Daily Market Report | August 5, 2021
US FINANCIAL MARKET
Stocks Rise as Jobless Claims Drop – Wall Street Journal, 8/5/2021
- U.S. stock edged up Thursday as investors weighed a decline in jobless claims against data showing that the trade deficit widened.
- Fresh data Thursday showed the U.S. trade deficit widened to $75.7 billion in June, more than economists had forecast, as Americans bought more goods from overseas.
- Meanwhile, jobless claims, seen as a proxy for layoffs, slipped to 385,000, showing that workers’ filings have settled at an elevated level in the summer after weeks of steady declines.
- Despite the volatility, the S&P 500 is still hovering near its all-time high, boosted by strong quarterly results from the biggest businesses.
- In bond markets, the yield on the benchmark 10-year Treasury note edged up to 1.187% from 1.183% on Wednesday.
Uber Ridership Rebounds From Pandemic Lows – Wall Street Journal, 8/4/2021
- Uber’s ridership rebounded strongly in the most recent quarter from last year’s pandemic lows, but a continuing driver shortage and uncertainty about how the Delta variant will affect consumer behavior pushed its shares lower.
- The company said Wednesday its adjusted loss excluding tax, interest and some costs narrowed to $509 million in the second quarter from $837 million in the year-earlier period.
- The San Francisco-based company reported record bookings in the second quarter. The company’s bookings grew 114% year-over-year to $21.9 billion in the three months ended in June.
- Bookings for Uber Eats, its food-delivery arm, grew 85% while the ride-hailing business more than doubled from the lows of last year.
- The company expects to beat its bookings record in the current quarter. It said it expected third-quarter bookings between $22 billion and $24 billion, in line with analysts’ average estimate of $23 billion.
- Uber said it didn’t plan to spend significantly more on incentives in the third quarter. It told analysts Wednesday that new driver additions in the U.S. in July grew 30% from the previous month, even as it pulled back on some incentives.
GM Reveals Hit From Chip Shortage, Rising Costs – Wall Street Journal, 8/4/2021
- General Motors posted strong second-quarter earnings and raised its full-year profit guidance but said the lingering computer-chip shortage and rising commodity costs would weigh on second-half results.
- GM’s outlook for second-half profits disappointed investors. Shares fell about 9% Wednesday, their biggest decline of the past year.
- The negative reaction is a sign that car companies, after a run of heady profits, could have trouble managing investor expectations, with the continuing chip shortage and pandemic still clouding the outlook.
- GM’s boosted forecast for full-year pretax profit of between $11.5 billion and $13.5 billion—the top end of which would be a record—fell short of analysts’ forecasts.
- The company said higher commodity costs would cut $1.5 billion to $2 billion from the bottom line in the second half of the year, echoing concerns from other auto makers about rising raw-material costs.
- GM on Wednesday said solid pickup-truck sales and record profits for GM Financial—boosted by soaring used-car prices—helped it notch $2.8 billion in net profit, compared with a loss a year earlier.
- Through the second quarter, GM had cut production of roughly 325,000 vehicles in North America this year because of the chip shortage, research firm AutoForecast Solutions estimates.
Fox Reports Higher Revenue, as Sports and Entertainment Events Resume – Wall Street Journal, 8/4/2021
- Fox Corp., parent of Fox News and the Fox broadcast network, said revenue rose in the latest quarter, as the company expects the return of live sports and entertainment events will continue to propel its growth
- Revenue for the company’s fiscal fourth quarter was $2.89 billion, up 20% from the year-ago period.
- Revenue in the TV station unit rose 30% from a year ago to $1.45 billion on higher advertising sales as local markets recovered with a swath of the economy reopening from coronavirus-related restrictions a year earlier.
- Profit rose to $253 million in the June quarter, or 43 cents a share, from $122 million, or 20 cents a share, a year earlier.
Foxconn to Buy Semiconductor Manufacturing Facility – Wall Street Journal, 8/5/2021
- Foxconn Technology, the world’s biggest electronics contract manufacturer, said that it would acquire a semiconductor manufacturing facility, taking the company deeper into the chip business at a time of unprecedented global strain.
- Foxconn, best known as the largest assembler of Apple Inc. iPhones, said Thursday that it would buy the Taiwan-based plant, which manufactures six-inch wafers used in cars, a purchase that it said would help secure a steady supply of auto chips as Foxconn expands further into the electric-vehicle industry.
- Young Liu, Foxconn’s chairman, said the plant will be able to churn out enough capacity to supply 30,000 electric vehicles each month.
Roku Pays to Be a Player – Wall Street Journal, 8/5/2021
- Roku may be best known to consumers for the TV sets and streaming boxes that bear its name, but advertising now makes up more than 80% of its total business.
- Advertising also is far more profitable, generating gross margins of 60% last year against 9% for the company’s hardware side.
- The stock has surged 153% over the past 12 months and commands a multiple of more than 16 times forward sales—more than double that of Netflix.
- Platform revenue reflecting the company’s advertising business more than doubled year over year to $532 million—handily beating Wall Street’s projections.
- But player revenue fell short, rising only 1% year over year to about $113 million. Moreover, player gross margins went negative for only the second time in the company’s history.
- The company added 1.5 million active accounts during the quarter, the lowest growth in two years.
- Streaming hours over the Roku platform also slipped 5% from the first quarter—the first sequential decline for this metric on record.
- The company powers about 38% of streaming devices and connected TVs in the U.S., according to Parks Associates, representing a leading market share over platforms backed by tech titans Amazon, Apple and Google
US ECONOMY & POLITICS
U.S. Jobless Claims Remain at Elevated Level After Steady Declines – Wall Street Journal, 8/5/2021
- U.S. jobless claims fell slightly to 385,000 last week, as worker filings for new unemployment benefits settled this summer at a level that is nearly double the pre-pandemic average.
- The four-week moving average, which smooths out volatility in the weekly figures slightly decreased to 394,000.
- Continuing claims for regular state programs, which provides an approximation of the number of people receiving benefits, dropped by 366,000 to 2.9 million in the week ended July 24, the most recent figures for that reading.
- Claims have hovered between 368,000 and 424,000 since late May, elevated above pre-pandemic levels but significantly lower than early in the pandemic.
- The Labor Department will separately release the July employment report on Friday that will show whether hiring accelerated last month.
- Economists polled by the Journal estimate that 845,000 jobs were created last month, similar to June’s total, and that the unemployment rate fell to 5.7%.
- Many workers remain on the sidelines—the labor market in June was 6.5 million workers smaller than before the pandemic—and economists are watching to see if the surge in Delta variant cases affects the economy.
U.S. June Trade Deficit Widened to a Record as Economic Growth Boosted Imports – Wall Street Journal, 8/5/2021
- The foreign trade gap in goods and services expanded 6.7% from May to a seasonally adjusted $75.7 billion, the Commerce Department said Thursday.
- Imports climbed 2.1% to $283.4 billion, also a monthly record. Exports increased 0.6% to $207.7 billion.
- The increase in imports in June was driven by purchases of industrial supplies, iron and steel mill products, organic chemicals, and nonmonetary gold, which includes gold for industrial use, Thursday’s Commerce Department report showed.
- Imports of consumer goods declined slightly for the month, driven primarily by a drop in pharmaceutical imports.
U.S. to Set Electric-Vehicle Sales Target of 50% by 2030 – Wall Street Journal, 8/5/2021
- Roughly half of all cars and light trucks sold in the U.S. by 2030 would be electric, hydrogen-fuel cell and plug-in hybrid vehicles under voluntary targets set to be announced Thursday by the Biden administration and backed by auto makers, contingent on government support.
- Auto makers said their commitment was to have electric, fuel cell and plug-in hybrid vehicles comprise 40% to 50% of sales by 2030, saying the action “represents a dramatic shift from the U.S. market today.”
- Biden administration officials, however, said the president plans to sign an executive order setting a voluntary target of 50%.
- The speed with which U.S. auto makers pivot to electric-vehicle manufacturing could shake up the auto labor force. Engines built for electric vehicles don’t require as much labor.
- The Environmental Protection Agency and the U.S. Department of Transportation also plan to announce more stringent fuel-efficiency and tailpipe-emissions standards Thursday, the White House said but didn’t release specific figures.
Biden Signs Order Allowing Some Hong Kong Residents to Stay in U.S. – Wall Street Journal, 8/5/2021
- President Biden on Thursday signed an order enabling some Hong Kong residents to remain in the U.S. rather than return to the Chinese territory, citing Beijing’s crackdown on political freedom there.
- Hong Kong residents who qualify for the program will be granted a work permit for 18 months and a reprieve from deportation.
- The action, which a U.S. official estimated would affect thousands of individuals, is the latest in a series President Biden has taken in objection to China’s aggression against Hong Kong and other allies.
U.S. senators gird for CBO analysis of $1 trillion infrastructure bill – Reuters, 8/5/2021
- A $1 trillion bipartisan infrastructure bill on Thursday faces its biggest test of this week’s U.S. Senate debate when the nonpartisan Congressional Budget Office delivers its judgment on whether the measure fulfills a promise of not adding to Washington’s budget deficits.
- If the CBO concludes lawmakers have fallen short in crafting a deficit-neutral bill, it could prompt some Republican senators to oppose the legislation after showing support in two early procedural votes.
- If and when the $1 trillion bill passes, the Democratic-controlled Senate will then turn its attention to ramming through a $3.5 trillion “human infrastructure” budget framework that Republicans oppose by using a special procedure temporarily scrapping the 60-vote threshold for bills to advance.
U.S. Taps Amazon, Google, Microsoft, Others to Help Fight Ransomware, Cyber Threats – Wall Street Journal, 8/5/2021
- The U.S. government is enlisting the help of tech companies, including Amazon.com Inc., Microsoft Corp. and Google, to bolster the country’s critical infrastructure defenses against cyber threats after a string of high-profile attacks.
- The Department of Homeland Security is formally unveiling the initiative Thursday, called the Joint Cyber Defense Collaborative.
- The disruptions have made cybersecurity a major area of concern beyond the White House. The Senate has included additional funding for CISA in its $1 trillion infrastructure bill that could be passed by the chamber this week.
- The proposed legislation includes a raft of other cybersecurity measures, such as $1 billion in funding over the next few years for a cybersecurity grant program for states and local authorities and additional money to boost energy-sector cyber defenses
- Improving information sharing between government and companies will make it easier to spot and combat threats such as what happened with SolarWinds, said Jen Easterly, director of the DHS’s Cybersecurity and Infrastructure Security Agency.
EUROPE & WORLD
Delta Variant Prompts Beijing to Cancel Large August Events – Wall Street Journal, 8/5/2021
- Health authorities in Beijing announced the city would cancel all large-scale exhibitions and events for the remainder of August, according to state media, the latest sign of economic disruption due to the fast-spreading Delta variant.
- China has been battling a series of Covid-19 outbreaks caused by the variant since mid-July, with new cases numbering 62 nationwide on Wednesday, according to the country’s National Health Commission.
- Among the large events canceled in Beijing is the third annual World 5G Conference, a mobile internet industry gathering that was scheduled to take place in a 215,000 square-foot exhibition center in southern Beijing from Friday through Sunday
Iran Swears In President Ebrahim Raisi as Unease Grows in West – Wall Street Journal, 8/5/2021
- For the first time in years, all branches of power in Iran are under the control of hard-liners after a protégé of the supreme leader was sworn in as president, bolstering their power and adding to growing unease that the Islamic Republic’s relations with the West could worsen.
- President Ebrahim Raisi, 60 years old, studied as a young man at one of Supreme Leader Ali Khamenei’s Islamic seminaries. He also served on a panel that ordered the execution of thousands of political prisoners.
- His inauguration Thursday, after an election in which most of his rivals were disqualified, is set to consolidate power among hard-line loyalists of Mr. Khamenei just as Iran and the West are attempting to revive a deal that limits Tehran’s nuclear capabilities.
Canada’s Plan to Reopen Border Threatened by Labor Strife – Wall Street Journal, 8/4/2021
- Canada’s plan to reopen its border next week to U.S. tourists could be in trouble as the union representing customs and immigration officers said it is ready to cut services at land crossings, airports and shipping ports Friday morning unless a new labor agreement is struck.
- Canada said last month it would reopen its borders to fully-vaccinated U.S. citizens and permanent residents currently living in the U.S. to enter for tourism and recreation purposes, starting Aug. 9.
- Public Service Alliance of Canada, which is handling negotiations for the roughly 9,000 employees at the Canada Border Services Agency, said it served formal strike notice late Tuesday to the federal government, informing it labor disruptions could start at 6 a.m. EDT Friday unless the two sides reach a new collective bargaining agreement.
Contractor Says Fired Supreme Court Justice Behind Killing of Haitian President – Wall Street Journal, 8/5/2021
- A Miami-based security contractor who hired Colombian mercenaries accused of killing Haitian President Jovenel Moïse last month said he was working with a former Haitian Supreme Court judge to help arrest Mr. Moïse and not assassinate him.
- More than 40 people including members of the slain president’s security detail, Haitian politicians, a convicted drug dealer turned DEA informant, a second longtime DEA informant and Miami-area businessmen have been detained or implicated in the case.
- The lawyers’ statement was accompanied by nearly 40 pages of private correspondence, contracts, a “Memorandum of Understanding” to replace Mr. Moïse with an obscure preacher, and an arrest warrant for the president.
- The Biden administration has sent investigators from the Federal Bureau of Investigation and Department of Homeland Security to help Haiti solve the case; officials from Colombia have also offered assistance.
Factmonster – TODAY in HISTORY
- For the first time, the U.S. government levied an income tax. (1861)
- The cornerstone for the Statue of Liberty was laid on Bedloe’s Island. (1884)
- The first electric traffic lights were installed in Cleveland, Ohio. (1914)
- Marilyn Monroe died. (1962)
- Joan Benoit won the first Olympic women’s marathon. (1984)
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