of thousands of other lawsuits blaming the pharmaceutical industry for the opioid crisis.
  • Johnson & Johnson’s New York deal removes it from a coming trial on Long Island but not from the rest of the cases it faces nationwide, including a continuing trial in California.
  • The New York settlement includes an additional $33 million in attorney fees and costs and calls for the drugmaker to no longer sell opioids nationwide, something Johnson & Johnson said it already stopped doing.
  • More than 3,000 counties, cities and other local governments have also pursued lawsuits over the opioid crisis, complicating talks that have dragged on since late 2019 and that have been slowed down by the Covid-19 pandemic.
  • Johnson & Johnson, along with the nation’s largest drug distributors, AmerisourceBergen, Cardinal Health and McKesson , have been in talks with state attorneys general and plaintiffs’ lawyers for local governments to resolve the cases for $26 billion.

United Airlines closes in on $30 billion post-pandemic jet order – Reuters, 6/28/2021

  • United Airlines was putting the finishing touches on Monday to an airplane order potentially worth $30 billion at list values for up to 270 narrowbody jets in a bid to secure a pandemic recovery at favorable prices, industry sources said.
  • The order could include up to 200 Boeing 737 MAX and some 70 Airbus A321neo which competes with the top end of the MAX family for single-aisle trips needing most range.
  • Such a deal would notionally be worth $33 billion at the most recently published list prices, but analysts say airlines typically pay less than half price for deals of this size.

Boeing 777X ‘realistically’ will not win certification approval before mid-2023 – U.S. FAA – Reuters, 6/28/2021

  • The U.S. Federal Aviation Administration (FAA) has told Boeing that its planned 777X is not yet ready for a significant certification step and warned it “realistically” will not certify the airplane until mid- to late 2023.
  • The FAA in a May 13 letter to Boeing seen by Reuters cited a number of issues in rejecting a request by the manufacturer to issue a Type Inspection Authorization (TIA) Readiness. “The aircraft is not yet ready for TIA,” the FAA wrote, declining to approve “a phased TIA of limited scope with a small number of certification flight test plans.”
  • The letter, which had not previously been made public, cites numerous concerns about lack of data and the lack of a preliminary safety assessment for the FAA to review.
  • European regulators have said in particular that they will subject the 777X to extra scrutiny after the fatal crashes prompted the 20-month grounding of the 737 MAX.

Latest ‘Fast & Furious’ Movie Leads Weekend Box Office – Wall Street Journal, 6/28/2021

  • The “Fast & Furious” franchise gave Hollywood its best opening weekend since December 2019 at the box office this weekend, offering further evidence that American entertainment industries are accelerating toward some semblance of normalcy.
  • “F9: The Fast Saga,” the ninth installment of the car-racing franchise, collected an estimated $70 million from domestic theaters. While that opening is only the sixth-best of the series so far, it comes after several releases that indicate a steadily growing appetite among moviegoers to venture back to the theater.
  • “F9” premiered a few weeks ago in certain international markets, where it has collected a total of $335 million, including more than $200 million in China, the world’s second-largest moviegoing market.

US ECONOMY & POLITICS

White House, Senate Negotiators Try to Keep Infrastructure Deal Alive – Wall Street Journal, 6/28/2021

  • The White House and Senate negotiators sought to keep a bipartisan infrastructure deal on track Sunday after its future was cast into doubt when President Biden made and then withdrew a suggestion that he would veto the proposal if lawmakers failed to pass a separate antipoverty package favored by Democrats.
  • Several Senate Republicans who reached agreement with Democratic lawmakers and the president on infrastructure appeared reassured Sunday by Mr. Biden’s statement a day earlier walking back his comments tying the fate of the roughly $1 trillion infrastructure agreement to the larger piece of legislation that could cost trillions more.
  • In the Senate, Democrats hope to pass the bipartisan bill by drawing enough Republican votes to reach the 60-vote threshold required for most legislation to advance.
  • They also hope to pass the broader bill, which expands child care, Medicare, affordable housing and other programs under a special process tied to the budget, known as reconciliation, that requires only a simple majority.
  • While Mr. Biden’s earlier linking of the two initiatives drew a rebuke late last week from Senate Minority Leader Mitch McConnell (R., Ky.), Sen. Bill Cassidy (R., La.) said he thought Mr. McConnell would support the plan “if it continues to come together as it is.”

Fed Officials Debate Scaling Back Mortgage-Bond Purchases at Faster Clip – Wall Street Journal, 6/28/2021

  • As Federal Reserve officials discuss how to eventually scale back their easy-money policies, they are debating whether to start by reducing purchases of mortgage-backed securities to avoid adding more fuel to the housing boom.
  • The Fed has bought $982 billion of the mortgage bonds since March 5, 2020, and currently plans to keep buying at least $40 billion each month.
  • Those purchases, along with the Fed’s monthly purchases of $80 billion of Treasury debt, aim to hold down long-term borrowing costs to stimulate the economy as it recovers from the effects of the pandemic.
  • One option suggested at the meeting was to start scaling back the mortgage-bond purchases earlier or more quickly than the Treasury debt purchases, officials said. Call it a two-speed taper.
  • St. Louis Fed President James Bullard, in a June 18 CNBC interview, said, “I’m leaning a little bit toward the idea that maybe we don’t need to be in mortgage-backed securities with a booming housing market and even a threatening housing bubble here, according to some people.”

Iran-Backed Militias Threaten Revenge After U.S. Airstrikes in Iraq, Syria – Wall Street Journal, 6/28/2021

  • Iran-backed militias vowed revenge on Monday for U.S. airstrikes overnight in Iraq and Syria, underscoring Baghdad’s struggles to rein in these groups that have attacked American troops.
  • The U.S. strikes, which the paramilitaries said killed four of their members, highlight the challenge facing the Biden administration as it attempts to deter attacks on American and allied forces in Iraq without provoking an escalation with the militias or their main sponsor, Iran.
  • The U.S. strikes came in response to a campaign of drone attacks by the militias on the American military presence in Iraq, which includes about 2,500 troops to support Iraqi forces’ fight against Islamic State insurgents.
  • A spokesman for Iraqi Prime Minister Mustafa al-Kadhimi condemned the U.S. airstrikes, calling them “a blatant and unacceptable violation of Iraqi sovereignty and Iraqi national security.” Iraq’s military spokesman also issued a rare condemnation of the strikes.

Costly New Alzheimer’s Drug Could Force Medicare to Restrict Access – Wall Street Journal, 6/28/2021

  • The recent approval of a high-price Alzheimer’s drug is raising questions about who will have access to a treatment that could cost Medicare billions of dollars in coming years.
  •  Biogen priced the drug Aduhelm at $56,000 a year.
  • Wall Street analysts estimate it could eventually surpass $5 billion in yearly sales, mostly paid by Medicare, while some health economists warn the bill would be multiples higher.
  • The FDA acted over the objections of some of its statisticians and outside medical advisers, who said further studies were needed to prove the drug worked.
  • The Centers for Medicare and Medicaid Services, the agency overseeing Medicare, is reviewing Aduhelm’s approval and will have more information soon about its coverage, a spokesman said.

EUROPE & WORLD

Emergency ECB stimulus could end next March: Holzmann – Reuters, 6/28/2021

  • The European Central Bank could end its emergency stimulus scheme next March and markets may be right in not pricing in an increase in more traditional bond purchases, Austrian central bank chief Robert Holzmann said on Monday.
  • With the pandemic now receding, analysts, including the ECB’s own Survey of Monetary Analysts, expect the 1.85 trillion euro Pandemic Emergency Purchase Scheme to end next March and see no increase in volumes under the Asset Purchase Programme (APP) to compensate for the lost stimulus.
  • “This is how the market sees this and I think the market gives the right assessment,” Holzmann, who sits on the ECB’s rate setting Governing Council said. “We don’t know yet but at the moment it looks like the end is in March.”

Renault seals electric car battery deals with Envision, Verkor – Reuters, 6/28/2021

  • French carmaker Renault said on Monday it had sealed partnerships with China’s Envision and France’s Verkor to produce electric car batteries in northern France.
  • Carmakers globally are racing to keep ahead of rivals in producing cleaner vehicles, a technology shift that is already prompting Germany’s Volkswagen to build six battery cell plants of its own in Europe.
  • Renault made the announcement, which confirmed earlier media reports, before a visit of President Emanuel Macron to the Douai site in northern France where Envision is investing up to 2 billion euros ($2.4 billion) close to “Renault ElectriCity” electric car hub to create 2,500 new jobs by 2030.

SoftBank shrinks robotics business, stops Pepper production- sources – Reuters, 6/28/2021

  • SoftBank Group is slashing jobs at its global robotics business and has stopped producing its Pepper robot, according to sources and documents reviewed by Reuters, as the conglomerate downgrades its industry ambitions.
  • Production of the humanoid Pepper, touted as the first robot with “a heart”, was stopped last year, according to three sources familiar with the matter and the documents. It would be costly to restart production, two of the sources said.
  • Built by Foxconn in China, Pepper was meant to help plug labour shortages but struggled to find a global customer base. Only 27,000 were produced, one of the sources said.
  • As part of the retrenchment, SoftBank plans to eliminate about half of its 330 staff positions in France in September, according to four sources and documents, cutting into the historical heart of the business, whose origins lie in SoftBank’s 2012 acquisition of French robotics firm Aldebaran.

Factmonster – TODAY in HISTORY

  • The fourth president of the United States, James Madison, died at Montpelier, his Virginia estate. (1836)
  • Archduke Francis Ferdinand of Austria-Hungary and his wife were assassinated, setting off World War I. (1914)
  • The Treaty of Versailles was signed in France, ending World War I. (1919)
  • In Iraq, the United States transferred power back to the Iraqis two days earlier than planned. (2004)

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