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Daily Market Report | July 2, 2021

US FINANCIAL MARKET

Stocks Move Higher Following Strong Jobs Report – Wall Street Journal, 7/2/2021

  • The S&P 500 and Nasdaq Composite rose Friday, on track to notch a pair of record closes, after the monthly employment report confirmed that the U.S. economy continues to recover at a healthy clip.
  • The broad S&P 500 benchmark added 0.3%, rising a seventh consecutive session, while the tech-heavy Nasdaq Composite advanced 0.5%. The Dow Jones Industrial Average, meanwhile, was little changed as investors traded out of some cyclical stocks.
  • Friday’s jobs report added to the good news cheering on markets in recent weeks.
  • Employers added 850,000 jobs last month, showing a pickup in labor market activity after it appeared to somewhat cool in previous months.
  • Beyond the growth trade, shares of doughnut-maker Krispy Kreme fell nearly 6%.
  • The company closed its first trading day with shares up 24% on Thursday as it returned to public markets.
  • And shares of ride-hailing giant Didi Global fell 4.6% after report that it was blocked from adding new users as China’s internet regulator reviews its cybersecurity.
  • In bond markets, the yield on the 10-year Treasury note ticked down to 1.438% from 1.479% Thursday.
  • Overseas, the pan-continental Stoxx Europe 600 added 0.3%.
  • Chinese stocks tumbled Friday, a day after the country commemorated the 100th anniversary of China’s Communist Party.
  • The CSI 300 index, which tracks the largest stocks listed in Shanghai or Shenzhen, tumbled 2.8%, led by declines in shares of distiller Kweichow Moutai and financial conglomerate Ping An Insurance.
  • Hong Kong’s Hang Seng Index fell 1.8%.

General Motors quarterly sales get boost from strong SUV demand – Reuters, 7/1/2021

  • U.S. automaker General Motors on Thursday posted a 40% jump in second-quarter U.S. sales on strong demand for its sport utility vehicles (SUVs), and said the trend will continue into 2022.
  • GM said its Chevrolet Bolt EV posted record second-quarter deliveries with total Chevrolet deliveries up 31%, while sales of its Buick’s premium SUVs soared 86%.
  • Shares of the U.S. automaker were up 0.6% at $59.49 in morning trade as its U.S. auto sales jumped to 688,236 vehicles in the quarter.

Tesla Q2 deliveries meet analysts’ estimates despite chip shortage, shares gain – Reuters, 7/2/2021

  • Tesla on Friday posted record vehicle deliveries for the second quarter that were in line with Wall Street estimates as the electric-car maker coped with a shortage of chips and raw materials.
  • Tesla delivered 201,250 vehicles in total during the second quarter.
  • Analysts had expected Tesla to deliver 200,258 vehicles, according to Refinitiv data.
  • Total production in the second quarter rose about 14% to 206,421 vehicles from the first quarter.
  • The numbers showed that strong deliveries of its Model 3 sedans and Model Y crossovers, its two lower priced variants, offset a drop in deliveries of higher-end Model S and X variants.
  • Overall deliveries of its higher priced Model S and X cars fell to 1,890 during the April to June period, from a meager 2,020 the preceding quarter, Tesla said.
  • Tesla sold 21,936 cars to Chinese customers in May, rebounding from a sales slump in April, but still well below March numbers.

Tesla top-of-range car caught fire while owner was driving, lawyer says – Reuters, 7/2/2021

  • A Tesla Model S Plaid electric vehicle burst into flames on Tuesday while the owner was driving, just three days after the $129,900, top-of-the-range car was delivered following its June launch, an attorney for the driver told Reuters.
  • The driver, identified as an “executive entrepreneur”, was initially not able to get out of the car because its electronic door system failed, prompting the driver to “use force to push it open,” Mark Geragos, of Geragos & Geragos, said on Friday.
  • The car continued to move for about 35 feet to 40 feet (11 to 12 meters) before turning into a “fireball” in a residential area near the owner’s Pennsylvania home.

GM shakes up lithium industry with California geothermal project – Reuters, 7/2/2021

  • General Motors is investing in a U.S. lithium project that could become the country’s largest by 2024, making the automaker one of the first to develop its own source of a battery metal crucial for the electrification of cars and trucks.
  • Detroit-based GM said it will make a “multimillion-dollar investment” in and help develop Controlled Thermal Resources (CTR) Ltd’s Hell’s Kitchen geothermal brine project near California’s Salton Sea, roughly 160 miles (258 km) southeast of Los Angeles.
  • While other automakers, including China’s Great Wall Motor and BYD, have invested in lithium producers before, none appear to have taken such an aggressive step to be part of the production process, as GM is taking with CTR.
  • The Hell’s Kitchen project could be producing 60,000 tonnes of lithium – enough to make roughly 6 million EVs, depending on design – by mid-2024 if all goes as planned, said Rod Colwell, CTR’s chief executive.
  • The company expects to obtain federal environmental permits by the end of next year.

OPEC+ Fights Over Oil Output With Inflation Outlook at Stake – Bloomberg, 7/2/2021

  • OPEC+ allies were locked in a tense diplomatic standoff on Friday after a dispute that threatens to send oil prices sharply higher.
  • As of early afternoon in London, the group had failed to find a way out of the impasse, with both sides entrenched in their demands, delegates said.
  • If the negotiations fail, the fallback position is that there’ll be no increase in output, one of them said. That would squeeze an already tight market, risking a further inflationary price spike.
  • The disagreement centers on how the group measures its production cuts, with the United Arab Emirates refusing to back a deal to raise output unless the baseline for its own curbs is increased, according to delegates.
  • The UAE is prepared to accept no change in output for August if an agreement can’t be reached, one delegate said.

Uber, Lyft Sweeten Job Perks Amid Driver Shortage, Lofty Fares – Wall Street Journal, 7/2/2021

  • A shortage of drivers in the U.S. is propelling prices for Uber and Lyft rides to record highs and pushing the services to rethink how they attract gig workers.
  • Uber Technologies and Lyft are pouring millions of dollars into incentives for drivers to return, a short-term fix that has helped alleviate the scarcity and tempered fare increases in some areas but that has also raised the companies’ costs.
  • Uber fares in the U.S. increased 27% between January and May, Chief Executive Dara Khosrowshahi tweeted last month.
  • Over the same period, he said, driver pay per trip increased 37%.
  • He didn’t say whether the ongoing driver incentives drove the uptick.
  • Gridwise, which tracks Uber and Lyft prices, estimates that second-quarter fares in the U.S. were up 79% from the second quarter of 2019, before the pandemic.

Wells Fargo Acted Like a ‘Mafia’ to Suppress Internal Critics, Former Executive Said – Wall Street Journal, 7/2/2021

  • A former top Wells Fargo executive in London said the lender had a flawed compliance culture and executives acted like a mafia to suppress internal critics, according to a recorded phone call submitted to a U.K. court.
  • Alicia Reyes was chief executive of Wells Fargo’s European investment bank. She left the bank in January 2020 and criticized the lender in an April 2020 telephone call with a former Wells Fargo contract worker who is suing for unfair dismissal after he raised concerns internally about compliance failings in the U.K.
  • “It’s like a mafia, literally,” Ms. Reyes said during the call. “This place is just a scheme. There’s no intention of actually solving problems or building things. There’s just smoke and mirrors and a coverup.”

US ECONOMY & POLITICS

U.S. Jobs Jump by Most in 10 Months as Economy Gains Steam – Bloomberg, 7/2/2021

  • The pace of U.S. hiring accelerated in June, with payrolls gaining the most in 10 months, suggesting firms are having greater success recruiting workers to keep pace with the economy’s reopening.
  • Nonfarm payrolls increased by 850,000 last month, bolstered by strong job gains in leisure and hospitality, a Labor Department report showed Friday.
  • The unemployment rate edged up to 5.9% because more people voluntarily left their jobs and the number of job seekers rose.
  • The U-6 rate, also known as the underemployment rate, fell to a pandemic low of 9.8%. The broad measure includes those who are employed part-time for economic reasons and those who have stopped looking for a job because they are discouraged about their job prospects.
  • The median estimate in a Bloomberg survey of economists was for a 720,000 rise in June payrolls.
  • At the same time, a limited supply of labor continues to beleaguer employers, with the number of Americans on payrolls still well below pre-pandemic levels.
  • Wage growth is also picking up as businesses raise pay to attract candidates. The June jobs report showed a hefty 2.3% month-over-month increase in non-supervisory workers’ average hourly earnings in the leisure and hospitality industry.
  • Overall average earnings rose 0.3% last month.
  • Even with the latest advance, U.S. payrolls are still 6.76 million below their pre-pandemic level.
  • The Labor Department’s figures showed a 343,000 increase in leisure and hospitality payrolls, a sector that’s taking longer to recover because of the pandemic.
  • Job growth last month was also bolstered by a 188,000 gain in government payrolls. State and local government education employment rose about 230,000, boosted by seasonal adjustments to offset the typical declines seen at the end of the school year.
  • The overall participation rate held steady and remained well short of pre-pandemic levels.
  • The participation rate for women age 25 to 54 rose by 0.4 percentage point; the rate among men in that age group also climbed.

 

 

U.S. Trade Deficit Widened in May as Economic Rebound Fueled Demand for Imports – Wall Street Journal, 7/2/2021

  • The U.S. trade deficit widened in May, as American consumers and businesses stepped up purchases of imported products and materials amid a continued economic recovery.
  • The foreign-trade gap in goods and services expanded 3.1% from the prior month to a seasonally adjusted $71.2 billion in May, the Commerce Department said Friday.
  • Imports rose 1.3% to $277.3 billion, while exports increased 0.6% to $206 billion.
  • Even as the trade deficit with the European Union and Canada expanded, the deficit with China decreased by $5.1 billion to $27.2 billion in May, due to a $5.2-billion drop in imports.

U.S. factory orders rebound strongly in May – Reuters, 7/2/2021

  • New orders for U.S.-made goods rebounded sharply in May, while business spending on equipment remained solid, despite bottlenecks in the supply chain.
  • The Commerce Department said on Friday that factory orders surged 1.7% in May after slipping 0.1% in April.
  • Economists polled by Reuters had forecast factory orders rebounding 1.6%.
  • Orders increased 17.2% on a year-on-year basis.
  • Factory goods orders in June were boosted by a 7.7% surge in orders for transportation equipment.
  • Orders for electrical equipment, appliances and components rose 1.3%.
  • Unfilled orders at factories rose 0.8% after gaining 0.4% in April.
  • The Commerce Department also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, edged up 0.1% in May instead of dipping 0.1% as reported last month.
  • Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, increased 1.1%, upwardly revised from the 0.9% rise estimated last month.

IMF raises U.S. 2021 growth forecast to 7%, assumes Biden spending plans pass – Reuters, 7/2/2021

  • The International Monetary Fund raised its 2021 U.S. growth projection sharply to 7.0% due to a strong recovery from the COVID-19 pandemic and an assumption that much of President Joe Biden’s infrastructure and social spending plans will be enacted.
  • The IMF’s latest forecast, marking the fastest U.S. growth pace since 1984, compares with an April projection of 4.6% growth in 2021. The Fund raised its 2022 U.S. GDP growth forecast to 4.9%, up from its previous 3.5% April forecast.
  • The new forecasts, contained in the IMF’s annual assessment of U.S. economic policies, assume that the U.S. Congress will pass the Biden administration’s American Jobs Plan and American Families Plan infrastructure, social spending and tax reform plans this year at a size and composition similar to their original proposals.

CBO Sees Stronger Growth in 2021, After Covid-19 Relief Package – Wall Street Journal, 7/2/2021

  • The Congressional Budget Office on Thursday lifted its forecasts for economic growth, inflation and federal budget deficits this year, following the $1.9 trillion Covid-19 relief package enacted in March.
  • Beyond 2021, however, the agency sees smaller deficits as a recovering economy boosts federal revenues.
  • Forecasts for the federal debt are also slightly lower than in the February report.
  • The federal debt will grow to 103% of the economy at the end of 2021 before dipping slightly between 2023 and 2025, CBO said.
  • The agency estimated real gross domestic product growth of 7.4% in the fourth quarter of 2021 compared with a year earlier, up from the 3.7% projected in February, when the CBO last issued updated projections on the federal budget and U.S. economy.
  • The agency also sees inflation accelerating by 2.8% in the fourth quarter from the previous year, before slowing to 2% in 2022, as measured by the personal-consumption expenditures price index. In February, before the enactment of the stimulus bill, the agency saw inflation accelerating by 1.7% this year.
  • The CBO’s deficit projection for this year is $3 trillion, more than it forecast in February but less than the $3.2 trillion deficit in fiscal year 2020.

U.S. Wins International Backing for Global Minimum Tax – Wall Street Journal, 7/2/2021

  • The U.S. has won international backing for a global minimum rate of tax as part of a wider overhaul of the rules for taxing international companies, a major step toward securing a final agreement on a key element of the Biden administration’s domestic plans for revenue raising and spending.
  • Officials from 130 countries that met virtually agreed Thursday to the broad outlines of what would be the most sweeping change in international taxation in a century.
  • Among them were all of the Group of 20 major economies, including China and India, which previously had reservations about the proposed overhaul.
  • Those governments now will seek to pass laws ensuring that companies headquartered in their countries pay a minimum tax rate of at least 15% in each of the nations in which they operate, reducing opportunities for tax avoidance.

More Republican Women Plan Runs for House, Building on Party’s 2020 Wins – Wall Street Journal, 7/2/2021

  • More GOP women have announced plans to run for House seats in 2022 at this point than in any recent election cycle, according to Republican officials, feeding confidence that the party is positioned to build on its big gains in sending women to Congress last year.
  • This cycle, 127 Republican women already have indicated they plan to run for House seats, either filing with the Federal Election Commission or announcing plans publicly, the National Republican Congressional Committee told The Wall Street Journal’s Aaron Zitner.
  • That’s more than double the 50 women at about this point in the 2020 cycle and a record for this point dating to 2010.
  • A record 227 Republican women sought House nominations in 2020, up from 120 in 2018, the Center for American Women and Politics at Rutgers University has reported. Far more Democratic women sought House seats—356—but that number was flat from 2018.

U.S. Shuts Down Bagram Air Base as Afghanistan Pullout Speeds Up – Wall Street Journal, 7/2/2021

  • The U.S. military has withdrawn from the Bagram Air Field northeast of Kabul, the centerpiece of its operations in Afghanistan for nearly 20 years, as the pullout of remaining American forces speeds up amid a worsening security crisis.
  • U.S. officials say that all American forces, along with weaponry, vehicles and other equipment, have left Bagram, and the U.S.’s largest military installation in Afghanistan is now closed.
  • This leaves only the coalition headquarters compound inside Kabul as the remaining American military outpost in Afghanistan, with several hundred U.S. troops assigned there.

EUROPE & WORLD

 

Euro zone producer prices accelerate in May – Reuters, 7/2/2021

  • Euro zone producer prices accelerated in May, driven by a surge in energy prices, data from the European Union’s statistics office Eurostat showed on Friday.
  • Eurostat said prices at factory gates in the 19 countries sharing the euro rose 1.3% month-on-month for a 9.6% year-on-year increase.
  • The rise in intermediate goods’ prices remained the same in May against April, at 1.8%, with energy costs registering the third-biggest increase of 2.1%.
  • But in year-on-year terms, energy contributed the most, with prices surging 25.1% against May 2020, while intermediate goods were up 9.2%.

China, India Move Tens of Thousands of Troops to the Border in Largest Buildup in Decades – Wall Street Journal, 7/2/2021

  • China and India have sent tens of thousands of soldiers and advanced military equipment to their disputed border, as troop deployments in the region reach the highest level in decades.
  • China’s People’s Liberation Army has gradually increased its troop presence, mostly over the past few months, to at least 50,000, up from about 15,000 at this time last year, according to Indian intelligence and military officials.
  • Those moves have been matched by India, which has sent tens of thousands of its own troops and advanced artillery to the region, the officials said.
  • Both countries have built up infrastructure at the border in recent months, including insulated cabins and huts to keep troops stationed there through the frigid Himalayan winters.
  • China has moved advanced surface-to-air missiles to the region, the officials said, including its HQ-9 system, which is similar to Russia’s S-300 and America’s Patriot antimissile batteries.

China’s Internet Regulator Reviewing Cybersecurity of Ride-Hailing Business Didi Chuxing – Wall Street Journal, 7/2/2021

  • China’s internet regulator said it is reviewing the cybersecurity of Didi Chuxing Technology, the Chinese ride-hailing business of Didi Global, which went public in the U.S. on Wednesday.
  • No new user registration is allowed during the review to prevent potential risks expanding, the Cyberspace Administration of China said late Friday.
  • The regulator didn’t say how long the review would last but said that the move was aimed at safeguarding national data security.

Factmonster – TODAY in HISTORY

  • Congress passed the Sherman Antitrust Act. (1890)
  • Amelia Earhart and her co-pilot Fred Noonan disappeared over the Pacific Ocean while attempting to fly around the world. (1937)
  • President Johnson signed the Civil Rights Act of 1964 into law. (1964)
  • Steve Fossett became the first to circumnavigate the globe solo in a balloon. (2002)

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