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Daily Market Report | August 19, 2021

US FINANCIAL MARKET

U.S. Stocks Hug Flatline as Oil and Copper Drop – Wall Street Journal, 8/19/2021

  • U.S. stocks were mixed Thursday, while oil and copper prices retreated and the dollar hit a nine-month high as investors weighed the likely reduction in stimulus measures by the Federal Reserve and rising Covid-19 cases.
  • In one bright sign for the economy, fresh data showed that jobless claims fell to a pandemic low of 348,000 last week, suggesting the labor market continues to heal. New jobless claims are down more than 50% since January.
  • Broadly, though, investors moved out of assets that are particularly sensitive to the global economic recovery, and into those seen as more sheltered. The dollar, viewed as a haven by money managers, strengthened, pushing the ICE Dollar Index up 0.3% to its highest level since November.
  • Government bonds rallied, pushing down yields. The yield on the 10-year U.S. Treasury note slid to 1.245% from 1.273%.
  • Minutes of the Fed’s July meeting, published Wednesday, revealed an emerging consensus to scale back $120 billion in monthly asset purchases this year.
  • The minutes said several officials favored reducing asset purchases in the coming months to position the Fed to potentially raise interest rates if the economy strengthens further next year.
  • Paring back stimulus efforts that have helped stocks and other assets soar since the spring of 2020 is likely to cause some volatility, investors say.
  • The stronger dollar weighed on commodities, adding to pressure stemming from forecasts that China’s economic slowdown will weigh on demand for industrial materials.
  • Brent-crude fell 2.7% to $66.38 a barrel, while copper dropped 1.7%.
  • Overseas markets followed Wall Street lower. The Stoxx Europe 600 slid 1.7%.
  • Chinese technology stocks sold off, led by some of the country’s Internet giants, after two government ministries said they were likely to impose additional regulations on the sector.
  • The broader Shanghai Composite Index fell 0.6% by the close of trading.
  • The Hong Kong-listed shares of Alibaba Group Holding tumbled 5.5% to their lowest close since their secondary listing in November 2019, while shares of food-delivery giant Meituan dropped 7.2%.
  • The city’s flagship Hang Seng Index ended 2.1% lower on Thursday.

As Covid-19 Boosters Loom, Pfizer and Moderna Expected to See Billions More in Sales – Wall Street Journal, 8/19/2021

  • Vaccine makers Pfizer and Moderna are on track to notch billions more in sales than previously expected, as new booster-shot strategies and concerns about the Delta variant push demand, and the companies raise prices in the U.S. and elsewhere.
  • The Biden administration on Wednesday urged adult Americans who received two doses of messenger RNA vaccines from Pfizer or Moderna to get a third dose eight months later.
  • Pfizer and partner BioNTech Covid-19 vaccine sales are expected to reach $74 billion through next year, excluding Germany and Belgium, 17% more than previous estimates, according to Ronny Gal, a Sanford Bernstein pharmaceuticals analyst.
  • Meanwhile, the analyst projects Moderna will ring up $35 billion during the span, 25% more sales than previously forecast.

Nvidia’s Gaming Chips Drive Record Quarterly Results – Wall Street Journal, 8/19/2021

  • Graphics-chip maker Nvidia benefited from continued hot demand for devices from computer videogamers and cryptocurrency miners, pushing its sales and profit to records in its most recent quarter.
  • Sales rose by 68% to $6.51 billion in the period ended in July, the company said.
  • Net profit nearly quadrupled, reaching $2.37 billion.
  • Nvidia’s gaming revenue was $3.06 billion in the second quarter, a record and an 85% increase from the same period a year ago.
  • The company also said its revenue from data-center sales, where its chips are widely used in artificial-intelligence calculations, reached $2.37 billion, up 35% from the year-ago period.
  • The company suggested Wednesday that the wave it is riding has yet to crest.
  • Revenue for the current quarter should be around $6.8 billion, Nvidia said, higher than Wall Street forecasts.
  • Chip-supply shortages affecting the company’s gaming business are expected to persist throughout the current quarter, Ms. Kress said.

Robinhood Revenue Surges on Cryptocurrency Trades – Wall Street Journal, 8/19/2021

  • Revenue at Robinhood Markets more than doubled in the second quarter thanks to a torrent of customers trading cryptocurrency, but the company posted a big loss due to an emergency funding deal earlier this year.
  • The trading app recorded a loss of $502 million, or $2.16 per share, on revenue of $565 million in its first earnings report since its July initial public offering.
  • In the second quarter of 2020, Robinhood generated a profit of $58 million on revenue of $244 million.
  • Nearly 14.2 million Robinhood users, or roughly 63% of the company’s customer base with funded accounts, traded digital assets in the second quarter.
  • Robinhood earned $233 million in fees from routing customers’ cryptocurrency trades to high-speed trading firms, with dogecoin accounting for nearly two-thirds of the volume. That is up from just $5 million a year earlier.
  • Despite decreased stock-trading activity, interest that Robinhood received on margin loans nearly tripled to $31 million.
  • Around 700,000 users held about $5.4 billion in margin-loan balances at the end of June.
  • Robinhood reiterated its third-quarter outlook for lower revenue and fewer new accounts, citing a typical trading lull in the late summer and early autumn.

Kohl’s earnings top estimates, retailer raises forecast as higher foot traffic drives sales – CNBC, 8/19/2021

  • Kohl’s reported Thursday fiscal second-quarter earnings that beat analyst expectations and it raised its forecast for the year, as shoppers headed back to its stores.
  • Revenue rose 31% to $4.45 billion, outpacing estimates of $4.02 billion.
  • Net income rose to $382 million, or $2.48 per share, from $47 million, or 30 cents per share, a year earlier.
  • The results topped the $1.21 per share expected by analysts surveyed by Refinitiv.
  • Kohl’s expects full-year earnings per share to range from $5.80 to $6.10, up from $3.80 to $4.20.
  • Kohl’s raised its net sales outlook for the year.
  • It expects sales to grow at a low twenties percentage, up from the mid-to-high teens.
  • During the quarter, Kohl’s repurchased $255 million of its stock. It said it plans to buy back $500 million to $700 million of its shares this year, up from $200 million to $300 million.

Macy’s shares jump as earnings trounce estimates, retailer says it’s gaining new customers online – CNBC, 8/19/2021

  • Macy’s on Thursday reported fiscal second-quarter profit and revenue that topped analyst estimates, as customers returned to its stores to buy denim, luggage and new dresses.
  • Net sales grew to $5.65 billion from $3.56 billion a year earlier. That beat estimates for $5.01 billion.
  • Macy’s said its comparable sales on an owned plus licensed basis grew 62.2% year over year, while analysts surveyed by Refinitiv anticipated 41.1% growth.
  • E-commerce sales were down 6% from a year earlier, when Macy’s stores were shut due to the pandemic and shoppers resorted to buying online. They were up 45% on a two-year basis and accounted for 32% of net sales.
  • Macy’s net income for the period ended July 31 grew to $345 million, or $1.08 per share, compared with a net loss of $431 million, or $1.39 per share, a year earlier.
  • Macy’s raised its outlook for net sales in fiscal 2021 to be in a range of $23.55 billion to $23.95 billion, up from $21.73 billion to $22.23 billion.
  • It expects full-year adjusted earnings to be in a range of $3.41 to $3.75 per share, up from guidance of $1.71 to $2.12 a share.

Cisco delivers slight beat as revenue grows 8% – CNBC, 8/19/2021

  • Cisco shares moved slightly lower in extended trading on Wednesday after the networking hardware company reported earnings that exceeded analysts’ expectations.
  • Revenue grew about 8% year over year to $13.13 billion in the fiscal fourth quarter, which ended on July 31, according to a statement.
  • The Infrastructure Platforms segment, which accounts for most of Cisco’s revenue, delivered $7.55 billion in sales.
  • That’s up 13% year over year and more than the $7.11 billion that analysts had expected, according to StreetAccount.
  • Cisco’s Applications segment, which includes sales from Webex video-calling products, produced $1.34 billion in sales.
  • That’s down 1% and below the $1.46 billion StreetAccount analyst consensus.
  • Security revenue came in at $823 million, up 1% but missing the $904.7 million consensus.
  • Earnings of 84 cents per share beat estimates of 82 cents, according to Refinitiv.
  • With respect to guidance, Cisco said it sees 79 cents to 81 cents in adjusted fiscal first-quarter earnings and revenue growth of 7.5% to 9.5%.
  • Cisco also issued guidance for the 2022 fiscal year, in a break from tradition. It called for $3.38 to $3.45 in adjusted earnings per share and 5% to 7% revenue growth.

Estee Lauder gives glossy forecast as demand for makeup rebounds – Reuters, 8/19/2021

  • Estee Lauder forecast fiscal 2022 net sales largely above estimates on Thursday, encouraged by a rebound in demand for makeup products as people start venturing out following the easing of coronavirus curbs.
  • Net sales in the reported quarter rose 62% to $3.94 billion, beating market estimates of $3.75 billion.
  • Sales in its makeup division surged 76% on a reported basis to $960 million in the fourth quarter ended June 30, marking a return to growth for the first time in more than a year.
  • The owner of Clinique projected net sales to increase between 13% and 16% in fiscal 2022.
  • Analysts expect net sales to rise 14% to $18.29 billion, according to IBES data from Refinitiv.
  • Estee, which analysts say typically provides conservative outlook, also forecast adjusted earnings between $7.23 and $7.38 per share, compared with estimates of $7.14.

Coach owner Tapestry forecasts higher revenue, profit as luxury demand returns – Reuters, 8/19/2021

  • Coach handbag maker Tapestry forecast annual revenue and profit above estimates after posting better-than-expected results on Thursday, expecting vaccine-aided reopening of economies to boost demand for designer apparel and purses.
  • Net sales rose 126% to $1.62 billion in the fourth quarter ending July 3, topping analysts’ average estimate of $1.56 billion, according to IBES data from Refinitiv.
  • Excluding items, the company reported a profit of 74 cents per share, compared with analysts’ expectations of a profit of 69 cents per share.
  • Tapestry forecast full-year revenue of about $6.4 billion, edging past market estimates of $6.08 billion.
  • It also expects annual profit per share in the range of $3.30 to $3.35, higher than analysts’ average estimate of $3.19 per share.
  • The luxury brand said it plans to return more than $750 million to shareholders in fiscal year 2022 by reinstating its dividend and share buyback program.

Amazon Plans to Open Large Retail Locations Akin to Department Stores – Wall Street Journal, 8/19/2021

  • Amazon.com plans to open several large physical retail locations in the U.S. that will operate akin to department stores, a step to help the tech company extend its reach in sales of clothing, household items, electronics and other areas, people familiar with the matter said.
  • Some of the first Amazon department stores are expected to be located in Ohio and California, the people said.
  • The new retail spaces will be around 30,000 square feet, smaller than most department stores, which typically occupy about 100,000 square feet, and will offer items from top consumer brands.

Ford will halt production at U.S. truck plant for week over chip shortage – Reuters, 8/19/2021

  • Ford said Wednesday it will temporarily shutter its Kansas City assembly plant that builds its best-selling F-150 pickup truck due to a semiconductor-related part shortage as a result of the COVID-19 pandemic in Malaysia.
  • The one-week shutdown will begin Aug. 23, the second largest U.S. automaker said, adding it will also cut a shift on Saturday. The global auto industry has been hit hard by chip shortages that have caused significant production cuts.

Intel CEO Calls Chip Maker ‘Willing Buyer’ as Industry Consolidates – Wall Street Journal, 8/19/2021

  • Intel Chief Executive Pat Gelsinger is committed to buying other chip-makers as the industry consolidates, despite a leading acquisition candidate’s plan to go public.
  • Mr. Gelsinger, who was involved in about 100 acquisitions in his prior roles as president of EMC and later CEO of VMware, said he’s looking to bring some of that experience to Intel.
  • Intel had been in talks to buy GlobalFoundries, The Wall Street Journal previously reported.
  • The talks cooled as GlobalFoundries focuses on an initial public offering, people familiar with the matter said.
  • Intel is investing $23.5 billion in new factories in Arizona and New Mexico, and nearing completion of a $3 billion expansion in Oregon.
  • Intel has said more investments in the U.S. and abroad are planned.

US ECONOMY & POLITICS

Fed Signals Asset Purchases Likely to Slow This Year – Wall Street Journal, 8/19/2021

  • Federal Reserve officials last month indicated they were on track to begin reversing their easy-money policies later this year, despite lingering differences over when exactly to pull back support for an economy growing faster than they expected earlier in the year.
  • Minutes of their July 27-28 Fed meeting, released Wednesday, revealed an emerging consensus to begin scaling back the bank’s $120 billion in monthly purchases of Treasury and mortgage securities at any of the officials’ three remaining policy meetings this year.
  • “Most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year,” the minutes said.
  • Many officials think the Fed has met this threshold for its inflation objective, the minutes said.
  • At the same time, most officials don’t think the labor market has met the “substantial further progress” threshold; the meeting occurred, however, days before the Labor Department reported that the economy added 943,000 jobs in July and the unemployment rate fell to 5.4%, from 5.9% in June.
  • The Fed’s next meeting will be Sept. 21-22, and several Fed officials have said they would argue in favor of beginning to taper bond purchases shortly after that meeting if the recent run of strong hiring continues.
  • But the minutes don’t reveal a consensus for such a step, and that, analysts said Wednesday, suggests a reduction is more likely come after the Fed’s Nov. 2-3 meeting.

U.S. Jobless Claims Fell to Pandemic Low of 348,000 Last Week – Wall Street Journal, 8/19/2021

  • Jobless claims fell to a new pandemic low last week, suggesting the labor market continues to heal even as the Delta variant causes uncertainty.
  • First-time applications for benefits, a proxy for layoffs, fell to a seasonally adjusted 348,000 in the week ended Aug. 14, from a revised 377,000 in the prior week, the Labor Department said Thursday. That was the lowest level of claims since the pandemic took hold in the U.S. in March 2020.
  • The four-week moving average, which smooths often volatile data, fell by 19,000 to 377,750 last week, also a fresh pandemic low. New jobless claims are down more than 50% since January.
  • The number of benefit payments made through all programs, including pandemic programs established in March 2020, fell to about 12 million in late July, the Labor Department said.
  • Extended unemployment benefits and a $300 weekly enhancement on top of state payments will remain in place in California and 25 other states until the week ending Sept. 4.
  • Nineteen other states have ended their participation in those federal programs, and five more removed only the $300 weekly enhancement, according to the National Conference of State Legislatures.

Philly Fed factory index falls in July to lowest since December – Reuters, 8/19/2021

  • Growth in factory activity in the U.S. mid-Atlantic region slowed for the fourth consecutive month in August after hitting its highest pace in nearly half a century earlier this spring, a survey showed on Thursday.
  • The Philadelphia Federal Reserve Bank said its business activity index fell to 19.4, the lowest since December, from 21.9 in July. That was below economists’ expectations for a reading of 23.0, according to a Reuters poll.
  • The Philly Fed employment index increased to a record-high of 32.6 from 29.2 in July.
  • Additionally, the price paid index rose to 71.2 in August from 69.7 in the month prior, after reaching a 42-year high in June.

EUROPE & WORLD

Thousands Still Trying to Flee Taliban in Kabul as Biden Says U.S. Troops Could Stay Longer – Wall Street Journal, 8/19/2021

  • Afghans and foreigners struggled Thursday to get through Taliban checkpoints and crowds to reach the airport in Kabul, a day after President Biden said U.S. troops would stay as long as needed to evacuate Americans.
  • Operations within the airport have improved from the initial chaos that followed the Taliban’s march into Kabul on Sunday, Western officials say.
  • But many people are still struggling to reach the airport, which is controlled inside by thousands of U.S. military personnel.
  • Thousands of Afghans continued to surround the airport, pushing desperately to get in.
  • Many lack the required documents to be allowed to board a flight but blocked entry gates.
  • Mr. Biden said Wednesday that the U.S. is committed to evacuating Americans from Afghanistan, adding that troops could remain in Kabul past the Aug. 31 exit deadline if necessary.

Toyota Succumbs to Chip Shortage and Shuts Factories – Wall Street Journal, 8/19/2021

  • The global semiconductor shortage has finally started to bite at Toyota Motor, highlighting how prolonged disruptions in the global supply chain in the wake of the Covid-19 pandemic are hitting even the best-prepared companies.
  • Japan’s largest car maker said Thursday it was cutting production in the country by 40% in September because of a shortage of semiconductors.
  • The company declined to say whether it would shut down plants outside of Japan.
  • Toyota reported a record $8.2 billion profit in the April-June quarter, the first quarter of its fiscal year, representing nearly 40% of its profit projection for the full fiscal year.
  • But it kept its outlook for the full year unchanged, citing Southeast Asia issues, in what proved to be a harbinger of Thursday’s announcement of production shutdowns.

VW might have to cut production further due to chip shortage – Reuters, 8/19/2021

  • Volkswagen may need to cut production further due to a semiconductor supply crunch, the German carmaker said on Thursday, after a report that Toyota would slash output by 40% in September.
  • The auto industry is facing renewed strains after a recovery in demand stretched supply chains earlier this year, with COVID-19 outbreaks in Asia hitting both chip production and operations at commercial ports.
  • The Wolfsburg-based carmaker said it expects the situation to improve by the end of the year and aims to make up for production shortfalls in the second half as far as possible.

Booster Shots Make ‘Mockery of Vaccine Equity,’ WHO’s Moeti Says – Bloomberg, 8/19/2021

  • The rollout of Covid-19 booster shots by a growing number of wealthy nations makes a “mockery of vaccine equity,” World Health Organization Director for Africa Matshidiso Moeti said.
  • “High-income countries have already, on average, administered more than 103 Covid-19 vaccine doses per 100 people, whereas in Africa that number stands at six,” Moeti told reporters during a weekly virtual briefing on Thursday.
  • The decision to use boosters comes as the number of cases are rising across the continent and some nations are battling multiple viruses.
  • Both Ivory Coast and Guinea are dealing with outbreaks of viral haemorrhagic fevers.
  • This highlights the “multitude of challenges countries are facing in parallel to the pandemic,” Moeti said.

Factmonster – TODAY in HISTORY

  • The U.S. frigate Constitution, Old Ironsides, defeated the British ship Guerriere during the War of 1812. (1812)
  • Germans voted to make Adolf Hitler Fuhrer. (1934)
  • Comedian Groucho Marx died in Los Angeles at age 86. (1977)
  • U.N. special representative Sergio Vieira de Mello was one of 22 killed when a suicide car bomb struck the UN’s Baghdad headquarters. (2003)

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