Daily Market Report | August 3, 2021
US FINANCIAL MARKET
U.S. Stocks Climb Amid Earnings Optimism – Wall Street Journal, 8/3/2021
- U.S. stocks edged higher Tuesday as investors assessed the latest string of corporate earnings reports.
- Solid economic data and earnings have helped bolster investors’ optimism that stocks can continue to grind higher following an already strong rally this year.
- Shares of Under Armour rose 3.3% after the company reported it swung to a profit in the second quarter.
- Clorox shares slid 11% after the company said it expects sales to fall slightly for fiscal 2022.
- Eli Lilly narrowed its revenue guidance but reiterated the same earnings forecast it had previously issued. Its shares bounced up 2.1%.
- Besides earnings, investors are also monitoring a number of other factors that could add volatility to markets and limit the pace of the rally in broader markets
- An increase in Delta-variant Covid-19 cases has raised concerns about the global economic recovery stalling, and a recent regulatory clampdown in China caught some investors by surprise last month.
- Hong Kong’s broader Hang Seng Index drifted 0.2% lower, while Japan’s Nikkei 225 fell 0.5%, and Australia’s S&P/ASX 200 dropped 0.2%.
- In bond markets, the yield on the 10-year Treasury note hovered around 1.173%, its lowest closing level since February. Yields fall as bond prices rise.
- Marriott International posted gains for the June quarter, driven by leisure travel, as the company keeps an eye on the spread of the Delta variant, Chief Executive Anthony Capuano said.
- The hotel chain, whose portfolio encompasses roughly 7,800 properties world-wide, sees demand for business and group stays rising in the fall as it anticipates more workers returning to offices on a hybrid basis, Mr. Capuano said.
- The company turned a profit of $422 million, compared with a loss of $234 million in the prior-year period.
- Revenue more than doubled to $3.15 billion but missed Wall Street estimates.
- World-wide occupancy was 50.8% for the quarter, up 32.8 percentage points from a year ago and down 24.1 percentage points from the same quarter in 2019.
- E-commerce and cloud-computing sales fueled higher revenue for Alibaba in the latest quarter, as the company posted a profit after a regulatory fine dented its bottom line in the previous quarter.
- Revenue for the Chinese tech giant rose to 205.74 Chinese yuan, or about $31.9 billion. A year earlier, Alibaba’s revenue in 2020s June-ending quarter was 153.75 billion yuan.
- Chinese e-commerce sales grew 34% year over year, as the company added about 14 million monthly active mobile users.
- Cloud-computing revenue was up by 29% amid greater demand from the technology, financial services and retail industries.
- Alibaba’s profit attributable to shareholders was about $6.99 billion, or about $2.57 per American depositary share.
- The e-commerce giant reported its first quarterly loss as a public company earlier this year, resulting from an antitrust fine.
- Alibaba was one of the first major Chinese tech companies to come under scrutiny by Chinese regulators in what has become a continuing regulatory crackdown that started last year.
Tencent Sinks After China Denounces Online Gaming – Wall Street Journal, 8/3/2021
- Shares of Tencent and rivals fell Tuesday after a state-owned Chinese newspaper criticized online gaming as “opium for the mind,” fueling investor concerns that the companies’ popular games could be swept up into a broader regulatory crackdown.
- Within hours the article was no longer accessible on the paper’s website, before later reappearing with some of its harsher language removed. Meanwhile, Tencent said it would introduce stricter curbs on younger users.
- Tencent’s shares, which had dropped more than 10% earlier in the session, pared some losses after the article disappeared to close 6.1% lower in Hong Kong at 446 Hong Kong dollars a share, matching the more than one-year low it hit last week
- Tencent said Tuesday it would introduce new rules, starting with its flagship “Honor of Kings” game, that will enforce tougher limits on playing time than required by the authorities.
- Tencent is an industry powerhouse and “Honor of Kings” was the world’s top-grossing game in both 2019 and 2020.
- For last year, the company reported the equivalent of $22.7 billion in revenue from smartphone games, and $6.9 billion from PC games, out of total revenue of $74.6 billion.
Clorox forecasts drop in annual sales as pandemic boom fades, shares fall – Reuters, 8/3/2021
- Clorox signaled on Tuesday that the pandemic-driven boom in demand for its bleaches, wipes and other surface cleaners was fading due to vaccinations and easing COVID-19 curbs, sending its shares down 12%.
- The company forecast fiscal 2022 sales to fall between 2% and 6%, while analysts expected a decline of 1%, according to Refinitiv IBES data.
- Like Procter & Gamble Co and Britain’s Reckitt Benckiser Group Plc, Clorox had benefited from consumers stockpiling cleaning products at the height of the pandemic last year.
- But with the opening up of the economy, sales in its mainstay health and wellness unit slumped 17% in the fourth quarter.
- The household business, which makes Glad trash bags and Kingston charcoal, reported an 8% drop in sales.
- Clorox’s results also took a hit from rising costs of raw materials, such as pulp, resin and petrochemical products, that have prompted companies across sectors to increase prices.
Tesla Rival Li Auto Launches $2 Billion Hong Kong Share Sale – Wall Street Journal, 8/3/2021
- Electric-car maker Li Auto kicked off a near-$2 billion stock offering in Hong Kong, joining a string of U.S.-listed Chinese companies in tapping investors closer to home.
- The Nasdaq-listed maker of electric vehicles is pushing ahead with the stock sale despite a recent selloff in offshore-listed Chinese stocks, which was fueled by a raft of official actions against sectors like tutoring, ride-hailing, food-delivery and property.
- But unlike most of those companies, Li Auto is following fellow EV maker XPeng in obtaining what is known as a dual primary listing rather than a secondary one.
- Choosing this route allows Li Auto to list in Hong Kong earlier after going public in the U.S.
- It will also enable Li Auto shares to be bought and sold by investors in mainland China via a trading link.
- Based on a maximum offer price of 150 Hong Kong dollars per share, or about $19.29, for the small part of the deal reserved for individual investors, the share sale could raise about $1.93 billion.
Bundled Commercial Real-Estate Loans Climb to Sales Record – Wall Street Journal, 8/3/2021
- Sales of securities backed by riskier commercial real-estate loans have surged to a record, highlighting investors’ demand for higher-yielding debt and expectations for a recovery in business properties.
- This year’s record sales are a reversal from 2020, when shutdowns related to the Covid-19 pandemic caused some loan borrowers to delay renovations or skip interest payments, increasing default rates.
- Sales of other floating-rate debt have also surged. Some analysts and investors say that strong U.S. economic growth and high inflation, which erodes the purchasing power of conventional bonds’ fixed payments, will prompt the Federal Reserve to increase rates sooner than expected.
US ECONOMY & POLITICS
U.S. Says It Has Shared 110 Million Covid-19 Vaccine Does Overseas – Wall Street Journal, 8/3/2021
- President Biden’s administration has shipped more than 110 million Covid-19 vaccine doses to 65 countries, the White House said, as it works to share supply with the rest of the world following regulatory and logistical setbacks.
- The figures come about a month behind the White House’s June goal of delivering 80 million doses overseas, part of a greater vaccine-donation drive by the U.S. in the coming months.
- Natalie Quillian, deputy coordinator of Mr. Biden’s Covid-19 response, said later this month, the administration will also begin exporting the first batch of 500 million doses of Pfizer Inc.’s vaccine to low- and middle-income countries over the next year, as Mr. Biden promised.
- The shipping delays were caused by myriad factors, including the regulatory process for vaccines that hadn’t been approved by recipient countries and infrastructure to store the vaccines at proper temperatures.
- Roughly three-quarters of the doses shipped have been routed through Covax, the international vaccine effort, with the remaining 25% shared directly with partners, based on regional needs, the White House said.
- The $1 trillion infrastructure bill moving through the Senate this week stands to be a windfall for cable and fiber-optic internet companies, with $65 billion allocated to improve internet access for poor and isolated communities.
- The plan, which must still be reconciled with a House version, would help home internet providers such as AT&T and Charter Communications by providing $40 billion in grants that states can dole out to operators that expand their networks to households that lack high-speed service.
- The bill would also extend an emergency fund set up earlier this year to cover broadband service for low-income Americans. Those users could eventually become full-paying customers.
- Consumer advocates have meanwhile complained that the legislation avoided mandating more aggressive measures to expand internet access.
- The grants stop short of supporting government-owned networks that could compete with cable companies, for instance.
Apartment Rents Increase as Young Workers Head Back to Cities – Wall Street Journal, 8/3/2021
- Apartment rents are rising fast, boosted by young professionals returning to cities and an expensive housing market that keeps many of them renting.
- Median rent has risen more than 10% over the past year $1,244, according to homesearch website Apartment List.
- That figure is also 9.4% above where rents stood in March 2020, right before Covid-19 lockdowns began.
- One big factor behind the recent increase: Soaring housing prices are forcing many would-be home buyers out of the for-sale market, and they have had little choice but to pay up for rent.
- Two special U.S. congressional elections on Tuesday to fill vacant seats in Ohio reflect splits in both the Republican and Democratic parties, with a Trumpish Republican and a leftist Democrat battling mainstream candidates in party strongholds.
- The competition in Ohio’s traditionally Republican 15th District south of Columbus will be a fresh measure of former President Donald Trump’s clout in the Republican Party, coming just a week after a Trump-backed candidate for Congress suffered a surprise loss to a fellow Republican in north Texas.
- But the contest in northeast Ohio’s 11th District, a Democratic enclave, will test whether a progressive who last year compared voting for Democratic President Joe Biden to eating excrement, can be the party’s nominee for Congress.
- The two seats were left vacant by former Republican Representative Steve Stivers’ resignation in May and former Democratic Representative Marcia Fudge’s move to Biden’s cabinet.
Sen. Lindsey Graham Tests Positive for Covid-19 After Boat Outing – Wall Street Journal, 8/2/2021
- Sen. Lindsey Graham (R., S.C.) has tested positive for Covid-19 despite being vaccinated, raising concerns about the highly transmissible Delta variant on Capitol Hill, as senators push to complete a $1 trillion bipartisan infrastructure bill.
- Mr. Graham and other senators were on a house boat, the “Almost Heaven,” belonging to Sen. Joe Manchin (D., W.Va.) for a bipartisan get-together on Saturday, according to attendees.
- Mr. Manchin told reporters Monday evening that he had tested negative.
- Sen. Graham described his symptoms as mild—similar to a sinus infection—and credited the vaccine for ensuring he wasn’t more seriously ill.
EUROPE & WORLD
As Covid-19 Recedes in India, Bars Are Full and Masks Are Optional – Wall Street Journal, 8/3/2021
- In New Delhi and other cities across the country, shoppers are once again crowding stores, diners are squeezing into restaurants, and bars are hosting crowds of revelers.
- Coronavirus infections have steadily fallen—despite a sluggish vaccination rollout—after hitting a peak of more than 400,000 cases a day in early May.
- For weeks, daily confirmed cases have plateaued around 40,000. Only about 7% of the country’s more than 1.3 billion people have received both shots of a Covid-19 vaccine.
- Public health experts say the decline in cases is partly due to regional lockdowns in April and May that forced businesses to close and people to hunker down at home.
- About two-thirds of Indians have antibodies, according to a study by the Indian Council on Medical Research released last month.
- The city where Covid-19 was first detected reported new infections for the first time in more than a year, prompting authorities there to launch mass testing, as China fights to contain several outbreaks of the more infectious Delta variant.
- China on Tuesday logged 90 new confirmed cases, 61 of which were locally transmitted, according to China’s National Health Commission.
- With 1.69 billion shots of Covid-19 vaccines administered in China’s population of 1.41 billion people by the end of Monday, according to statistics by the National Health Commission, much of the transmission is silent.
- On Tuesday, China’s Ministry of Education issued a notice urging local authorities across the country to promote student vaccination.
- In June, China approved the emergency use of the Sinovac Covid-19 vaccine for children as young as three.
Incoming president says Iran will seek end to ‘tyrannical’ US sanctions – Reuters, 8/3/2021
- Iran’s hardline incoming president Ebrahim Raisi said on Tuesday he would take steps to lift “tyrannical” sanctions imposed by the United States, after winning the formal endorsement of the country’s supreme leader to take office later this week.
- Raisi, who is under personal U.S. sanctions over allegations of human rights abuses in his past as a judge, promised to improve the living conditions of Iranians, which have worsened since 2018 when Washington reimposed sanctions on Iran after abandoning a nuclear deal.
- Iran and six powers have been in talks since April to revive the nuclear pact, under which Iran agreed to curb its nuclear program to make it harder to obtain fissile material for a weapon in return for relief from sanctions.
- To return to the negotiating table, North Korea wants a relaxation of the ban on mineral imports, which prohibit once-lucrative shipments of coal and iron, and a removal of caps that limit the country to importing up to 500,000 barrels of refined fuel a year.
- Another precondition was Pyongyang’s elite needing the ability to import daily essentials, as South Korean lawmakers described them based on the intelligence briefing. The lawmakers cited Western-style suits and liquor as examples.
- The U.S. and North Korea haven’t held formal denuclearization talks since October 2019.
Factmonster – TODAY in HISTORY
- Columbus set sail from Palos, Spain. (1492)
- Germany declared war on France. (1914)
- The National Basketball Association was formed. (1949)
- The nuclear-powered submarmine Nautilus became the first vessel to cross the North Pole underwater. (1958)
- The Iran-Contra hearings ended. (1987)
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