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Daily Market Report | July 22, 2021

US FINANCIAL MARKET

Stocks Waver as Jobless Claims Rise – Wall Street Journal, 7/22/2021

  • U.S. stocks wavered around the flatline Thursday, pausing after two strong days of gains.
  • In recent days, stocks had resumed their monthslong rally, erasing most of their losses from the sharp drop on Monday when the spread of the Delta variant raised alarms about renewed lockdown measures. Investors have since sent the major indexes back up to less than 1% below their all-time highs.
  • Semiconductor company Texas Instruments slipped 4.8% after it signaled a likely slowdown in growth in the third quarter.
  • Casino operator Las Vegas Sands declined 3.8% after it reported revenue that missed analysts’ estimates and a bigger loss than expected.
  • Domino’s Pizza rose 7.1% after reporting earnings that beat estimates and disclosing a new share repurchase program.
  • Earlier Thursday, the Labor Department’s latest data on jobless claims, viewed as a proxy for layoffs, showed that 419,000 people applied for unemployment insurance last week. That was up from the preceding week.
  • Economists had been expecting claims to fall to a new pandemic low.
  • Overseas, the pan-continental Stoxx Europe 600 added 0.6%.
  • The European Central Bank left key interest rates unchanged in its latest monetary policy decision and said it may keep rates at current levels or below until it sees inflation stabilizing at 2%.
  • Benchmark Italian, Spanish and Portuguese government bonds rallied on the prospect of longer-term monetary support. The yield on Spain’s 10-year bond declined to 0.220% from 0.280% on Wednesday.
  • In Asia, most major benchmarks rose by the close of trading. The Shanghai Composite Index edged up 0.3%, and Hong Kong’s Hang Seng Index rose 1.8%. Japanese markets were closed for a holiday.

American Airlines beats second-quarter revenue estimates as travel recovers – Reuters, 7/22/2021

  • American Airlines beat Wall Street estimates for second-quarter revenue on the back of a recovery in demand as leisure travel rebounds from pandemic lows.
  • Total operating revenue jumped 361% to $7.48 billion. Analysts, on average, expected a revenue of $7.34 billion, according to Refinitiv data.
  • The U.S airline posted a net income of $19 million, or 3 cents per share, in the quarter ended June 30, compared with a loss of $2.07 billion, or $4.82 per share, a year earlier.
  • The airline reported positive cash flow in the second quarter for the first time since the pandemic began, reversing a trend of cash burn of about $100 million a day when global travel had ground to a halt.
  • The airline reported a cash build rate of about $1 million per day in the second quarter.

Southwest Airlines losses narrow as leisure travel bounces back – Reuters, 7/22/2021

  • Southwest Airlines on Thursday reported a smaller quarterly loss and said it would remain profitable for the rest of the year, as leisure bookings rebound thanks to aggressive vaccination drives.
  • Total operating revenue rose nearly 300% to $4 billion from a year earlier, but fell about 32% from 2019.
  • Excluding items, Dallas-based Southwest’s net loss narrowed to $206 million, or 35 cents per share, in the second quarter, from $1.50 billion, or $2.67 per share, a year earlier.
  • June leisure passenger traffic rose above June 2019 levels while passenger fares were on par with the same period two years ago, Chief Executive Officer Gary Kelly said, adding that the company expected to see further improvement in July.
  • Southwest said it now expects July operating revenue to drop between 10% and 15% compared with the same period in 2019, an improvement from its prior forecast of a fall between 15% and 20%.
  • The company expects August operating revenue to decline between 12% and 17% from two years earlier.

AT&T raises forecast for revenue, HBO Max as business recovers from pandemic – Reuters, 7/22/2021

  • AT&T on Thursday raised its full-year financial forecast as the telecoms company emerged from the pandemic with more wireless and internet customers, and beat analyst estimates for phone subscribers and revenue in the second quarter.
  • Total revenue at AT&T rose 7.6% to $44 billion, beating analysts’ average estimate of $42.67 billion, according to IBES data from Refinitiv.
  • The company added 789,000 net new phone subscribers who pay a monthly bill during the quarter ended June 30, blowing past Wall Street estimates of 278,000 new subscribers, according to data from research firm FactSet.
  • WarnerMedia added 2.8 million U.S. subscribers for its premium channel HBO and streaming platform HBO Max during the quarter, thanks to new movies like Lin-Manuel Miranda’s “In the Heights” and “Mortal Kombat,” which is based on the popular video game.
  • Globally, HBO and HBO Max now have 67.5 million subscribers, compared with 209 million subscribers for Netflix.
  • Net income attributable to common stock rose to $1.5 billion, or 21 cents per share, in the second quarter, from $1.2 billion, or 17 cents per share, a year earlier.
  • AT&T raised its forecast for global HBO Max subscribers to between 70 million and 73 million by the end of the year. It previously expected 67 million to 70 million subscribers.
  • Excluding impacts from the DirecTV and TPG deal, AT&T now expects 2021 revenue growth in the 2% to 3% range and adjusted earnings per share to rise in the low- to mid-single digits.

U.S. railroad operator Union Pacific’s quarterly profit jumps 59% – Reuters, 7/22/2021

  • Top U.S. railroad operator Union Pacific reported a 59% jump in its quarterly profit on Thursday, as it shipped more industrial chemicals, metals, petroleum, and liquefied petroleum gas.
  • The company’s revenue rose 29.7% to $5.504 billion from $4.24 billion a year ago, while operating ratio — a key profitability metric — improved to 55.1% from 61%.
  • Union Pacific, the largest U.S. railroad operator by market value, also said its second-quarter volumes increased 22%.
  • The company’s net income for the second quarter, that ended on June 30, rose to $1.798 billion from $1.13 billion a year ago.

D.R. Horton slows home orders due to supply constraints – Reuters, 7/22/2021

  • D.R. Horton said on Thursday a slowdown in its homebuilding driven by high lumber prices and the shortage of labor affecting the U.S. economy had forced it to take fewer orders for new homes in recent months.
  • Revenue jumped 35% to $7.28 billion, above estimates of $7.19 billion.
  • But the company said sales orders fell by 16.5% in the three months ended June 30.
  • The company’s third-quarter profit jumped 77% to $1.12 billion as it benefited from record-high property prices due to high demand. Adjusted earnings of $3.11 per share topped estimates of $2.81.
  • Horton expects full-year revenue between $27.6 billion and $28.1 billion, marginally above estimates of 27.35 billion, according to Refinitiv data.
  • It expects 2021 home sales between 83,000 units and 84,500 units, while analysts’ estimate sales of 83,475 homes.

Abbott beats profit estimates as medical device sales rebound – Reuters, 7/22/2021

  • Abbott Laboratories beat quarterly profit estimates on Thursday, driven by a rebound in its non-COVID-19 testing business and sales of its medical devices as vaccinations encouraged Americans to resume non-urgent procedures.
  • Abbott said its second-quarter sales, excluding COVID testing, rose more than 11% on an organic basis from the pre-pandemic levels recorded in 2019.
  • Its worldwide diagnostics revenue, excluding coronavirus testing, increased 42.5% from a year earlier, while medical devices sales rose 51.3% on the back of growth in its heart devices business.
  • But the rise in vaccinations pulled down its COVID-19 testing-related sales to $1.3 billion, from $2.2 billion in the previous quarter.
  • Excluding items, Abbott earned $1.17 per share, beating analysts’ estimates of $1.02 per share, according to Refinitiv IBES data.
  • The company reiterated its 2021 adjusted earnings forecast of $4.30 to $4.50 per share from continuing operations.

Dow gives upbeat sales forecast as reopening economies drive demand – Reuters, 7/22/2021

  • Chemicals maker Dow on Thursday forecast better-than-expected sales for the current quarter, betting on increased industrial production, and higher consumer spending as economies emerge from pandemic-led lockdowns.
  • Net sales of $13.89 billion also topped estimates of $13.07 billion.
  • Product prices jumped 16% in the second quarter from the prior period, while volumes rose 1%, helped by growing demand in infrastructure, industrial and personal-care end markets.
  • Adjusted net operating income doubled to $2.72 per share and beat estimates of $2.45, according to Refinitiv IBES data.
  • The company said it was expecting third-quarter net sales of between $13.75 billion and $14.25 billion, well above the estimates of $12.64 billion, according to Refinitiv IBES data.

Domino’s delivers upbeat results as new menu items boost sales – Reuters, 7/22/2021

  • Domino’s Pizza beat market estimates for quarterly revenue and profit on Thursday, as the world’s biggest pizza chain strove to carry on the momentum of 18 months when millions of Americans ordered in more than ever before.
  • Total revenue rose 12.2% to $1.03 billion, beating estimates of $972.3 million, according to IBES data from Refinitiv.
  • Its new flavor of chicken wings as well as cheeseburger and chicken taco pizzas helped U.S. same-store sales rise 3.5%, marking 41 consecutive quarters of increases, while analysts were expecting a 1.3% decline.
  • International same-store sales growth of 13.9% was also well above the 8.9% jump expected by analysts. That boost came from fresh lockdowns in countries, including the United Kingdom and India, where people relied on online ordering.
  • On an adjusted basis, Domino’s earned $3.12 per share, beating estimates of $2.87.

Blackstone doubles second quarter earnings on surging asset sales – Reuters, 7/22/2021

  • Blackstone, the world’s largest private equity firm, said on Thursday its second quarter distributable earnings nearly doubled year on year driven by a surge in asset sales across its real estate, private equity, credit and insurance businesses.
  • Distributable earnings, which represents the cash used to pay dividends to shareholders, rose to $1.1 billion from $548 million a year earlier.
  • This translated into a distributable earnings per share of 82 cents, surpassing the average Wall Street analyst estimate of 78 cents, data compiled by Refinitiv showed.
  • The buyout firm said its private equity portfolio grew 13.8% in the second quarter, compared with a 8.2% rise in the benchmark S&P 500 stock index over the same period. Opportunistic and core real estate funds rose 9.4% and 5.7%, respectively.
  • Its total assets under management rose to $684 billion from $648.8 billion in the prior quarter. Unspent capital fell to $129.9 billion from $148.2 billion three months earlier owing to the pace of capital deployments.

Uber’s Freight Unit to Buy Logistics Tech Firm Transplace for $2.25 Billion – Wall Street Journal, 7/22/2021

  • Uber Technologies’s Freight unit is buying technology-focused logistics services provider Transplace in a cash and stock transaction deal worth about $2.25 billion that extends the ride-hailing giant’s reach into the U.S. domestic shipping sector.
  • Under the agreement, Uber will pay up to $750 million in common stock of Uber Freight’s parent company and the rest in cash to TPG Capital.
  • Freight is just a sliver of Uber’s overall business, providing $302 million in gross bookings of the company’s overall revenue of $19.5 billion in gross bookings in the three months ending March 31.
  • The company is seeking to bring greater efficiency through digital bookings to the domestic shipping sector but faces strong competition from traditional middlemen that match freight loads to available trucks and from a lineup of tech-focused startups including Convoy and Transfix Inc.

GM will cut truck production amid semiconductor shortage – Reuters, 7/21/2021

  • General Motors said Wednesday it will cut some truck production in North America because of the ongoing global semiconductor shortage.
  • The largest U.S. automaker said its Flint Assembly plant that builds the Chevrolet Silverado HD and GMC Sierra HD trucks will operate on one production shift the week of July 26.
  • GM said its Ft. Wayne Assembly plant in Indiana that builds the Chevrolet Silverado 1500 and GMC Sierra 1500 model trucks will be idled next week. GM’s Silao Assembly plant in Mexico that also builds the Chevrolet Silverado 1500, Cheyenne and GMC Sierra 1500 will also suspend production next week.
  • All three plants are expected to resume regular production the week of Aug.2

US ECONOMY & POLITICS

U.S. Unemployment Benefit Rolls Shrink, New Applications Rise – Wall Street Journal, 7/22/2021

  • The number of Americans receiving jobless payments fell this month to the lowest level since early in the coronavirus pandemic, but first-time applications rose as supply constraints persist in the auto industry.
  • Continuing payments made through all unemployment benefit programs fell by 1.3 million in the week ended July 3, to 12.6 million, the Labor Department said Thursday.
  • Meanwhile, initial jobless claims, a proxy for new layoffs, rose by 51,000 to a seasonally adjusted 419,000 for the week ended July 17, the Labor Department said Thursday.
  • Continuing unemployment payments through regular state programs decreased by 29,000 to a seasonally adjusted 3,236,000 for the week ended July 10, also the lowest level since March 2020.

U.S. Median Existing-Home Price Hit New High in June – Wall Street Journal, 7/22/2021

  • The median U.S. home price rose to a new high of $363,300 in June as strong demand pushed home sales higher.
  • Existing-home sales rose 1.4% in June from the prior month to a seasonally adjusted annual rate of 5.86 million, the National Association of Realtors said Thursday. June sales rose 22.9% from a year earlier.
  • The median existing-home price rose 23.4% in June from a year earlier, setting a record high, NAR said, extending steady price increases amid limited inventory.
  • There were 1.25 million homes for sale at the end of June, up 3.3% from May and down 18.8% from June 2020. At the current sales pace, there was a 2.6-month supply of homes on the market at the end of June.
  • Existing-home sales rose the most month-over-month in the Midwest, up 3.1%, and in the Northeast, up 2.8%.

Fed Ramps Up Debate Over Taper Timing, Pace – Wall Street Journal, 7/22/2021

  • Federal Reserve officials are set to accelerate deliberations at their meeting next week over how to scale back their easy-money policies amid a stronger U.S. economic recovery than they anticipated six months ago.
  • Some officials have discussed concluding the purchases around October 2022 so they could lift rates later that year if the recovery is stronger or inflation is higher than now anticipated.
  • The timing of the Fed’s plans will depend on whether the economy keeps performing as expected and on whether Fed Chairman Jerome Powell can build a consensus among policy makers about how to proceed.
  • Officials are also weighing how quickly to taper the asset purchases. In 2013, the Fed ultimately shrunk its purchases in modest, equal amounts over the course of eight policy meetings, which spanned 10 months.
  • Some officials have questioned whether they will be able to do that this time.

Senate Republicans Block Infrastructure Bill but Talks to Continue – Wall Street Journal, 7/22/2021

  • Senate Republicans blocked an effort to begin debate on a bipartisan infrastructure deal still under negotiation Wednesday, but lawmakers said they expected to close in on a final agreement by early next week.
  • The vote failed, with 49 in favor and 51 against, short of the 60 needed to open debate. Senate Majority Leader Chuck Schumer (D., N.Y.) switched his vote to no, which he said gave him the option to bring the bill up again.
  • Senate Democratic leaders had hoped to start the process Wednesday of moving both the infrastructure bill and a separate $3.5 trillion package of child care, education, antipoverty and climate provisions expected to pass with only Democratic votes.
  • The failed vote Wednesday pushed the timeline for both deeper into the summer, although lawmakers involved in the infrastructure negotiations said they expected to have enough of an agreement in place to move forward by Monday, if Senate Democratic leaders agree to schedule another vote.

EUROPE & WORLD

China Rejects WHO Proposal for Second Phase of Covid-19 Origins Probe – Wall Street Journal, 7/22/2021

  • China rejects the World Health Organization’s proposal for a second phase of investigation into Covid-19’s origins, including a potential laboratory leak, and has put forward its own proposal to seek evidence in other countries, a top Chinese official said.
  • WHO chief Tedros Adhanom Ghebreyesus presented member states last week with a plan for further study that would include audits of laboratories and markets in Wuhan, the Chinese city where the first cases were identified. He also called for greater transparency from Beijing.
  • “We cannot accept this kind of plan for origin-tracing,” Zeng Yixin, vice minister of China’s National Health Commission, told a news conference Thursday.
  • China’s rejection of the WHO’s proposal presents a stumbling block in a painstaking global effort to find the origin of Covid-19, which has caused more than four million deaths around the world.
  • Beijing is sensitive to other countries blaming it for the pandemic, and rising mistrust between the U.S. and China has compounded the difficulty of scientific collaboration and consensus.

China Weighs Unprecedented Penalty for Didi After U.S. IPO – Bloomberg, 7/22/2021

  • Chinese regulators are considering serious, perhaps unprecedented, penalties for Didi Global after its controversial initial public offering last month, according to people familiar with the matter.
  • Regulators see the ride-hailing giant’s decision to go public despite pushback from the Cyberspace Administration of China as a challenge to Beijing’s authority, the people said, asking not to be named because the matter is private.
  • Regulators are weighing a range of potential punishments, including a fine, suspension of certain operations or the introduction of a state-owned investor, the people said.
  • Also possible is a forced delisting or withdrawal of Didi’s U.S. shares, although it’s unclear how such an option would play out.

ECB Looks to Keep Rates Low for Longer – Wall Street Journal, 7/22/2021

  • The European Central Bank signaled that it would support the eurozone economy by keeping interest rates low for longer as a surge in Covid-19 cases driven by the highly contagious Delta variant triggers new social restrictions and weighs on the region’s large tourism industry.
  • The ECB’s move is in part a response to its new policy framework, unveiled two weeks ago, which aims to give bank officials broader powers to stimulate the economy when inflation is too low.
  • While a surge in prices has stirred fears the U.S. is entering an inflationary period, the eurozone has long been mired in low inflation, despite years of ultra loose monetary policy.
  • The ECB also reiterated its pledge to buy eurozone debt under an emergency €1.85 trillion bond-buying program, equivalent to $2.2 trillion, through at least March 2022.

Volkswagen expects China EV sales to soar in H2 – Reuters, 7/22/2021

  • Volkswagen  expects sales of its ID series of electric vehicles in China — the world’s largest car market — to pick up significantly in the second half of the year, Chief Executive Herbert Diess said on Thursday.
  • By the end of the year, Volkswagen wants to sell between 80,000 and 100,000 of the series in China, Diess said, adding sales were expected to double to 6,000 in July from 3,000 in June.
  • In the first half, deliveries of battery electric vehicles (BEV) in China more than doubled to 18,285, but accounted for just 10.7% of global BEV deliveries.

Hyundai Motor Q2 net profit soars, expects chip shortage to ease – Reuters, 7/22/2021

  • South Korea’s Hyundai Motor turned in its best quarterly profit in about six years on Thursday, helped by solid demand for its high-margin sport-utility vehicles (SUVs) and its premium Genesis cars.
  • Hyundai, which together with affiliate Kia is among the world’s 10 biggest automakers by sales, reported net profit of 1.8 trillion won ($1.57 billion) for April-June versus 227 billion won in the same period a year earlier.
  • On Thursday, it said it expects on-year sales growth might slow in the second half of 2021 due to challenging business conditions, including raw material price fluctuation and unstable supplies of automotive chips.

Factmonster – TODAY in HISTORY

  • John Dillinger was shot to death outside Chicago’s Biograph Theater. (1934)
  • Franklin D. Roosevelt’s “court packing” scheme was rejected by the U.S. Senate. (1937)
  • Saddam Hussein’s sons, Uday and Ousay, were killed in a firefight. (2003)

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