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Daily Market Report | July 1, 2021

US FINANCIAL MARKET

Stocks Rise Along With Oil Prices and Bond Yields – Wall Street Journal, 7/1/2021

  • U.S. stocks inched higher Thursday, while oil prices rose to fresh multiyear highs.
  • The S&P 500 added 0.3%, a day after the broad stocks gauge closed at its 34th all-time high of the year and logged its fifth consecutive quarter of gains.
  • Stocks have been lifted to record highs from data showing the U.S. economy is growing at a rapid clip, and the prospect of a bumper set of second-quarter earnings at the largest companies.
  • Meantime, investors have grown less concerned that the Federal Reserve will raise interest rates to ward off higher inflation.
  • In one sign of the rebounding economy, the number of people filing for unemployment benefits fell to 364,000 last week from 415,000 a week earlier, marking a new pandemic low.
  • West Texas Intermediate, the main grade of U.S. crude, jumped 3.2% to surpass $75 a barrel for the first time since 2018.
  • Energy shares soared alongside oil prices, with Occidental Petroleum adding 5.3%.
  • The yield on 10-year U.S. Treasury notes ticked up to 1.460% from 1.443% Wednesday. Yields, which move in the opposite direction to bond prices, have fallen of late in a sign that some investors have doubts about the strength of the U.S. economy in the coming years.
  • In overseas stock markets, gains for oil-and-gas stocks helped to push the Stoxx Europe 600 up 0.5%.
  • Japan’s Nikkei 225 fell 0.3% by the close and China’s Shanghai Composite Index lost about 0.1%.

Micron sales beat expectations as chip supplies remain tight, prices high – Reuters, 7/1/2021

  • Micron Technology on Wednesday beat Wall Street estimates for quarterly profit and forecast fourth-quarter revenue above expectations, as tight supplies of memory chips and continued strong demand kept prices high.
  • The company’s revenue for the third quarter ended June 3 rose 36% to $7.42 billion, beating estimates of $7.24 billion, according to IBES data from Refinitiv.
  • The company also said it will sell a plant in Lehi, Utah, to Texas Instruments.
  • Micron said it expects to get about $1.5 billion for the plant, $900 million of which will be in cash and $600 million of which will be in the value of tools it can either sell to outsiders or move to its other factories.
  • Micron had said it would sell the Utah facility, which it shared with Intel, under a joint venture formed nearly a decade ago, as part of a broader technology strategy shift.
  • Excluding items, the company earned $1.88 per share in the quarter, above estimates of $1.72.
  • The chipmaker forecast current-quarter revenue of $8.2 billion, plus or minus $200 million, while analysts on average were expecting $7.87 billion, according to IBES data from Refinitiv.

Walgreens Sales Rise as Vaccinations Improve Prescriptions Business – Wall Street Journal, 7/1/2021

  • Sales and profit strengthened in the latest quarter for Walgreens Boots Alliance, as the vaccination campaign that the company has contributed to helped ease pandemic conditions for its stores’ pharmacy and retail businesses.
  • Overall, Walgreens’s sales in the quarter that ended on May 31 rose to $34.03 billion, from $30.36 billion a year earlier.
  • Prescriptions filled rose by 9.8% in the latest quarter on a comparable basis, including a 6% contribution from Covid-19 vaccines.
  • Improved store traffic played a part in 1.7% comparable growth in retail sales, the company said.
  • The company posted net earnings of $1.2 billion, or $1.38 a share, compared with a loss of $1.71 billion, or $1.95 a share, in the year-ago quarter.

Oil Prices Surge as OPEC Weighs Rising Demand in Rich Countries – Wall Street Journal, 7/1/2021

  • Oil prices rose above $75 a barrel as OPEC and a Russia-led group of producers met to weigh surging demand from the industrialized world.
  • A week ago, OPEC and allied producers led by Russia were leaning toward boosting production by half a million barrels a day, with more additions possible later in the year, The Wall Street Journal reported.
  • Going into formal deliberations being held remotely, Saudi Arabia, OPEC’s de facto leader, and Russia agreed Thursday to take up a proposal that includes a boost of about half a million barrels a day starting in August, according to people familiar with the talks, and then gradually increasing so-called OPEC+ output by a total two million barrels through December.
  • Ahead of the meeting, U.S. crude rose more than 3%, topping $75 a barrel for the first time since 2018 and approaching $76 a barrel. Brent crude, the international benchmark, was up almost 2%, approaching $76 a barrel.

Amazon Seeks Recusal of FTC Chairwoman Lina Khan in Antitrust Investigations of Company – Wall Street Journal, 7/1/2021

  • Amazon.com filed a request with the Federal Trade Commission seeking the recusal of new Chairwoman Lina Khan from antitrust investigations of the company, in light of her extensive past criticisms of the online giant.
  • “Given her long track record of detailed pronouncements about Amazon, and her repeated proclamations that Amazon has violated the antitrust laws, a reasonable observer would conclude that she no longer can consider the company’s antitrust defenses with an open mind,” Amazon said in a 25-page motion filed Wednesday with the FTC.
  • Amazon’s recusal petition said Ms. Khan had made “numerous and highly detailed public pronouncements” about the company. “Indeed, she has on numerous occasions argued that Amazon is guilty of antitrust violations and should be broken up,” it said.
  • Under FTC rules, if the commission brings an enforcement or rule-making proceeding involving Amazon and Ms. Khan chooses to participate, the other commissioners would decide on Amazon’s motion.
  • The commission has an open, wide-ranging antitrust investigation into Amazon’s business practices, and it recently secured the right to review Amazon’s proposed acquisition of Hollywood studio MGM.

Car Market Is Expected to Cool Amid Dearth of Vehicles on Lots – Wall Street Journal, 7/1/2021

  • The dwindling number of vehicles on dealership lots is threatening to cool the U.S. car market’s blistering sales pace.
  • New-vehicle sales in the first half of the year are expected to reach about 8.3 million units, according to an estimate from J.D. Power, a 32% increase over the same period a year earlier and up nearly 1% from the first half of 2019.
  • But the rate of sales slowed considerably at the end of the second quarter, hovering below an annualized selling pace of 16 million vehicles, J.D. Power estimates.
  • Analysts attribute the deceleration to withering dealership inventory.
  • Dealers started June with about 1.5 million vehicles on their lots or en route to stores, down 42% from the same time in 2020 and down 23% from the start of May, according to research firm Wards Intelligence.
  • The diminishing selection is driving prices to record highs.
  • The average new vehicle sold eclipsed $40,000 for the first time in June, according to an estimate from research firm J.D. Power, with car shoppers routinely paying above the sticker price.

Ford to shut some N. American plants for few weeks on chip shortage – Reuters, 7/1/2021

  • Ford said on Wednesday several of its North American factories will be shut for a few weeks in July and August due to a global shortage of semiconductors.
  • The supply crunch would cost it $2.5 billion this year and halve vehicle production in the second quarter, the Dearborn, Michigan-based company had said in April.
  • The No.2 U.S. automaker said its Chicago assembly plant, which makes the Explorer sport utility vehicles (SUVs), will be shut from the week of July 5 to the week of July 26. The plant will run two shifts during the Aug. 2 week.
  • The company said it would also shutter the production line for one of its best selling vehicles, the F-150 pickup truck, at its Kansas City assembly plant for a couple of weeks next month.
  • Ford’s Michigan assembly plant that recently started shipping its Bronco SUVs will be down for two weeks in July due to a shortage of certain auto parts, the company said, adding that this was unrelated to the chip shortage.

US ECONOMY & POLITICS

U.S. Jobless Claims Fell to 364,000 Last Week, a New Pandemic Low – Wall Street Journal, 7/1/2021

  • Worker filings for jobless benefits fell to 364,000 last week, reaching a new pandemic low as layoffs continue to recede.
  • The Labor Department said Thursday initial jobless claims in the week ended June 26 fell by a seasonally adjusted 51,000 from the prior week’s revised total of 415,000.
  • The drop brought the four-week moving average, which smooths out volatility in the weekly figures, down by 6,000 from the previous week’s average to 392,750, also a new pandemic low.
  • The total number of benefits distributed for all programs in the week ended June 12—which gives an approximation of the number of people receiving benefits—was 14.7 million on an unadjusted basis, with 3.2 million accounting for regular state programs and most of the rest from pandemic-related assistance.

U.S. manufacturing sector grows moderately; prices paid at record high-ISM – Reuters, 7/1/2021

  • U.S. manufacturing activity grew at a moderate pace in June, but employment contracted for the first time in seven months, likely because of rampant shortages of raw materials and labor.
  • The Institute for Supply Management (ISM) said on Thursday its index of national factory activity slipped to 60.6 last month, the lowest reading since January, from 61.2 in May.
  • The ISM survey’s measure of prices paid by manufacturers jumped to a record 92.1 last month from a reading of 88.0 in May.
  • Demand is also being fueled by the reopening of the economy, with more than 150 million Americans fully vaccinated.
  • The survey’s forward-looking new orders sub-index edged down to a reading of 66.0 last month from 67.0 in May.

Construction spending unexpectedly falls in May – Reuters, 7/1/2021

  • U.S. construction spending unexpectedly fell in May as gains in private homebuilding were offset by persistent weakness in outlays on nonresidential structures and public projects.
  • The Commerce Department said on Thursday that construction spending dropped 0.3% after edging up 0.1% in April.
  • Construction spending, which accounts for about 3.6% of gross domestic product, increased 7.5% on a year-on-year basis in May.
  • Spending on private construction projects fell 0.3%, weighed down by a 1.1% drop in private nonresidential construction like gas and oil well drilling.
  • Business investment on nonresidential structures has declined for sixth straight quarters.
  • Private construction outlays increased 0.3% in April.
  • Investment in residential projects rose 0.2%, lifted by a 0.8% increase in single-family homebuilding.
  • Spending on public construction projects fell 0.2% in May after decreasing 0.6% in April.

This Summer, Jobs Come With a Hefty Signing Bonus – Wall Street Journal, 7/1/2021

  • Signing bonuses are usually reserved for professional athletes and a privileged few white-collar professionals. Not this summer.
  • Nearly 20% of all jobs posted on job search site ZipRecruiter in June offer a signing bonus, up from 2% of jobs advertised on the job search site in March.
  • Hiring bonus offers start at $500 and quickly rise from there. Job postings across sectors show that a $1,000 hiring bonus is quickly becoming table stakes in recruiting hourly workers who make between $16.50 and $25 an hour.
  • The $1,000 hiring bonus is advertised on jobs listed for apartment-complex groundskeepers in Texas, movers in Florida, cabinet makers in Georgia, housekeepers in Wisconsin, pool cleaners in New Mexico and welders in Ohio, among others.
  • Ten states have started to offer bonus payments to get workers off unemployment, including Arizona, Colorado, Connecticut, Kentucky and Michigan, among others, according to the U.S. Chamber of Commerce.
  • A recent poll conducted by the Chamber found more than half of workers ages 24-34 say hiring bonuses could attract them back to the job market.

Drought’s Toll on U.S. Agriculture Points to Even-Higher Food Prices – Wall Street Journal, 7/1/2021

  • The Southwest is suffering through one of its worst droughts on record amid a critical reduction in the amount of water from snowpack runoff.
  • Roughly 9.8% of the U.S. is currently in what climate experts refer to as exceptional drought, the most severe designation, which is characterized by widespread crop and pasture losses and shortages in reservoirs, streams and wells amounting to water emergencies. About 44% of the nation is experiencing some level of drought, with a further 13% currently affected by drier-than-normal conditions.
  • The price of feed grains has risen in the past year to its highest levels since 2013, when another persistent and widespread drought tested the nation’s farm economy. It is another example of how economic strains are compounded by secondary effects of extended droughts.

EUROPE & WORLD

Xi Jinping Warns China Won’t Be Bullied as Communist Party Marks 100 Years – Wall Street Journal, 7/1/2021

  • Chinese leader Xi Jinping marked his ruling Communist Party’s 100th anniversary with rousing appeals for national unity and defiance against foreign pressure, a rallying cry for one-party rule aimed at reinforcing his authority for years to come.
  • Addressing a crowd of thousands gathered Thursday at Beijing’s Tiananmen Square, Mr. Xi struck strident tones in recounting the party’s successes in surmounting challenges at home and abroad—from eliminating rural poverty to resisting imperialist aggression.
  • He insisted that China has irreversibly emerged from past humiliation by foreign powers into an era of pride and prosperity.
  • The Chinese people “will never allow any foreign force to bully, oppress, or enslave us,” Mr. Xi said, dressed in a gray Mao suit atop the Gate of Heavenly Peace. “Anyone who tries to do so shall be battered and bloodied from colliding with a great wall of steel forged by more than 1.4 billion Chinese people using flesh and blood,” he said, drawing cheers and applause.

Euro zone factory growth, input costs rose at record pace in June -PMI – Reuters, 7/1/2021

  • Euro zone manufacturing activity expanded at its fastest pace on record in June, according to a survey on Thursday which also showed factories faced the steepest rise in raw materials costs in well over two decades.
  • IHS Markit’s final manufacturing Purchasing Managers’ Index (PMI) rose to 63.4 in June from May’s 63.1, above an initial 63.1 “flash” estimate and the highest reading since the survey began in June 1997.
  • An index measuring output, which feeds into a composite PMI due on Monday and seen as a good guide to economic health, rose from May’s 62.2 to 62.6. Anything above 50 indicates growth.
  • Due to a shortage of shipping containers and supply chains hugely affected by the global pandemic, the input prices index soared to 88.5 from 87.1 — by far the highest in the survey’s history.

Delta Variant’s Spread Hobbles Global Efforts to Lift Covid-19 Restrictions – Wall Street Journal, 7/1/2021

  • The fast spread of the Delta variant of the coronavirus in much of the world is thwarting plans in many countries to lift lockdowns and reopen economies, a major setback to efforts to contain the global Covid-19 pandemic.
  • Delta, which swept through India in May, is estimated to be at least twice as contagious as the original version of the virus.
  • It is now present in 85 countries and is the most common variant in the U.S.
  • In parts of Asia, Australia and Europe, governments are reintroducing travel restrictions and delaying the lifting of lockdowns as health authorities find that restrictive measures that kept earlier lineages of the virus in check aren’t curbing Delta.
  • Israel has reimposed an indoor mask requirement, as the number of daily new Covid-19 cases has risen to an average of about 200 in the past week from about 10 a day in early June.

Factmonster – TODAY in HISTORY

  • The Battle of Gettysburg, which marked the turning point in the Civil War, began. (1863)
  • Canada became a self-governing dominion of Great Britain under the British North America Act. (1867)
  • Theodore Roosevelt and his Rough Riders fought the battle of San Juan Hill in the Spanish-American War. (1898)
  • Yasir Arafat returned to Palestinian land after 27 years in exile. (1994)
  • After 156 years of British colonial rule, Hong Kong was returned to China. (1997)

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