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Daily Market Report | August 18, 2021

US FINANCIAL MARKET

Stocks Waver Ahead of Fed Minutes – Wall Street Journal, 8/18/2021

  • U.S. stocks traded mostly lower Wednesday ahead of the release of minutes from the Federal Reserve’s July policy meeting.
  • Minutes from the Fed meeting, due at 2 p.m. ET, will offer more indications of when the central bank may begin scaling back easy-money policies that were adopted at the start of the pandemic.
  • Fed officials are nearing consensus on beginning to taper bond purchases in about three months.
  • Money managers say they expect that markets may waver as investors weigh increasing cases of Covid-19 and the Delta variant against positive factors such as a strong earnings season and stimulus measures.
  • Fresh data on Tuesday showed that spending at U.S. retailers fell sharply in July as Americans cut back on purchases of goods.
  • Among individual stocks, Lowe’s jumped 4.2% after the home-improvement retailer said it expects 2021 revenue of about $92 billion. In May, the company said only that it was tracking above a previous forecast of $86 billion.
  • TJX, the parent company of HomeGoods, Marshalls and TJ Maxx, dropped 1.1%, giving up its initial premarket gains after posting quarterly results that topped analysts’ expectations.
  • Later Wednesday, companies including Cisco Systems and Nvidia are set to post their quarterly earnings results.
  • In bond markets, the yield on the 10-year Treasury note ticked up to 1.272% from 1.258% Tuesday.
  • Overseas, the pan-continental Stoxx Europe 600 wavered between gains and losses, recently trading up less than 0.1%.
  • Major indexes in Asia ended the day higher. China’s Shanghai Composite rallied 1.1%, South Korea’s Kospi added 0.5% and Japan’s Nikkei 225 rose 0.6%.

Covid-19 Booster Shot to Be Offered to Americans Fully Vaccinated With Pfizer, Moderna – Wall Street Journal, 8/18/2021

  • The Biden administration on Wednesday called for a third Covid-19 shot starting in the fall for Americans who were fully vaccinated with the two-shot regimen, citing the threat from the highly contagious Delta variant and heightened concerns over data showing initial immunity wanes over time.
  • The announcement on Wednesday means that booster shots will soon be available for the more than 155 million people in the U.S. who have been fully vaccinated with messenger RNA vaccines from Pfizer and partner BioNTech or from Moderna.
  • The booster shot would be administered about eight months after the second dose of the vaccine.
  • The government said it is preparing to offer booster shots beginning the week of Sept. 20.
  • The FDA has been weighing whether adults who received Johnson & Johnson’s single-dose shot will also need another Covid-19 vaccine shot, according to the U.S. health authorities. Data about J&J’s shot isn’t complete but it is likely this population will also need booster shots, the authorities said.

Lowe’s forecasts higher sales as big-ticket purchases offset DIY slowdown – Reuters, 8/18/2021

  • Lowe’s forecast full-year sales above estimates on Wednesday, as higher spending on big-ticket items offsets some of the slowdown in demand from the company’s core do-it-yourself (DIY) customers.
  • Lowe’s, whose shares were up about 4% in premarket trade, said sales to so-called “pro customers”, who can constitute up to a quarter of its business, jumped 21% in the second quarter as they spent on new tools and building materials.
  • Lowe’s same-store sales fell 1.6% in the second quarter, as demand for items such as paint and gardening equipment that had surged while people were homebound slowed with the easing of lockdowns.
  • The company’s net earnings rose 6.7% to $3.02 billion, or $4.25 per share, in the second quarter.
  • Analysts had expected a profit of $4.01 per shares

Target Sales Increase as Shoppers Return to Stores – Wall Street Journal, 8/18/2021

  • Target reported increased revenue in the second quarter as more people returned to stores and online spending moderated compared with last summer, when the Covid-19 pandemic upended shopping habits.
  • Target reported $25.2 billion in revenue in the July-ended quarter, up 9.5% from a year earlier.
  • The retailer said comparable sales, which include in-store and online purchases, for the quarter rose 8.9% from a year earlier, when they jumped 24.3% because people stocked up on groceries and because many other retail chains were temporarily closed.
  • Foot traffic rose 12.7% for the quarter.
  • Digital sales increased 10%, after nearly tripling in the second quarter of 2020.
  • It reported net earnings of $1.8 billion, up from $1.7 billion a year earlier.
  • The company said it had adjusted earnings per share of $3.64 in the latest quarter, beating Wall Street’s estimate of $3.51 a share.

T.J. Maxx owner receives sales boost as customers return to stores – Reuters, 8/18/2021

  • TJX Cos on Wednesday beat market estimates for quarterly net sales, as the easing of COVID-19 curbs prompted Americans to return to brick-and-mortar stores ahead of the reopening of schools.
  • The company’s second-quarter net sales rose 81% to $12.08 billion from a year earlier, above estimates of $11.04 billion.
  • Open-only same-store sales at its Marmaxx U.S. division, which includes its U.S. T.J. Maxx and Marshalls stores, soared 18% from pre-pandemic levels two years ago, while its HomeGoods segment kept up its strong run during the health crisis, posting a 36% jump.
  • Excluding items, TJX earned 79 cents per share, beating Refinitiv IBES estimates of 57 cents.
  • TJX said open-only same-store sales for the start of the third quarter were up mid-teen percentage from the third quarter of fiscal 2020.
  • The company, however, stopped short of providing a financial forecast, citing uncertainty at a time when COVID-19 Delta variant cases are increasing across its markets.

T-Mobile Says Hackers Stole Information on More Than 40 Million People – Wall Street Journal, 8/18/2021

  • T-Mobile said the attack that breached its computer network pulled Social Security numbers and other personal information of more than 40 million current and prospective customers.
  • The cellphone carrier said the stolen data included first and last names, birth dates, Social Security numbers and driver’s license information from a subset of current and potential customers.
  • The victims included people who applied for credit with T-Mobile—regardless of whether they ended up doing business with the carrier—and about 7.8 million current subscribers with postpaid plans.
  • The company said early Wednesday that it had reset the PIN codes of all the affected prepaid accounts and recommended that postpaid users do the same. The carrier said it would offer two years of free identity protection services from security firm McAfee.

U.S. Senators Urge FTC to Probe Tesla’s Autopilot Claims – Wall Street Journal, 8/18/2021

  • Two U.S. senators are urging the Federal Trade Commission to open a probe into whether Tesla Inc. used deceptive marketing practices involving driver-assistance features that the electric-vehicle maker calls Autopilot and Full Self-Driving.
  • In a letter to the head of the FTC, Lina Khan, dated Wednesday, Sens. Richard Blumenthal of Connecticut and Ed Markey of Massachusetts said they have serious concerns about how Tesla advertises its advanced driver-assistance features, which don’t enable vehicles to operate autonomously.
  • They also took aim at Chief Executive Elon Musk for some of his comments.
  • “Tesla and Mr. Musk’s repeated overstatements of their vehicle’s capabilities—despite clear and frequent warnings—demonstrate a deeply concerning disregard for the safety of those on the road and require real accountability,” the senators wrote. “Their claims put Tesla drivers—and all of the travelling public—at risk of serious injury or death.”
  • The FTC, which has a consumer protection mandate and can sue companies for allegedly false advertising, didn’t immediately respond to a request for comment.

US ECONOMY & POLITICS

U.S. housing starts fall sharply; permits increase – Reuters, 8/18/2021

  • U.S. homebuilding fell more than expected in July, the latest sign that surging construction costs and home prices continued to constrain the housing market early in the third quarter.
  • Housing starts dropped 7.0% to a seasonally adjusted annual rate of 1.534 million units last month.
  • Data for June was revised up to a rate of 1.650 million units from the previously reported 1.643 million units.
  • Starts increased 2.5% on a year-on-year basis in July.
  • Single-family starts, which account for the largest share of the housing market, fell 4.5% to a rate of 1.111 million units.
  • Starts for the multi-family segment tumbled 13.1% to a rate of 423,000 units.
  • Permits for future homebuilding rose 2.6% to a rate of 1.635 million units in July.
  • Single-family permits fell 1.7% to a rate of 1.048 million units.
  • Permits for multi-family housing projects jumped 11.2% to a rate of 587,000 units.

U.S. mortgage applications drop as mortgage rates edge above 3% -MBA – Reuters, 8/18/2021

  • Mortgage applications declined last week, especially for refinancing, as mortgage rates rose back over 3% for the first time in about a month.
  • The Mortgage Bankers Association (MBA) said on Wednesday its average contract interest rate for traditional 30-year mortgages inched up to 3.06% from 2.99% in the week ending Aug. 13.
  • The seasonally adjusted market index tracking mortgage applications fell 3.9% from a week earlier, reflecting a 5.3% decrease in applications to refinance existing loans.
  • Purchase applications declined 0.8%, the MBA said.

Fed minutes likely to detail bond-buying taper talks, inflation worries – Reuters, 8/18/2021

  • Insight into the Federal Reserve’s debate over when to end its pandemic-era emergency programs and the level of concern among officials over a spike in inflation should emerge on Wednesday with the release of a readout of the U.S. central bank’s policy meeting last month.
  • The minutes of the July 27-28 meeting, which are due to be released at 2 p.m. EDT, will cover a session at which the Fed said it still had faith in the U.S. economic recovery even as the Delta variant of the coronavirus was fueling a troubling rise in cases.
  • Officials also continued laying plans for the eventual end of the central bank’s $120 billion in monthly purchases of Treasury bonds and mortgage-backed securities (MBS).
  • Analysts expect the Fed to announce its plan for a “taper” of its asset purchases as early as the Sept. 21-22 meeting of the policy-setting Federal Open Market Committee (FOMC), with less certainty about how fast the actually reduction in the bond-buying program will proceed.

Nancy Pelosi Braces for Showdown With Moderates Next Week Over Infrastructure Vote – Wall Street Journal, 8/18/2021

  • Top House Democrats said the chamber would move forward with voting on the budget blueprint for a $3.5 trillion healthcare, education and climate package next week, rebuffing demands from a group of centrist Democrats to first vote on a $1 trillion infrastructure bill and urging their caucus to stay unified around President Biden’s agenda.
  • Mrs. Pelosi in a letter on Tuesday night exhorted House Democrats to pass the budget measure next week, writing that “any delay in passing the budget resolution could threaten our ability to pass this essential legislation.”
  • Once the House adopts the budget resolution, lawmakers will begin crafting the details of the $3.5 trillion legislation.
  • In the narrowly divided House, Democrats can afford no more than three defections. None of the nine centrist Democrats who have demanded the infrastructure vote first spoke about the issue during the call, according to a lawmaker who participated.
  • Dozens of members of the Congressional Progressive Caucus have indicated that they will oppose the bipartisan infrastructure package if it comes to the floor before the $3.5 trillion bill, and many progressives have been infuriated with the recent threat from centrists.

EUROPE & WORLD

U.K. Inflation Posts a Temporary Slowdown on Its Way to 4% – Bloomberg, 8/18/2021

  • U.K. inflation eased in July in what is widely seen as a blip on its way to double the Bank of England’s target this year.
  • Consumer prices fell back to the 2% goal for the first time since April, easing from a 2.5% increase in June, the Office for National Statistics said Wednesday. It’s the first time in four months that inflation rose less than economists had expected.
  • About 0.2 points of the easing in inflation were due to base effects from last year.
  • Input prices rose 9.9% from a year ago in July. That’s more than the 9.7% pace of the previous month, which was revised higher.
  • Output costs rose 4.9%, the highest since December 2011 and more than economists had forecast.
  • July’s retail price index, which is usually used to set rail fares starting in the following January, stood at 3.8%.
  • That’s more than double the rate of a year earlier.
  • The Bank of England predicts price growth of 3% in August and more than 4% in the final two months of the year.

Tencent beats estimates with gaming and advertising uplift – Reuters, 8/18/2021

  • Chinese gaming and social media giant Tencent beat forecasts with a 29% jump in second-quarter profit, helped by an increase in revenue from popular games and growth in online advertising sales.
  • Revenue jumped 20% to 138.3 billion yuan with sales from mobile games up 13%.
  • Robust demand for games such as “Honor of Kings” and “PUBG mobile” offset a decrease in revenues from its battle royale title “Peacekeeper Elite”.
  • Net profit for the three months through June came in at 42.6 billion yuan ($6.6 billion), above a Refinitiv consensus estimate of 34.4 billion yuan.
  • Profit was also boosted by an increase in the fair value assessment of some of the companies Tencent has invested in.

Carlsberg raises guidance as beer volumes recover – Reuters, 8/18/2021

  • Danish brewer Carlsberg raised its full-year earnings guidance on Wednesday after reporting second-quarter sales above expectations as beer volumes exceeded pre-pandemic levels.
  • Sales between April and June rose 17% to 18.69 billion Danish crowns ($2.94 billion), compared with a 17.97 billion crown forecast in a company-compiled poll of analysts.
  • It registered 2% organic growth in overall beer volumes in the first six months of the year compared with the same period in 2019. The world’s third-biggest brewer said beer volumes in key markets China and Russia rose to “well above” 2019 levels.
  • Carlsberg said it now expects operating profit to grow by between 8% and 11% this year, up from its previous guidance of 5-10% growth.
  • The company also launched a 1 billion crown share buyback programme on Wednesday.

Rift Forms on Didi’s Board Following Beijing’s Regulatory Assault – Wall Street Journal, 8/18/2021

  • A rift has developed among the top executives of three of China’s internet giants, in the wake of Didi Global’s ill-fated decision to go public in New York.
  • After the listing, Tencent President Martin Lau and Alibaba Chairman and Chief Executive Daniel Zhang were surprised and furious when they learned that Didi was in trouble with the Cyberspace Administration of China, according to people familiar with the matter.
  • Two of the people said Didi executives didn’t fully inform the board about the cyberspace regulator’s concerns before the IPO, making it hard for board members to fully ascertain the risks of going ahead.
  • The fallout from Didi’s IPO—and China’s intensifying regulatory crackdown on internet-technology and other businesses—have rippled across companies and Chinese stocks listed on several exchanges.

Factmonster – TODAY in HISTORY

  • Mongol conqueror Genghis Khan died in China. (1227)
  • Congress established the Bureau of Immigration, forerunner of the Immigration and Naturalization Service. (1894)
  • When Tennessee ratified the 19th Amendment to the Constitution, the three-quarters of the states necessary was achieved and American women got the right to vote. (1920)
  • Spanish poet and playwright Federico Garcia Lorca was shot and killed by Franco’s soldiers during the Spanish Civil War. (1936)
  • Vladimir Nabokov’s novel Lolita was published. (1958)

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