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Daily Market Report | August 26, 2021

US FINANCIAL MARKET

Stocks Pause After S&P 500,Nasdaq Records – Wall Street Journal, 8/26/2021

  • U.S. stocks ticked lower Thursday, suggesting that the S&P 500 and Nasdaq Composite Index will retreat from record levels.
  • Money managers say their focus is largely on comments expected from Federal Reserve officials on Friday that could offer cues on the central bank’s plans for tapering stimulus measures.
  • Fresh data Thursday showed that the U.S. economy grew 6.6% on an annualized basis in the second quarter, an upward revision from the first print last month, but still below economists’ forecasts.
  • Meanwhile, weekly jobless claims came in at 353,000, a moderate uptick from the previous week’s pandemic low.
  • The yield on the benchmark 10-year Treasury note ticked up for a third day to 1.358%, from 1.342% on Wednesday, and reached the highest level in two weeks.
  • Ahead of the market opening, Salesforce shares rose nearly 3% after the business-software company reported a jump in quarterly sales and raised its full-year outlook on Wednesday evening.
  • Home goods retailer William-Sonoma jumped close to 14% premarket after increasing its quarterly dividend and share buyback program.
  • Software developer Autodesk fell over 7% in early trading after it said it expects third-quarter revenue and profit levels that came in below analysts’ estimates.

Salesforce Sales Jump on Pandemic-Fueled Demand for Cloud Services – Wall Street Journal, 8/26/2021

  • San Francisco-based Salesforce on Wednesday posted revenue of $6.34 billion, up 23% from the same quarter a year ago, topping Wall Street expectations, according to analysts surveyed by FactSet.
  • The company generated earnings per share of 56 cents.
  • Since the close of the most recent quarter, Salesforce completed its $27.7 billion acquisition of chat-based business communication company Slack Technologies last month.
  • For the current quarter, the first to include Slack, Salesforce projects sales of $6.78 billion to $6.79 billion, slightly ahead of Wall Street expectations.
  • The company also raised its full fiscal-year revenue forecast that includes Slack to between $26.2 billion to $26.3 billion, or around $300 million above the prior quarter’s projection.

Ulta Beauty raises 2021 outlook on ‘recovery’ for beauty products retail – MarketWatch, 8/25/2021

  • Ulta Beauty stock rose nearly 4% in the after-hours session Wednesday after the beauty-product retailer beat Wall Street forecasts for its second quarter and raised its outlook for the year, saying that its industry experienced a “recovery.”
  • Ulta Beauty said it earned $250.9 million, or $4.56 a share, compared with $8.1 million, or 14 cents a share, in the year-ago period.
  • Sales rose 60% to $2 billion from $1.2 billion a year ago, with same-store sales up 56%. Same-store sales rose 6% as compared with the second quarter of 2019, Ulta said.
  • Analysts polled by FactSet expected the company to report EPS of $2.57 on sales of $1.8 billion.
  • Ulta called for fiscal 2021 net sales between $8.1 billion and $8.3 billion, versus a previous estimate of sales between $7.7 billion and $7.8 billion.
  • It targets to end the year with 44 new stores, from an earlier estimate of 40 new stores.
  • It forecasts EPS between $14.50 and $14.70 for the year, compared with an earlier forecast of EPS between $11.50 and $11.95.

Snowflake Beats Revenue Estimates and Gives Upbeat Forecast – Bloomberg, 8/26/2021

  • Snowflake, the software company with 2020’s biggest U.S. initial public offering, delivered better-than-expected results and a rosy forecast for the current quarter.
  • Product sales, which make up more than 90% of Snowflake’s revenue, will be $280 million to $285 million this quarter, the company said on Wednesday.
  • Analysts have projected $271.4 million on average. Revenue also topped projections in the second quarter, and Snowflake posted a narrower loss than predicted.
  • Snowflake makes software that pulls in, stores and analyzes information from multiple systems. Its customers include BlackRock and McKesson Product revenue climbed to $254.6 million last quarter, compared with an average analyst estimate of $240.1 million. Snowflake reported a loss of 64 cents a share, narrower than the 70 cents projected.
  • At its analyst day in June, Snowflake said it is aiming for $10 billion in sales by fiscal 2029.
  • Analysts expect annual sales to top $1 billion in the current fiscal year, 2022.

Burlington stock slumps after wide comparable sales miss – MarketWatch, 8/26/2021

  • Burlington Stores stock sank 6.2% in Thursday premarket trading after the off-price retailer reported second-quarter comparable sales that missed the Street by a wide margin.
  • Net income totaled $102.6 million, or $1.50 per share, after a loss of $46.8 million, or 71 cents per share.
  • Adjusted EPS of $1.94 beat the FactSet consensus for $1.50.
  • Revenue of $2.22 billion was up from $1.01 billion last year and beat the FactSet consensus for $2.07 billion.
  • Comparable sales increased 19%, well below the FactSet consensus for 49.7% growth.
  • The company did not provide a sales or earnings outlook due to uncertainty from the coronavirus.

Microsoft Hires Former Top Amazon Cloud Executive, Adding to Rivalry – Wall Street Journal, 8/25/2021

  • Microsoft hired a top Amazon cloud veteran and ally of Chief Executive Andy Jassy, according to a company document, in a rare jump of a senior executive between the cloud-computing industry’s leading rivals.
  • Charlie Bell, who left Amazon Web Services recently, is now listed by Microsoft as a corporate vice president, according to an internal employee register viewed by The Wall Street Journal.
  • Mr. Bell was a senior vice president at Amazon Web Services, as the company’s cloud-computing arm is known, and for years worked with Mr. Jassy, then the AWS boss, to build up the cloud-computing business.
  • Mr. Bell spent more than two decades at AWS and was widely considered an heir apparent to Mr. Jassy.

U.S. August auto sales to fall as supply constraints continue – Reuters, 8/26/2021

  • Retail sales of new vehicles are expected to fall 14.3% to 987,100 in August from a year earlier, consultants J.D. Power and LMC Automotive said in a report released on Thursday.
  • The chip shortage continues to weigh on manufacturing activity, with automakers cutting production despite strong demand for personal transportation during the COVID-19 crisis.
  • Dealers currently have about 942,000 vehicles in inventory, compared with about 3 million, two years ago, according to the report.
  • Average transaction prices are expected to rise 16% to $41,378, partly due to fewer manufacturer incentives.
  • The consultants lowered their forecast for 2021 global light vehicle sales by 2 million units to 83.8 million units, due to a lack of sufficient production volume.

Oil Declines After Three-Day Rally as Fears Over Virus Linger – Bloomberg, 8/25/2021

  • Brent oil dropped following its biggest three-day gain since November, with the latest Covid-19 resurgence still clouding the outlook for fuel demand.
  • Investors will also be keenly watching the Federal Reserve’s Jackson Hole meeting from Thursday for insights on how the central bank will ease stimulus.
  • The dollar edged higher, making raw materials such as oil that are priced in the U.S. currency more expensive for investors.
  • West Texas Intermediate for October delivery lost 1.1% to $67.60 a barrel by 8:27 a.m. in New York. It rose almost 10% during the previous three sessions.
  • Brent for October settlement fell 1% to $71.55 a barrel.

US ECONOMY & POLITICS

U.S. Jobless Claims Rise but Hold Near Pandemic Low – Wall Street Journal, 8/26/2021

  • Unemployment claims edged up to 353,000 last week from a revised 349,000 a week earlier, the Labor Department said Thursday.
  • That was the lowest level for claims since the coronavirus hit in March 2020.
  • The four-week moving average, which smooths out volatility in the weekly figures, fell to a new pandemic low of 366,500 last week.
  • Applications for unemployment benefits are down more than 50% since the start of the year.
  • Continuing claims for regular state programs, a proxy for the number of people receiving benefits, have also recently declined to pandemic lows.
  • About 2.86 million people were collecting unemployment benefits through state programs in the week ended Aug. 14, down slightly from 2.87 million a week earlier and the lowest level since March 2020.

U.S. second-quarter growth raised; corporate profits surge – Reuters, 8/26/2021

  • Gross domestic product increased at a 6.6% annualized rate, the government said in its second estimate of GDP growth for the April-June period.
  • That was revised up from the 6.5% pace of expansion reported in July.
  • Economists polled by Reuters had expected that second-quarter GDP growth would be raised to a 6.7% pace.
  • The economy grew at a 6.3% rate in the first quarter, and has recouped the steep losses suffered during the two-month COVID-19 recession. The level of GDP is now 0.8% higher than it was at its peak in the fourth quarter of 2019.
  • Growth in consumer spending was raised to an 11.9% rate from the previously reported 11.8% pace.
  • National after-tax profits without inventory valuation and capital consumption adjustments, conceptually most similar to S&P 500 profits, increased at a $303.6 billion rate, or 12.8% pace, in the second quarter, up from the 9.4% pace notched in the January-March period.
  • When measured from the income side, the U.S. economy grew at a 1.6% rate in the second quarter after expanding at a 6.3% pace in the first quarter.
  • The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, increased at a 4.0% pace after rising at a 6.3% rate in the first three months of the year.

Virtual Jackson Hole Underscores Uncertainty in Fed’s Next Steps – Bloomberg, 8/26/2021

  • The Fed chair will speak at 10 a.m. Washington time Friday and is expected to reinforce the message that it will probably be appropriate to begin scaling back the Fed’s $120-billion-a-month bond-buying program by the end of the year.
  • Minutes of their recent policy meeting in late July, published on Aug. 18, showed most Fed officials expected it would be appropriate to begin tapering the bond-buying program before the end of the year.
  • Last year, during the Jackson Hole symposium, Powell unveiled a new framework for rate-setting that the FOMC would use going forward, itself the outcome of a nearly 20-month internal review.
  • On the other side of the Fed’s dual mandate is price stability. Inflation is now running well above the central bank’s 2% target.
  • The view at the Fed is that the current burst of inflation is largely transitory, and it will dissipate next year as supply chains normalize and reopening progresses.

Biden Administration Likely to Approve Covid-19 Boosters at Six Months – Wall Street Journal, 8/26/2021

  • The person said approval for boosters for all three Covid-19 shots being administered in the U.S.—those manufactured by Pfizer and partner BioNTech, Moderna, and Johnson & Johnson —is expected in mid-September.
  • The Biden administration and companies have said that there should be enough supply for boosters that they plan to begin distributing more widely on Sept. 20.
  • The U.S. has purchased a combined 1 billion doses from Pfizer and Moderna.
  • Officials said at the time that the shots would be administered about eight months after the second dose for people ages 18 and older.
  • Boosters will be administered at the 80,000 pharmacies and other vaccination sites operating across the U.S.
  • Health authorities already have authorized booster shots for people 12 years old and above whose immune systems are compromised.
  • People 65 and older and individuals in chronic-care facilities are expected to get boosters first, along with health workers and anyone else who was vaccinated earliest, according to federal health officials.

EUROPE & WORLD

Kabul Airport Explosion Hits Crowd Amid Afghan Evacuations – Wall Street Journal, 8/26/2021

  • An explosion ripped through a crowd of Afghans trying to enter Kabul airport, where the U.S. military is attempting to evacuate thousands of Americans and Afghans.
  • At least three U.S. troops were injured, a U.S. official said. Western governments have repeatedly warned of an imminent attack by Islamic State and urged their citizens not to approach the airport.
  • Thursday’s explosion came after several of America’s allies said they were halting evacuation flights from Afghanistan, leaving behind citizens and thousands of Afghans who had been cleared for entry.
  • Secretary of State Antony Blinken said Wednesday that approximately 1,500 American citizens were still in Taliban-controlled Afghanistan, and that Washington was in touch with some 500 of them, trying to organize evacuations.

Biden to Face Pressure on Iran Nuclear Deal in Meeting With Israel’s Bennetts – Wall Street Journal, 8/26/2021

  • Israeli Prime Minister Naftali Bennett is set to meet President Biden for the first time Thursday at the White House, where he is expected to make the case that Washington should back off from reviving a deal to curtail Iran’s nuclear program.
  • Mr. Bennett made Iran the focal point in his preparations for the visit, where he hopes to reset Israel’s relations with the U.S. after his predecessor Benjamin Netanyahu’s close relationship with former President Donald Trump.
  • Israel says Tehran has no interest in returning to the confines of the 2015 deal, and Iran is two months away from being able to produce weapons-grade uranium.
  • In the days leading up to Mr. Bennett’s visit to Washington, Israeli security officials have emphasized that Israel is updating its plans and operational capabilities needed to independently take military action against Iran if the international community fails to limit the Islamic Republic’s nuclear program.

Western Digital in Advanced Talks to Merge With Kioxia in $20 Billion-Plus Deal – Wall Street Journal, 8/25/2021

  • Western Digital is in advanced talks to merge with Japan’s Kioxia, according to people familiar with the matter, in a deal that could be valued at more than $20 billion and further reorder the global chip industry.
  • Long-running discussions between the companies have heated up in the past few weeks and they could reach agreement on a deal as early as mid-September, the people said.
  • Any transaction would require the blessing of the Japanese government, given Kioxia’s significance there and the political sensitivities of transferring ownership of such key technology.

Factmonster – TODAY in HISTORY

  • Liberia was proclaimed an independent republic. (1847)
  • The 19th Amendment giving women the right to vote went into effect. (1920)
  • John Paul I became Pope of the Roman Catholic Church. He died one month later. (1978)

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