US FINANCIAL MARKET

Dow Falls 800 Points, Oil Drops as Delta Variant Sends Investors Into Bonds – Wall Street Journal, 7/19/2021

• U.S. stocks, oil prices and government bond yields slid Monday amid anxiety that the spread of the Delta coronavirus variant would hold back the global economy.
• The Dow Jones Industrial Average slumped 802 points, or 2.3%, starting the week with big losses after the index snapped a three-week winning streak Friday. The S&P 500 fell 1.9%, while the technology-heavy Nasdaq Composite declined 1.7%.
• In a sign that investors were sheltering in the safety of government bonds and other safe-haven assets, the yield on 10-year Treasury notes fell to 1.19% from 1.30% Friday.
• Surging cases of the coronavirus in many parts of the world, including highly vaccinated countries such as the U.K., have prompted investors to dial down their expectations of economic growth in the coming months.
• Some also are concerned that a steep rise in prices will pinch consumption and prompt central banks to withdraw stimulus, creating an environment of lower growth and higher inflation in which stocks tend to struggle.
• Airlines and oil companies were among the worst performers.
• Occidental Petroleum lost 6.2%, United Airlines 4.9%, Diamondback Energy 5.1% and American Airlines Group 5.1%.
• Global markets retreated amid worries about the economic effect of the Delta variant.
• The Stoxx Europe 600 slid 2.3%, led lower by shares of travel, leisure and commodities companies, alongside banks.
• In Asia, technology giants Alibaba and Tencent weighed on Hong Kong’s Hang Seng Index, which fell 1.8%.
• The Biden administration on Friday warned American companies about the increasing risks of operating in the financial hub.
• Japan’s Nikkei 225 dropped 1.3%. More athletes and staff members attending the Tokyo Olympics have tested positive, while cases are surging in Indonesia. Sydney, Australia’s most populous city, is under lockdown because of a Delta outbreak.

AutoNation tops earnings estimates, expects new vehicle demand to stay strong – Reuters, 7/19/2021

• AutoNation said it expects strong demand for new vehicles to continue into next year, as low-interest rates and robust demand helped the top U.S. auto retailer trounce quarterly earnings estimates.
• The company said on Monday sales of new and used vehicles surged 42% and 37%, respectively, in the second quarter.
• Fort Lauderdale, Florida-based AutoNation’s gross profit per new vehicle jumped 89% to $4,157 in the quarter ended June 30, while the gross profit per used vehicle rose 24% to $2,240.
• Adjusted net income from continuing operations came in at a record $4.83 per share, easily beating a Refinitiv IBES estimate of $2.81. Record revenue of $6.98 billion was also higher than expectations.

Long-Term Treasury Yields Plunge as Investors Rethink Growth – Bloomberg, 7/19/2021

• Long-term Treasury rates spiraled to their least since February — dragging the yield curve flatter — as the spread of the delta variant sparked investor concerns over economic growth and sent global stocks lower.
• The benchmark 10-year yields tumbled as much 12 basis points Monday to as little as 1.17%, the lowest since Feb. 12 and well below a 14-month high of 1.77% reached in March. The 30-year rate sank by a similar amount to 1.80%, the least since Jan. 29.
• The gap between 2- and 10-year yields dropped below 100 basis points Monday, touching its smallest spread since early February. Similarly, the difference between 5- and 30-year yields narrowed to 110 basis points, the least in a month.

OPEC, Allies Agree to Boost Oil Output as Demand Roars Back – Wall Street Journal, 7/19/2021

• OPEC and its Russia-led oil-producing allies agreed to unleash millions of barrels of bottled-up crude over the next two years, committing to restore all the cuts they made at the start of the Covid-19 pandemic as many economies pick up and crude demand recovers.
• Underscoring the uncertain speed of a full economic recovery and a return of pre-pandemic oil demand, the group chose to move gradually, agreeing to modest, monthly installments of new oil through the latter end of 2022.
• Sunday’s oil deal calls for the Organization of the Petroleum Exporting Countries and a Russia-led group of big producers to raise production by 400,000 barrels a day each month through the end of 2022.
• The deal seeks to unwind all the cuts the two groups, collectively called OPEC+, agreed to make at the start of the pandemic.

Zoom to Buy Five9 in All-Stock Deal Valued at $14.7 Billion – Wall Street Journal, 7/19/2021

• Zoom Video Communications, the videoconferencing service that became a household name globally during the pandemic, plans to parlay some of the resulting rise in its share price into a $14.7 billion acquisition to secure growth.
• The all-stock deal for Five9, a provider of cloud-based customer-service software, will help Zoom expand its potential offerings for business and enterprise clients. The growth opportunity will allow Zoom to tap into a $24 billion contact-center market, the company said Sunday.
• The deal is Zoom’s biggest-ever acquisition. Last year it bought startup Keybase to help it build end-to-end encryption capabilities for its videoconferencing service, and last month it acquired translation software maker Kites GmbH.

Tax-Increase Talk Prompts Wealthy to Splurge on Muni Bonds – Wall Street Journal, 7/19/2021

• Wealthy Americans eyeing potential tax increases are helping drive record amounts of money into municipal bond funds.
• In the first six months of 2021, U.S. municipal bond funds attracted an estimated $56.9 billion in net new money—the most for any first half of the year going back to 1992, according to data from Refinitiv Lipper.
• Investors withdrew an estimated net $46.1 billion from municipal bond funds in March 2020, according to Refinitiv Lipper.
• But in many places, the fiscal damage turned out to be less severe than anticipated. Federal aid for households and businesses supported consumer spending, and the economy picked up more quickly than expected.
• Aid from Washington also included $350 billion for state and local governments to pay for pandemic-related costs, fill revenue shortfalls and fund water, sewer and broadband projects.

J&J exploring putting talc liabilities into bankruptcy – Reuters, 7/19/2021

• Johnson & Johnson is exploring a plan to offload liabilities from widespread Baby Powder litigation into a newly created business that would then seek bankruptcy protection, according to seven people familiar with the matter.
• During settlement discussions, one of the healthcare conglomerate’s attorneys has told plaintiffs’ lawyers that J&J could pursue the bankruptcy plan, which could result in lower payouts for cases that do not settle beforehand, some of the people said.
• Plaintiffs’ lawyers would initially be unable to stop J&J from taking such a step, though could pursue legal avenues to challenge it later.
• J&J has not yet decided whether to pursue the bankruptcy plan and could ultimately abandon the idea, some of the people said. Reuters could not determine whether J&J has retained restructuring lawyers to help the company explore the bankruptcy plan.