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Daily Market Report | August 9, 2021

US FINANCIAL MARKET

S&P 500 Holds Steady While Oil Slides – Wall Street Journal, 8/9/2021

  • U.S. stocks hovered close to record highs, but a tumble in oil prices and a brief slump in gold and silver prices signaled investor unease about the strength of the economic recovery.
  • Global oil benchmark Brent crude dropped 3.8% to $68.04, putting it on track for its lowest settlement price since May.
  • Analysts attributed the fall of gold and silver to rising bond yields and an appreciation in the dollar in the wake of Friday’s strong U.S. jobs report.
  • In bond markets, the yield on the 10-year Treasury note ticked down to 1.275% from 1.288% Friday, halting a four-day rise.
  • Overseas, the pan-continental Stoxx Europe 600 ticked up less than 0.1%, holding steady after ending last week at a record high.
  • In Asia, most major benchmarks rose.
  • The Shanghai Composite Index added 1.1% and Hong Kong’s Hang Seng Index climbed 0.4%.

Oil Prices Slide on Worries Over China Delta Variant Outbreak – Wall Street Journal, 8/9/2021

  • The price of oil and other key industrial commodities slid Monday after Chinese government measures to halt the spread of the Delta variant spooked investors about global energy demand.
  • Brent crude oil, the global benchmark, fell 4% to $67.87 a barrel and West Texas Intermediate futures—the main U.S. benchmark—were down 4.3% at $65.38 a barrel
  • At those prices, both gauges were set for their lowest close in around 2½ months.
  • Though crude oil prices are down 10% from a month ago, the drop has yet to feed through at the pump.
  • The most recent average U.S. gas price was $3.19 a gallon, according to the American Automobile Association.

Record Pace for Corporate Earnings Keeps Stocks Buoyant – Wall Street Journal, 8/8/2021

  • Recent developments have had many investors expecting rockier trading in the coming months, following an 18% advance in 2021 that has taken the S&P 500 to 44 record closes.
  • With these potential hurdles coming into view, investors have been heartened by a standout earnings season in which the share of big U.S. companies beating profit expectations is on pace for a record.
  • Analysts now project that earnings from companies in the S&P 500 grew 90% in the second quarter from a year earlier, up from an estimate of 53% growth the day before the quarter’s April kickoff, according to FactSet.
  • The S&P 500 traded Thursday at more than 21 times its projected earnings over the next 12 months, above a five-year average of 18.5.
  • With 83% of the market value of the S&P 500 having reported, the operating margin for the index in the second quarter is expected to come in at 13%.

WeWork and Cushman & Wakefield Are Forming $150 Million Partnership – Wall Street Journal, 8/9/2021

  • Shared office space giant WeWork and Cushman & Wakefield PLC, one of the world’s largest commercial real-estate firms, are negotiating to form a $150 million partnership to navigate the new world of remote working and flexible workplaces.
  • That merger, expected to value WeWork at $9 billion including debt, will cap off the firm’s effort to reconstruct its balance sheet following the high-profile collapse of its planned initial public offering in late 2019.
  • Cushman, which had $4.17 billion in revenue the first half of 2021 and operations in 60 countries, has a big business in managing office space for tenants.
  • Cushman executives think WeWork’s technology, app, reputation for hip spaces and other amenities will help give the partnership a competitive edge.

DraftKings to buy Fertitta-backed Golden Nugget for $1.56 billion – Reuters, 8/9/2021

  • DraftKings said on Monday it would buy billionaire Tilman Fertitta’s Golden Nugget Online Gaming for $1.56 billion in a deal that sees the Houston Rockets owner join the fantasy sports betting firm’s board and brings it more than 5 million new customers.
  • As part of Monday’s deal, DraftKings said it will form a new holding company called New DraftKings containing both DraftKings and Golden Nugget, which also owns the Landry’s portfolio of restaurants.
  • If the all-stock deal comes through, Golden Nugget shareholders will receive 0.365 shares of New DraftKings’ stock for each share held.
  • The transaction is expected to close in the first quarter of 2022.

Roku to Release More Shows From Quibi to Boost Streaming Channel – Bloomberg, 8/9/2021

Hertz Posts Higher Revenue, Plans to Relist Amid Travel Rebound – Wall Street Journal, 8/9/2021

  • Car-rental company Hertz said it plans to relist on a major stock exchange by the end of 2021 as its quarterly revenue surged amid a travel rebound.
  • For April through June, Hertz posted sales of $1.87 billion, growth of 62% compared with the first three months of the year.
  • For Hertz, demand has been resurgent and slim car-rental inventories industrywide boosted the company’s results, Chief Executive Paul Stone said.
  • Hertz’s net loss for the quarter to June 30 narrowed to $168 million, or $1.05 a share, from $847 million, or $5.86 a share, in the year-ago period.
  • Stripping out $633 million of restructuring costs and other one-time items, Hertz posted an adjusted profit of $2.55 a share.

US ECONOMY & POLITICS

Senate Democrats Outline $3.5 Trillion Antipoverty, Climate Plan – Wall Street Journal, 8/9/2021

  • The plan, which is set to offer universal prekindergarten, two free years of community college, and expanded Medicare to cover hearing, dental and vision care, is the second of two major packages encapsulating President Biden’s agenda that lawmakers are pushing through Congress this year.
  • Democrats are planning to raise taxes on corporations and high-income households to cover the cost of the $3.5 trillion plan, which also calls for a federal paid leave benefit, a series of energy tax incentives, and a program to push the U.S. to receive 80% of its electricity from clean sources by 2030.
  • It doesn’t include a measure to increase the U.S. government’s borrowing limit, meaning Democrats will seek to raise the debt ceiling with GOP support in the coming weeks.
  • Mr. Schumer has said that the Senate won’t break for its August recess until it has passed both the infrastructure plan and the budget outline for the $3.5 trillion plan.

U.S. Job Openings Hit New Record in June, Surpassing 10 Million – Bloomberg, 8/9/2021

  • The number of available positions rose to 10.1 million during the month from an upwardly revised 9.5 million in May, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Monday.
  • Economists in a Bloomberg survey had called for an increase to 9.27 million openings.
  • Faced with a snapback in consumer demand for services like travel and dining out, employers have been scrambling to fill a multitude of vacant positions, but the supply of labor remains restrained.
  • Ongoing childcare obligations, health concerns and enhanced unemployment benefits have kept some Americans from returning to the workforce.
  • The number of vacancies exceeded hires by 3.4 million in June, a slightly narrower gap from the record seen a month earlier. The number of people who voluntarily left their jobs increased to 3.9 million in the month, and the quits rate rose to 2.7%.

Senate Moves Closer to Passing Infrastructure Bill – Wall Street Journal, 8/9/2021

  • The roughly $1 trillion bipartisan infrastructure bill cleared a final set of procedural hurdles in the Senate, putting the legislation on track to easily pass the chamber in the coming days.
  • The bill will face a more complicated path in the House, where House Speaker Nancy Pelosi (D., Calif.) has said she wouldn’t bring it up until the Senate also passes a $3.5 trillion antipoverty and climate bill.
  • The bill provides $550 billion in new funding on top of money authorized for existing federal infrastructure programs.
  • Of that $550 billion, $65 billion is dedicated to expanding access to broadband, $110 billion will go toward rebuilding bridges and roads, and $55 billion is aimed at water infrastructure.

Rising Rents Pose Risks to the Fed’s Inflation Outlook – Wall Street Journal, 8/8/2021

  • In a June report, economists at Fannie Mae said they expected the rate of shelter inflation to pick up from around 2% in May to 4.5% over the coming years—and higher still, if house-price growth doesn’t cool off soon.
  • They forecast that by the end of 2022, housing could contribute 1 percentage point to core PCE inflation, the strongest contribution since 1990, and they forecast core inflation slowing to just 3% by then.
  • Housing inflation is important because it accounts for a hefty share of overall inflation—around 18% of core PCE inflation, and around one-third of a separate inflation gauge, the Labor Department’s consumer-price index.
  • Invitation Homes, the largest single-family landlord in the U.S., raised rents by 8% in the second quarter, including 14% on leases signed by new tenants.

Yellen Presses Congress to Raise U.S. Debt Limit as Capacity Nears – Reuters, 8/9/2021

  • U.S. Treasury Secretary Janet Yellen on Monday again urged Congress to raise the U.S. debt limit through bipartisan action as the federal government moves closer to exhausting its borrowing capability, warning of economic harm.
  • The U.S. is projected to exhaust its borrowing authority in October and failure to approve an increase in the statutory debt limit – now at $28.5 trillion- could trigger another federal government shutdown or a debt default.
  • Meanwhile, the Treasury Department has already announced measures such as suspending investments in employee health benefits funds to preserve the government’s borrowing authority.

EUROPE & WORLD

China’s Producer Prices Jump Despite Efforts to Cool Commodities Costs – Wall Street Journal, 8/9/2021

  • July’s increase matched May’s 9.0% year-over-year jump, which marked the biggest surge in producer prices since September 2008.
  • The price increases came despite measures taken by Beijing in recent months to cool soaring commodity prices, including restricting steel exports and cracking down on speculative behavior.
  • Fortunately for Chinese policy makers, the high producer prices haven’t fed through to consumers.
  • China’s consumer-price index rose 1.0% from a year earlier in July, down from June’s 1.1% gain, kept in check by food prices that fell 3.7% in July from a year earlier, compared with June’s 1.7% drop.
  • Nonfood prices rose by 2.1% in July, up from June’s 1.7% advance, lifted by soaring oil prices and higher hotel and travel expenses during the summer months, China’s statistics bureau said.

Saudi Aramco Follows Big Oil Competitors as Profit Surges – Bloomberg, 8/7/2021

Greece Starts to Count Cost After a Week of Devastating Fires – Reuters, 8/9/2021

  • Prime Minister Kyriakos Mitsotakis was due to chair a ministerial meeting on Monday on relief measures for those who lost property in the fires.
  • The fires broke out during Greece’s worst heatwave in three decades last week, with searing temperatures and dry heat causing tinder box conditions.
  • On Evia, Greece’s second largest island which lies just off the mainland, water-bombing aircraft struggled to operate because of the large plumes of smoke blanketing the area, authorities said.
  • More than 2,000 residents and tourists have been evacuated by ferry since last Tuesday.

U.N. Sounds ‘deafening’ Warning on Climate Change – Reuters, 8/9/2021

  • The United Nations panel on climate change told the world on Monday that global warming was dangerously close to being out of control – and that humans were “unequivocally” to blame.
  • Unless immediate, rapid and large-scale action is taken to reduce emissions, the report says, the average global temperature is likely to reach or cross the 1.5-degree Celsius (2.7 degrees Fahrenheit) warming threshold within 20 years.
  • If emissions are slashed in the next decade, average temperatures could still be up 1.5C by 2040 and possibly 1.6C by 2060 before stabilizing.
  • Under these high-emissions scenarios, Earth could broil at temperatures 4.4C above the preindustrial average by the last two decades of this century.

Factmonster – TODAY in HISTORY

  • Jesse Owens became the first American to win four gold medals in one Olympics. (1936)
  • The United States exploded a nuclear bomb over Nagasaki, Japan, killing an estimated 74,000 people. (1945)
  • Singapore proclaimed its independence from Malaysia. (1965)
  • Vice president Gerald Ford was sworn in as president following Nixon’s resignation. (1974)

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