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Daily Market Report | August 10, 2021

US FINANCIAL MARKET

Stocks Rise at the Opening as Investors Await Fed Clues – Wall Street Journal, 8/10/2021

  • U.S. stock futures rose slightly at the opening Tuesday as investors awaited clues from Federal Reserve officials about plans to ease stimulus measures.
  • Kansas City Southern rose over 6% after Canadian Pacific Railways raised its bid to buy the railroad.
  • In commodity markets, oil prices recovered somewhat after slumping Monday on fears that the spreading Delta variant would weigh on demand.
  • Brent crude, the international oil benchmark, rose 1.1% to $69.78 a barrel. Gold prices gained 0.4%.
  • Overseas, the Stoxx Europe 600 rose 0.3%, led by the travel and technology sectors.
  • In Asia, stock markets mostly rose. In Japan, the Nikkei 225 edged up 0.2%, while Hong Kong’s Hang Seng Index rose 1.2%.
  • In mainland China, the Shanghai Composite Index added 1%.
  • The yield on the benchmark 10-year U.S. Treasury note rose to 1.329% from 1.316% Monday. Bond yields rise as prices fall.

Apple Readies New iPhones With Pro-Focused Camera, Video Updates – Bloomberg, 8/10/2021

  • Apple’s next iPhone lineup will get at least three major new camera and video-recording features, which the company is betting will be key enticements to upgrade from earlier models.
  • The new handsets will include a video version of the phone’s Portrait mode feature, the ability to record video in a higher-quality format called ProRes, and a new filters-like system that improves the look and colors of photos.
  • It will include a faster A15 chip and a smaller notch, also known as the display cutout, in addition to new screen technology that could enable a faster refresh rate for smoother scrolling.
  • The company is also working on revamped MacBook Pros with in-house chips likely to be dubbed M1X, a redesigned iPad mini and an entry-level iPad geared at students.

AMC Beats Estimates, Even With Movie Attendance Weak – Bloomberg, 8/9/2021

  • The world’s largest theater chain, struggling under $5.5 billion in corporate borrowings, said Monday its loss shrank to 71 cents a share, excluding some items, better than the 94-cent loss analysts were predicting.
  • Revenue soared to $444.7 million, from virtually nothing a year ago, and was better than the $382.3 million that Wall Street expected.
  • AMC recently set several pandemic-era attendance records, and sold 22 million tickets in the second quarter, compared to about 100,000 in the same period a year ago.
  • AMC also said Monday it signed an agreement with Warner to exclusively show all its 2022 movies for 45 days after their debut, ending this year’s pattern of simultaneous online releases.

A Surge in Wireless Subscribers Makes Analysts Wonder – Wall Street Journal, 8/10/2021

  • Cellphone carriers have reported adding millions of new U.S. wireless plans over the past year, making for the industry’s biggest gains in nearly a decade.
  • Recent increases at T-Mobile, AT&T, and Verizon aren’t fully explained by population growth, second cellphones used for work or parents handing ever-younger children their first devices, according to market analysts.
  • New Street Research, which tracks the industry, estimates that the U.S. market should have added about four million to six million cellphone users over the past year based on recent population and market trends.
  • Companies instead logged a net gain of eight million phone lines.
  • That increase included big national network operators as well as cable companies like Charter and Comcast, that resell wireless service under their own brands.
  • Some analysts pointed to free extra phone lines—a bonus T-Mobile salespeople have sometimes offered—as another cause of the upswing.
  • T-Mobile said there is evidence that customers in both older and younger demographics are adding phones for the first time while other subscribers carry separate devices for business and personal use.

Oil Rebounds From Three-Week Low as Recovery Withstands Delta – Bloomberg, 8/10/2021

  • Oil rebounded from a three-week low on expectations that the global economic recovery will withstand the latest virus onslaught, even as it takes a toll on fuel demand.
  • Futures climbed above $67 a barrel in New York, recovering in concert with other commodities, after tumbling almost 4% over the past two sessions.
  • In the short-term though, the spread of the virus in Asia, where many countries are lagging behind with vaccination rates, is inflicting a blow on fuel consumption.

Wells Fargo Names Steve Black Chairman as Noski Steps Down – Bloomberg, 8/10/2021

  • Wells Fargo said Charles Noski stepped down as chairman and is being replaced by board member and former JPMorgan Chase & Co. Vice Chairman Steven Black.
  • Noski, 68, a director for more than two years and chairman since March 2020, will remain on the board until his retirement on Sept. 30 to help with the transition.
  • Black, who has become chairman effective immediately, has more than 45 years of financial-services experience and has served as co-chief executive officer of private-equity firm Bregal Investments since 2012.

Home Builders Are Restricting Sales, Pushing Up New Home Prices – Wall Street Journal, 8/10/2021

  • Home builders have sold more homes than they can build. Now they are limiting their sales in an effort to catch up, helping push home prices even higher.
  • D.R. Horton’s net sales orders fell 17% in the most recent quarter from a year earlier, as the company slowed its sales pace.
  • The median price of a newly-built home rose in June to $361,800, up 6.1% from a year earlier, according to the Commerce Department.
  • Taylor Morrison Home said its average sales price for homes sales that closed in the second quarter rose 9.8% from a year earlier. The average price for new orders in the same quarter climbed 31.8%.
  • Meritage Homes reported a 4% annual increase in average sales price for second-quarter home closings and an 18% increase for new orders.
  • The S&P Homebuilders Select Industry index is up 31% year-to-date through Monday, outpacing the S&P 500’s 18% gain, though the home builder index has slid 4.5% from its recent peak in May.

US ECONOMY & POLITICS

U.S. Productivity Rose Less Than Forecast in Second Quarter – Bloomberg, 8/10/2021

  • Nonfarm business employee output per hour increased at a 2.3% annualized rate in the second quarter, according to Labor Department figures Tuesday.
  • That compared to a 4.3% rate in the first quarter and the 3.2% projected in a Bloomberg survey of economists.
  • Unit labor costs rose at a 1% rate following a 2.8% decline in the previous three months.
  • Persistent hiring challenges have led to a record number of job openings.
  • Many firms have had to raise compensation or offer incentives like hiring bonuses to attract applicants. As a result, hourly compensation growth remains robust at a 3.3% rate.
  • Tuesday’s report showed output rose at an annualized 7.9% pace from the prior period, while hours worked increased at a 5.5% pace.

Millions of Americans Are Unemployed Despite Record Job Openings – Wall Street Journal, 8/10/2021

  • More than 20 million jobs were lost in March and April 2020, when pandemic-related restrictions caused the economy to contract sharply.
  • By June 2021, economic output had returned to prepandemic levels, but employers had 6.6 million fewer jobs on payrolls.
  • The U.S. added 943,000 jobs in July, the best growth since last August.
  • Overall, payrolls were still 5.7 million short of fully recovering.
  • Looking sector by sector, service jobs are at a greater jobs deficit since before the pandemic than others.
  • Most July hiring was in services, adding 659,000 of the 943,000 total jobs, but well short of 8 million openings from June.
  • Industry by industry, a disconnect between which jobs have the most space to recover and which jobs are hiring sheds light on where the economy is poised to grow.

Progressive Opposition to Jerome Powell Clouds His Chances for Second Term as Fed Chairman – Wall Street Journal, 8/10/2021

  • Members of President Biden’s economic team generally support nominating Federal Reserve Chairman Jerome Powell to a second term, but growing resistance from prominent Democrats including Sen. Elizabeth Warren (D., Mass.) could lead to his replacement.
  • Some progressives are unhappy with his bent toward easing financial regulations that were put in place after the 2008 crisis and think the central bank should have someone more in sync with Democratic politics in charge.
  • If Mr. Powell isn’t given a new four-year term next February, when his current term expires, the leading contender for the job is Fed governor Lael Brainard, an economist appointed to the board in 2014 by former President Barack Obama.
  • If Mr. Powell gets a second term, Ms. Brainard is likely to be asked to serve as the vice chairwoman or as the vice chairwoman for bank supervision.

Senate Set to Pass Bipartisan Infrastructure Bill Tuesday – Wall Street Journal, 8/10/2021

  • The Senate was set to pass a roughly $1 trillion infrastructure package with broad bipartisan support Tuesday, advancing a central piece of President Biden’s economic agenda that would amount to one of the most substantial federal investments in roads, bridges and rail in decades.
  • A $65 billion infusion will fund an expansion of access to broadband, including by providing low-income households a $30 monthly voucher to pay for internet service.
  • The bill includes several measures aimed at avoiding the worst consequences of climate change, with $65 billion allocated for improving the electrical grid and energy production and nearly $50 billion set aside for making infrastructure more resilient to both cyberattacks and natural disasters like floods and wildfires.
  • Roughly $7.5 billion is dedicated to building additional charging stations for electric vehicles, while another $7.5 billion would help fund swapping out current school buses and ferries with lower-emission replacements.

Pentagon to Mandate Covid-19 Vaccine for U.S. Service Members– Wall Street Journal, 8/9/2021

  • Secretary of Defense Lloyd Austin on Monday said he would make Covid-19 vaccination mandatory for U.S service members by mid-September, an effort by the Biden administration to combat the highly contagious Delta variant sweeping across the country.
  • The Pentagon push represents the latest effort by the Biden administration to employ more assertive measures to encourage vaccination, at least among those employed by the government.
  • While roughly 71.1% of American adults are partially vaccinated, 73% of the active force has at least one jab, the Pentagon said Monday.
  • Among the services, the Navy has the highest vaccination rate, as 81% of sailors are fully vaccinated, as compared with 60% of the Marine Corps, which has the lowest rate among the services, according to the Pentagon.

EUROPE & WORLD

Chinese Bond Swings Threaten Global Debt Investors – Wall Street Journal, 8/10/2021

  • Policy moves in Beijing are hitting Chinese corporate bonds and rippling across global markets through the U.S. and European money managers who loaded up on the securities in recent years.
  • Global bond funds with the most Chinese corporate debt lagged behind their benchmark indexes over the month that ended last Thursday, according to a Wall Street Journal analysis of data from Morningstar.
  • The underperformance coincides with declines in stocks and bonds of Chinese private education, technology and property companies, triggered by regulatory and policy changes.
  • Prices of Meituan’s triple-B-rated bond due in 2030 fell on Friday to about 91 cents on the dollar, according to data from MarketAxess, down from face value, or 100 cents, in mid-July.
  • Chinese companies have roughly $6.55 trillion of bonds outstanding, with $752 billion sold in foreign currencies such as the dollar, according to the International Capital Market Association.
  • After accounting for government debt, the Chinese domestic bond market amounts to about $15 trillion, making it the second-largest after the U.S.

France, Italy Impose Strict Covid-19 Vaccine Mandate – Wall Street Journal, 8/10/2021

  • France began requiring the European Union’s new digital health certificate., which certify that somebody has been vaccinated against Covid-19, on Monday for people seeking to dine at a restaurant, whether indoors or outdoors.
  • The pass is now also necessary to take domestic flights and long-distance busses and trains.
  • Italy also made the digital health pass mandatory for a range of activities last Friday, although the unvaccinated can still dine at restaurants if they sit outdoors.
  • The certificates, known as the green pass in Italy and health pass in France, display a personal QR code that shows if a person is vaccinated, has recovered from Covid-19, or has freshly tested negative for the virus.
  • The EU’s digital certificates have existed since July 1, but most governments have only begun making them mandatory recently for activities other than cross-border travel.

Kim Jong Un’s Sister Threatens to Bolster Military After Being Ignored by U.S. – Wall Street Journal, 8/10/2021

  • Kim Jong Un’s sister vowed North Korea would amp up its national defense and deterrence after joint U.S.-South Korea military exercises that she demanded be canceled appeared likely to begin next week.
  • Ms. Kim, who has seen her role elevated in recent years, serves as Pyongyang’s mouthpiece for relations with Washington and Seoul.
  • To defend itself from outside military threats, Ms. Kim said the country would boost its national defenses, hone its pre-emptive strike powers and increase a deterrence of “absolute capacity.”

Factmonster – TODAY in HISTORY

  • Missouri became the 24th state in the United States. (1821)
  • The Smithsonian Institution was established in Washington, D.C., from funds left by British scientist James Smithson. (1846)
  • Franklin D. Roosevelt was stricken with polio at his summer home on Campobello Island. (1921)
  • U.S. forces seized Guam from Japan. (1944)
  • President Reagan signed a bill that awarded $20,000 to each survivor of the Japanese-American internment. (1988)
  • Ruth Bader Ginsburg was sworn in as the second female U.S. Supreme Court justice. (1993)

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