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Daily Market Report | August 25, 2021

US FINANCIAL MARKET

Stocks Pause After S&P 500, Nasdaq Hit Records – Wall Street Journal, 8/25/2021

  • U.S. stocks opened mixed on Wednesday, as major indexes continued to trade near record levels.
  • Investors appeared to be holding off on making any big new bets going into the end of the week, ahead of fresh insights from Federal Reserve Chairman Jerome Powell at the central bank’s Jackson Hole symposium Friday. Money managers are torn over whether the Fed will proceed with scaling back its bond purchases in coming months, given the uptick in Covid-19 cases and some signs that the economic recovery is slowing.
  • Markets are also weighing a mix of other factors. Regulatory approval of Pfizer and BioNTech’s Covid-19 vaccine has spurred some businesses to impose vaccination mandates, potentially boosting the pace of the U.S. rollout. Meanwhile, concerns over the duration of vaccines’ efficacy has caused some investors to expect that the global economic recovery could falter.
  • In bond markets, the yield on the 10-year Treasury note ticked up to 1.305% from 1.289% Tuesday. Yields rise when prices fall.
  • Overseas, the Stoxx Europe 600 index edged up 0.1%.
  • In Asia, major indexes closed on a mixed note. China’s Shanghai Composite added 0.7%, and South Korea’s Kospi rose 0.3%.
  • Japan’s Nikkei 225 was relatively flat, and Hong Kong’s Hang Seng declined 0.1%.

J&J Says Covid-19 Booster Prompts Strong Immune Response – Wall Street Journal, 8/25/2021

  • Johnson & Johnson said Wednesday that a second dose of its Covid-19 vaccine was found in a study to generate a strong immune response, justifying a booster shot.
  • Wednesday’s findings are expected to inform the U.S. booster strategy set to begin in September, when the U.S. plans to begin offering boosters to people who received messenger-RNA vaccines.
  • J&J said researchers found antibody levels increased ninefold among people who received a second dose of its vaccine, compared with one month after they received a first dose.
  • The company didn’t specify exactly when or how many subjects received the second dose, though information posted about the clinical trial in an online government database indicates it was administered six months after the first shot.

Delta to add $200 monthly health insurance charge for unvaccinated staff – Reuters, 8/25/2021

  • Delta Air Lines told unvaccinated employees on Wednesday they will have to pay an additional $200 per month for their company-sponsored healthcare plan.
  • Adding a surcharge to health insurance contributions is the latest tactic being used by employers to protect their operations from the highly contagious Delta variant of the coronavirus.
  • In the memo, Bastian said the surcharge is necessary to address the financial risk the Atlanta-based airline faces from the decision to not vaccinate.
  • The average hospital stay for COVID-19 has cost the company $50,000 per person, he said.

Nordstrom earnings beat, retailer raises forecast, but shares fall as sales still below 2019 levels – CNBC, 8/25/2021

  • Nordstrom shares fell Tuesday after the department store chain reported fiscal second-quarter sales remained below pre-pandemic levels.
  • Revenue rose to $3.66 billion from $1.86 billion a year earlier, topping estimates for $3.36 billion.
  • At Nordstrom’s namesake department store brand, revenue was up 127% compared with a year earlier but down 5% on a two-year basis.
  • At Nordstrom Rack, an off-price division that competes with TJ Maxx and Macy’s Backstage, sales were up 61% from 2020 but were down 8% from 2019.
  • The company said its online sales rose 30% from a year earlier, representing 40% of Nordstrom’s total business.
  • Nordstrom reported net income of $80 million, or 49 cents per share, compared with a loss of $255 million, or $1.62 a share, a year earlier.
  • Nordstrom now expects its annual revenue to rise more than 35%, up from a prior outlook calling for 25% growth.
  • Analysts had been looking for a 30% increase, according to Refinitiv.

Dick’s Sporting Goods shares rise after second-quarter sales surge 21%, retailer raises forecast – CNBC, 8/25/2021

  • Dick’s Sporting Goods shares rose Wednesday after the retailer reported sales growth of 21% for the fiscal second quarter and raised its outlook for the year.
  • Net sales rose to $3.27 billion from $2.71 billion a year earlier, outpacing estimates of $2.85 billion.
  • Same-store sales, which track sales at stores open for at least 12 months, were up 19.2% in the second quarter.
  • Net income rose nearly 80% to $495.5 million, or $4.53 share, from $276.8 million, or $3.12 per share, a year earlier.
  • The company now expects its full-year earnings to range from $11.00 to $11.45 per share and its full-year adjusted earnings to be between $12.45 and $12.95 per share.
  • The company said it planned a special dividend of $5.50 per share and would double its planned share repurchases for the year to a minimum of $400 million.

Global corporate profits to fall 8% in Q3 after record Q2 – data – Reuters, 8/25/2021

  • Global corporate profits in the third quarter are likely to fall for the first time in 18 months after record earnings in April-June, Reuters calculations showed, as the spreading COVID-19 Delta variant squeezes supply chains and raises labour costs.
  • Massive fiscal stimulus to support economic recovery and loosened pandemic curbs generated high consumer demand in the second quarter, and companies contending with disrupted supplies and falling inventories raised prices to offset rising input costs.
  • But profits are estimated to fall 8% on average to $678.2 billion in the July-September quarter.
  • Profits at U.S. firms are estimated to decline 7.2% in the third quarter, data showed, after rising 12.4% in the second quarter.
  • By sector, real estate, financial and consumer discretionary sectors are expected to see a decline of 22.2%, 18.8% and 16.2% in profits, respectively.
  • Average net margins at global firms are expected to drop to 10.66% in the third quarter from 11.43% in the second quarter.

Companies Strike While the Stock Market Is Hot – Wall Street Journal, 8/25/2021

  • There have been 556 follow-on offerings, or stock sales by companies or existing shareholders, among U.S. companies this year, the most since 1996, according to Dealogic data. They have raised a total of $133 billion.
  • Many companies have issued so-called at-the-market offerings, which allow them to quickly sell shares over time rather than all at once.
  • More than $75 billion of these deals have been issued this year, a jump of about 70% from the $44 billion that was issued over the same time frame last year and the most on record, according to Dealogic data going back to 1995.
  • Behind the boom in share issuance? An ascendant stock market.
  • The S&P 500 has hit 50 fresh highs this year and roughly doubled from its March 2020 pandemic low.
  • Many U.S. companies have posted strong earnings and staged a speedy recovery from the pandemic-induced recession, giving the stock market a boost. Valuations have surged.

OnlyFans Suspends Plan to Ban Sex Videos – Wall Street Journal, 8/25/2021

  • OnlyFans is walking back plans to button-up content on the social-media platform.
  • OnlyFans said it is suspending its plan to prohibit content featuring sexually explicit conduct starting Oct. 1.
  • The platform said last week that the changes were needed to comply with the requests of its banking partners and payout providers.
  • “We have secured assurances necessary to support our diverse creator community and have suspended the planned October 1 policy change,” OnlyFans said Wednesday in a tweet.
  • A company representative didn’t immediately respond to a request for comment.

US ECONOMY & POLITICS

Durable Goods Orders Dropped Slightly in July as Supply Constraints Continue – Wall Street Journal, 8/25/2021

  • Orders for cars, appliances and other durable goods decreased slightly in July, as manufacturers continued to grapple with shortages in parts and labor and confront higher material costs.
  • New orders for products meant to last at least three years decreased 0.1% to a seasonally adjusted $257.2 billion in July as compared with June, the Commerce Department said Wednesday.
  • Economists surveyed by The Wall Street Journal had estimated a 0.5% decline.
  • Orders increased 0.8% in June from the prior month, unchanged from the initial estimate for the month. Demand for durable goods has increased in 13 of the last 15 months.
  • The overall number was hurt by a 48.9% decline between June and July on new orders for nondefense aircraft and parts, a category that is often volatile.
  • New orders for nondefense capital goods excluding aircraft—so-called core capital-goods, a closely watched proxy for business investment—were unchanged in July compared with the previous month.

House Passes $3.5 Trillion Budget Blueprint, Sets Deadline for Infrastructure Bill – Wall Street Journal, 8/25/2021

  • The House narrowly passed a measure approving a $3.5 trillion budget blueprint and locking in a late September vote on a roughly $1 trillion infrastructure bill, ending a standoff between centrist Democrats and party leaders over their legislative agenda.
  • Tuesday’s passage of the $3.5 trillion budget framework in a 220-212 vote unlocks a process, known as reconciliation, allowing Democrats to pass a broad package of healthcare, education and climate provisions in the Senate without GOP support, so long as all 50 senators in the Democratic caucus back it.
  • Among the priorities Democrats hope to include the $3.5 trillion legislation are expanding Medicare to cover dental, hearing and vision care; offering universal prekindergarten and two free years of community college; and pushing utilities to generate 80% of the nation’s electricity from clean sources by the end of the decade.
  • They are also considering raising taxes on companies and high-income households to cover the cost.

Nursing Homes Keep Losing Workers – Wall Street Journal, 8/25/2021

  • Nursing homes have a long-term care problem: 18 months after the Covid-19 crisis began, their staffs are still shrinking.
  • Nursing homes and residential-care facilities employed three million people in July, down 380,000 workers from February 2020, according to the Bureau of Labor Statistics. Industry employment has fallen every month except one since the World Health Organization declared Covid-19 a global pandemic in March 2020.
  • Nursing-home staff have quit—and stayed away—because of the pay, burnout and fear of Covid-19, administrators and workers say. Enhanced unemployment benefits and competing job opportunities also have played a role, they say.
  • Covid-19 vaccines have brought relief inside nursing homes as resident and staff infections have declined. But they have also created another staffing challenge for administrators concerned that workers will walk away if they are required to get the shot.
  • About 61% of staff at long-term-care facilities are vaccinated, and 83% of residents, according to government data.

Only a Fraction of Covid-19 Rental Assistance Has Been Distributed – Wall Street Journal, 8/25/2021

  • The U.S. program to help tenants and landlords struggling with the impact of the Covid-19 pandemic is still moving at a slow pace and has delivered a fraction of the promised aid, data released by the Treasury Department on Wednesday show.
  • Since December, Congress has appropriated a total of $46.6 billion to help tenants who were behind on their rent. As of July 31, just $4.7 billion had been distributed to landlords and tenants, the Treasury said.
  • Wednesday’s data show that rental aid has begun to move faster in some states, though July’s $1.7 billion reflected only a modest overall increase from the $1.5 billion distributed in June.

SEC Chief Warns ‘Clock Is Ticking’ on Delisting Chinese Stocks – Bloomberg, 8/25/2021

  • Securities and Exchange Commission Chair Gary Gensler has a warning for hundreds of Chinese companies that have raised billions of dollars in U.S. markets: Submit to more scrutiny soon or get kicked out.
  • In a Tuesday interview, he pledged to strictly enforce a three-year deadline that requires Chinese firms to permit inspections of their financial audits. If businesses refuse, their shares could be delisted from the New York Stock Exchange and Nasdaq as soon as 2024.
  • The tough stance would seem to squash the hopes of some on Wall Street that Gensler might drag his feet in implementing the mandate from Congress and give Beijing more time to strike a deal with Washington regulators that allows the gravy train of Chinese stock sales to continue.

EUROPE & WORLD

Xiaomi revenue surges 64%, prepares autonomous driving expansion – Reuters, 8/25/2021

  • Smartphone maker Xiaomi’s second-quarter revenue rose a record 64% from a year earlier, it said on Wednesday, announcing the purchase of an autonomous driving startup as it prepares to expand into the competitive market.
  • Sales reached 87.8 billion yuan ($13.56 billion), up from 53.54 billion a year earlier and beating analyst expectations of 84.53 billion yuan.
  • Growth in Xiaomi’s internet services unit, which makes money primarily by placing ads across various apps, grew 19.1% year-on-year.
  • Net income reached 6.32 billion yuan, up 87.4% year on year and above analyst expectations.
  • On Wednesday Xiaomi also announced that it is acquiring autonomous driving startup Deepmotion for approximately $77.37 million, in a bid to boost its own R&D efforts in the area, the company’s President Wang Xiang said.

Chinese Factories Are Having Labor Pains—‘We Can Hardly Find Any Workers’ – Wall Street Journal, 8/25/2021

  • Labor shortages are materializing across China as young people shun factory jobs and more migrant workers stay home, offering a possible preview of larger challenges ahead as the workforce ages and shrinks.
  • China’s shortfall in factory labor comes as it grapples with the opposite problem in another part of its economy: too many workers for white-collar professional jobs.
  • More than 9 million students, a record, are graduating from college this year, aggravating the structural mismatch in China’s labor market, economists say.
  • As China’s overall surveyed urban unemployment rate edged down to 5.1% in July from 5.7% a year earlier, the jobless rate among those aged 16 to 24 was 16.2% last month, though that was lower than an all-time high of 16.8% in July 2020.
  • China’s working age population, defined as people between 15 and 59, fell to 894 million last year, or 63% of the total population.
  • That was down from 939 million in 2010, or 70% of total population at the time, according to the country’s once-in-a-decade census data.

Didi Delays U.K., Europe Expansion Plans After Officials Raise Data Concerns – Wall Street Journal, 8/25/2021

  • Chinese ride-hailing giant Didi Global has delayed plans to expand to Britain and Europe, partly due to political and regulatory challenges, according to people familiar with the matter, the latest illustration of the uphill battle that Chinese technology companies face in Western markets.
  • Didi recently obtained licenses to operate in three British regions, including Manchester, and was planning to launch ride-hailing services in the country as early as this summer, some of the people said.
  • It also planned to expand to London and other British cities later this year, one of the people said, and then France and Germany afterward, some of the people said.
  • But executives decided to postpone plans to launch in the U.K. and Europe as political and regulatory scrutiny grew in both China and Britain, the people said.

EU to Discuss Reimposing Covid-Related Travel Curbs on U.S. – Bloomberg, 8/25/2021

  • The European Union will discuss on Thursday whether to reintroduce travel restrictions on visitors from the U.S. as new coronavirus cases soar.
  • Slovenia, which holds the rotating presidency of the EU and is currently responsible for triggering an assessment of countries that are allowed non-essential travel into the bloc, recommended that the U.S. be removed from the list, according to two officials familiar with the plans.
  • The U.S. had 507 new Covid-19 cases per 100,000 inhabitants over the previous 14 days as of Aug. 15, according to the European Centre for Disease Prevention and Control. That’s well above the limit of 75 set out in the EU guidelines.
  • The latest proposal recommends removing several other countries, including Israel, said the officials, who asked not to be identified because the discussions are private.

Factmonster – TODAY in HISTORY

  • The Department of the Interior created the National Park Service to manage and preserve national parks and monuments for future generations. (1916)
  • Paris was liberated from Nazi occupation by Allied forces. (1944)
  • Edward “Ted” Kennedy, who served as a Democratic senator from Massachusetts since 1962, dies. He was diagnosed with a malignant brain tumor in 2008. (2009)
  • The first human to walk on the moon, Neil Armstrong, died after suffering complications from a heart bypass. (2012)

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