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Daily Market Report | August 24, 2021

US FINANCIAL MARKET

Stocks Open Higher, With S&P 500 Poised for Record Close – Wall Street Journal, 8/24/2021

  • U.S. stocks rose Tuesday, putting the S&P 500 on pace for another record close as the approval of Pfizer’s Covid-19 vaccine continued to lift sentiment.
  • The full approval from U.S. regulators for the Covid-19 vaccine from Pfizer and partner BioNTech has raised hopes that more unvaccinated people will get the shot, potentially diminishing a threat to the economic outlook.
  • Comments from Fed officials at the central bank’s Jackson Hole Symposium later in the week may offer insights into the pace at which the central bank would taper bond purchases. Chairman Jerome Powell speaks virtually at the event Friday.
  • In bond markets, the yield on the benchmark 10-year U.S. Treasury note ticked up to 1.282% from 1.254% on Monday.
  • Oil markets continued to rebound from recent losses, boosted by a decline in Covid-19 cases in China and signs of a pickup in travel activity in major cities. Brent crude, the benchmark in international energy markets, rose 1.8% to $70 a barrel.
  • Overseas, the Stoxx Europe 600 ticked down 0.3%. In Hong Kong, a strong rebound in the shares of online retailer JD.com led a broader rally in many beaten-down Chinese internet stocks.

Best Buy sees resilient work-from-home demand, raises sales forecast – Reuters, 8/24/2021

  • Best Buy said on Tuesday strong sales of home theater systems and work-from-home computer equipment despite market fears of pandemic-fueled growth shrinking prompted it to raise its annual comparable sales forecast, sending its shares up 5%.
  • Best Buy said sustained demand, as well as government stimulus for boosting the pandemic-battered economy, and improving wages helped lift second-quarter comparable sales by 20%.
  • The company earned an adjusted $2.98 per share in the second quarter, beating analysts’ average estimate of $1.85 per share, according to IBES data from Refinitiv.
  • Best Buy on Tuesday also said it expects to close about 30 U.S. stores this year, compared to roughly 20 closures annually over the last two years.
  • It raised its full-year comparable sales growth forecast to 9% to 11% from 3% to 6%.

Delta Air orders 30 A321neo jets from Airbus – Reuters, 8/24/2021

  • Delta Air Lines said on Tuesday it had added 30 A321neo narrowbody aircraft to its order book with Airbus, as the U.S. carrier upgrades its fleet and prepares for a rebound in travel.
  • The newly ordered jets bring its outstanding orders to a total of 155 A321neos, which are powered by Pratt & Whitney PW1100G turbofan engines.
  • The airline expects to take delivery of its first A321neo in the first half of 2022.

Ford doubles Lightning production target on strong pre-launch demand -sources – Reuters, 8/24/2021

  • Ford Motor has doubled its production target for the F-150 Lightning because of strong early demand for the full-sized electric pickup truck ahead of its 2022 launch, and the company plans to spend an additional $850 million to meet that target, several people and suppliers familiar with the plans said.
  • The No. 2 U.S. automaker is targeting annual production of more than 80,000 in 2024, up from its prior target of more than 40,000, according to the sources, who asked not to be identified. Shares of Ford rose 1.3% on Monday.
  • The ramp to the new production target includes plans to build about 15,000 next year after the electric truck’s spring launch and 55,000 in 2023, a second source said.
  • Following the launch of the second generation Lightning in late 2025, the annual target is just shy of 160,000.

Intel Lands Pentagon Deal to Support Domestic Chip Making – Wall Street Journal, 8/24/2021

  • Intel said it would provide commercial foundry services in the first phase of a broader Defense Department program that aims to build up domestic design and production of cutting-edge chips.
  • The chip maker on Monday said its foundry services unit will join with companies such as International Business Machines, Synopsys, Cadence Design Systems and others as part of the RAMP-C program, which is short for Rapid Assured Microelectronics Prototypes – Commercial.
  • The program was designed to support a U.S.-based, chip-building ecosystem that could give the government agency access to technology and help secure its long-term needs for products, Intel said.
  • The contract award will support Intel Foundry Services, which the company established as a stand-alone division earlier this year to produce Intel-design chips and those using other architectures.

Shopify, TikTok team up to let users shop from app – Reuters, 8/24/2021

  • Canada’s e-commerce giant Shopify said on Tuesday it was partnering with TikTok to work on a feature that would let shoppers buy directly from the social media app.
  • Shopify merchants who have a TikTok business account would soon be able to add a shopping tab to their profiles for the first time ever, the company said in a blog post.
  • The pilot version is currently available to users in the U.S. and UK and the company will launch in additional regions in the coming months.

With holidays around the corner, Walmart starts last mile delivery service – Reuters, 8/24/2021

  • Walmart on Tuesday launched a delivery service for other merchants throughout the United States, an announcement that comes as goods sellers scramble to secure deliveries ahead of the all-important holiday shopping season.
  • Through its latest program, called Walmart GoLocal, Walmart will dispatch workers from its Spark delivery network to merchants’ stores to pick up items and then deliver them to shoppers.
  • Over the past year, the retailer has doubled Spark’s coverage to more than 500 cities, Walmart Chief Financial Officer Brett Biggs said last week on an earnings call.
  • During the holiday peak season, there are expected to be some 5 million more parcels per day seeking delivery than providers able to handle that demand, UPS Chief Executive Officer Carol Tomé told analysts in July.

FAA to Review Boeing Employee Reports of Pressure Over Safety Issues – Wall Street Journal, 8/24/2021

  • The Federal Aviation Administration is launching a broad review of how Boeing employees handle safety matters on the agency’s behalf after some company engineers said they face undue pressure, according to an agency letter and people familiar with the matter.
  • An FAA survey conducted this year found 35% of a small sample of certain Boeing employees reported problems including pressure and hurdles to transparency, according to an Aug. 19 agency letter to Boeing.
  • Some surveyed employees, who are part of a group empowered by the agency to assist its work, said they encountered difficulties in being transparent with regulators, according to the letter, which was viewed by The Wall Street Journal.

US ECONOMY & POLITICS

U.S. new home sales increase in July – Reuters, 8/24/2021

  • Sales of new U.S. single-family homes increased in July, but housing market momentum is slowing amid surging prices that are being driven by an acute shortage of properties on the market.
  • New home sales rose 1.0% to a seasonally adjusted annual rate of 708,000 units last month, the Commerce Department said on Tuesday.
  • June’s sales pace was revised up to 701,000 units from the previously reported 676,000 units.

Democrats Hit Impasse on Infrastructure Bill, Broader Spending Package – Wall Street Journal, 8/24/2021

  • House Speaker Nancy Pelosi (D., Calif.) and a group of centrist House Democrats worked to break a deadlock Monday night over the party’s legislative strategy, as leaders tried to unify the party’s rival wings.
  • The fight centers on Democratic leaders’ plans to yoke together two pieces of legislation: a roughly $1 trillion infrastructure bill that the Senate passed earlier this month with bipartisan support and a $3.5 trillion package of healthcare, education and climate policies that lacks GOP backing and could take months to complete.
  • Plans to hold that vote Monday night were abandoned, though, and Mrs. Pelosi said the chamber would vote on the measure on Tuesday as she left the Capitol after midnight.
  • Lawmakers said there were also ongoing discussions over a possible commitment from Democratic leaders to bring up the infrastructure bill for a vote by a specific date, potentially Oct. 1, even if the broader budget package wasn’t done by then.
  • That could potentially win over centrists, but anger liberals who worry the party’s more centrist wing might oppose the broader budget package without repercussions if the infrastructure bill has already passed.

G-7 Allies to Press U.S. to Extend Afghanistan Presence – Wall Street Journal, 8/24/2021

  • U.S. allies are expected to pressure President Biden on Tuesday to prolong U.S. operations in Afghanistan past Aug. 31 to evacuate more Westerners and Afghans, despite warnings from the Taliban that they won’t accept the presence of international forces beyond the end of the month.
  • The U.K. has convened an emergency meeting of the Group of Seven advanced economies over the Afghanistan crisis, which will consider whether to prolong evacuation operations past the Aug. 31 deadline the Biden administration has set to end the U.S. presence in the country.
  • U.K. Prime Minister Boris Johnson also hopes to hammer out a united approach to the country and the Taliban regime in the longer term, according to British officials. The U.K. currently holds the rotating presidency of the G-7.
  • The Taliban say they won’t allow international troops to remain past the deadline and can’t guarantee that any troops who stay won’t be subject to attack.
  • In Kabul, thousands of Afghans are still struggling to get into the airport, while thousands more are inside waiting for flights. There are also thousands of U.S. and allied troops, as well as equipment, to also take out from Kabul airport by the deadline, meaning that the civilian evacuation has to effectively end before Aug. 31.

EUROPE & WORLD

Delta Variant Outbreaks in Sparsely Vaccinated Asian Countries Disrupt Production – Wall Street Journal, 8/24/2021

  • A gap has formed between the demand for goods in the well vaccinated U.S. and the capacity of sparsely vaccinated manufacturing countries to meet it, building inflationary pressure.
  • The outbreaks in Vietnam and elsewhere add to a long list of challenges—including outbreaks at ports, freight-container shortages and rising raw-material prices—that companies face in delivering goods at low cost and on time ahead of the holiday season.
  • Companies are trying to find alternative suppliers in China and elsewhere, and are paying for expensive airfreight to try to quickly shift product to Western markets to compensate for production delays.
  • Supply-chain experts say the added costs from lockdowns in Vietnam and other Asian countries will further increase the sales price of consumer goods like shoes, which rose 4.6% in July compared with a year ago in the U.S.
  • To try to maintain production, Vietnam’s government has ordered factories to adopt strict measures, including a “three-in-one-place” policy that requires employees in some highly affected regions to eat, sleep and work in the workplace to avoid catching and spreading the virus.

China’s Pinduoduo posts first quarterly profit – Reuters. 8/24/2021

  • Chinese e-commerce platform Pinduoduo reported its first ever quarterly profit on Tuesday as shoppers stayed online despite the easing of pandemic lockdowns but the company warned it could be a one-off.
  • In the three months to June 30, it reported net income attributable to ordinary shareholders of 2.41 billion yuan ($372 million) compared with a net loss of 899.3 million yuan a year ago.
  • Total revenues in the quarter were RMB 23,046.2 million ($13,569.4 million), an increase of 89% from RMB 12,193.3
  • million in the same quarter of 2020.
  • Average monthly active users in the quarter were 738.5 million, an increase of 30% from 568.8 million in the same
  • quarter of 2020.
  • Active buyers in the twelve-month period ended June 30, 2021 was 849.9 million, an increase of 24% from 683.2 million
  • in the twelve-month period ended June 30, 2020.
  • The company said it was launching an initiative worth 10 billion yuan to address needs in the agricultural sector and rural areas and profits from the second quarter and future quarters would be allocated to the initiative, “until the total 10 billion yuan commitment is fulfilled”.
  • Pinduoduo, which has the biggest e-commerce user base in China, said its profitability going forward was likely to be affected both by intensifying competition and investment in an agricultural sector initiative it launched on Tuesday.

Strong bookings keep Ryanair on course to hit targets, says CEO – Reuters. 8/24/2021

  • Ryanair is on track to hit upgraded guidance on passenger numbers, carrying more than 10 million people this month as a post-pandemic recovery continues with strong bookings to year-end, Group Chief Executive Michael O’Leary said.
  • After flying 5 million passengers in June, representing a third of 2019 levels, numbers soared to 9.3 million in July and are expected to reach about 10.5 million in August, he added.
  • “Bookings for the remainder of this year, through September, October, November are looking very strong, but pricing is weak … We are selling a lot of cheap seats to recover the market very quickly,” O’Leary said.

Samsung to Invest $205 Billion in Chip, Biotech Expansion – Wall Street Journal, 8/24/2021

  • Samsung plans to increase investments by one third to more than $205 billion over the next three years, as the South Korean conglomerate pursues leadership in chip manufacturing and a bigger role in Covid-19 vaccine production.
  • The company said Tuesday it would invest 240 trillion won in capital expenditure and research and development over the three years, up from 180 trillion won in the previous three.
  • One key decision awaiting Mr. Lee’s approval is the location of a planned Samsung Electronics semiconductor plant in the U.S. The $17 billion chip factory will be a key part of the Korean company’s bid to compete in the foundry business—making chips under contract for the companies that design them.

Factmonster – TODAY in HISTORY

  • Mount Vesuvius erupted and buried the towns of Pompeii and Herculaneum. (79)
  • The British set fire to the White House and the Capitol when they invaded Washington, DC during the War of 1812. (1814)
  • Mexico gained its independence from Spain with the Treaty of Cordoba. (1821)
  • France became the world’s fifth nuclear power as it exploded a hydrogen bomb in the South Pacific. (1968)\
  • Mikhail Gorbachev resigned as the general secretary of the Communist Party after a failed coup attempt against him. (1991)

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