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Daily Market Report | September 2, 2021

US FINANCIAL MARKET

U.S. Stocks Rise After Economic Data – Wall Street Journal, 9/2/2021

  • U.S. stocks rose after fresh data on the labor market and the trade balance showed that the economic recovery remains on track.
  • Jobless claims, a proxy for layoffs, dropped to 340,000, reaching a new pandemic low. The Fed signaled that the labor market’s recovery is a factor in its monetary policy decisions. Separately, fresh data showed that the U.S. trade deficit narrowed to $70.1 billion in July as American consumers shifted spending toward in-person services and away from goods.
  • The yield on the benchmark 10-year Treasury note ticked down to 1.295% from 1.301% on Wednesday.
  • Stocks have pushed higher this week as investors weighed strong corporate earnings and low interest rates against indicators that growth may be slowing in some parts of the world. Money managers say they are awaiting the jobs report for August, due Friday, for more cues on when and how the Federal Reserve may taper its bond purchases.
  • Among corporate names, Spotify Technologies rose 5.9%. Apple said it would allow media apps like the music streaming service to link to their own websites for payment, taking down restrictions criticized as anticompetitive.
  • Oil prices rose a day after the OPEC and its Russia-led allies agreed to continue increasing oil production. U.S. crude rose 2.4% to $70.23, lifted by lower-than-expected inventories, according to analysts.
  • Semiconductor and software developer Broadcom and information technology company Hewlett Packard Enterprise are scheduled to post earnings Thursday after markets close.
  • Overseas, the pan-continental Stoxx Europe 600 advanced 0.2%.
  • In Asia, most major benchmarks rose by the close of trading.
  • The Shanghai Composite Index climbed 0.8% while Hong Kong’s Hang Seng Index added 0.2%.
  • South Korea’s Kospi Index declined 1%. Stronger-than-expected inflation data may prompt an interest-rate increase in the coming months, according to analysts at Barclays.

American Eagle online sales drop on easing COVID-19 curbs, shares slump – Reuters, 9/2/2021

  • American Eagle Outfitters reported quarterly revenue that missed estimates on Thursday as the apparel retailer’s online business slowed following vaccinations and the easing of some COVID-19 curbs, sending its shares tumbling 12% before the bell.
  • Total net revenue increased 35% to $1.19 billion, mainly as temporary store closures hammered demand for apparel last year.
  • However, the figure came short of Refinitiv-IBES estimates of $1.23 billion.
  • The company’s second-quarter digital sales fell 5% from a year earlier, hurt by customers shopping more at brick-and-mortar stores as well as stiff competition from e-commerce giants including Amazon.com.
  • American Eagle’s consolidated revenue from its physical stores, however, increased 73% from a year earlier in the second quarter ended July 31.
  • The company’s Aerie brand, which sells work-from-home favorites lingerie and lounge wear, posted a 34% rise in revenue to $336 million, while American Eagle label sales jumped 35% to $846 million.
  • Excluding items, American Eagle earned 60 cents per share, beating estimates of 55 cents, as it sold more goods at full prices.

GM to cut North American production, citing chip shortage – Reuters, 9/2/2021

  • General Motors will reduce production at most North American assembly plants this month because of the ongoing semiconductor chip shortage, hitting its profitable truck and sport utility vehicles, it said on Thursday.
  • The largest U.S. automaker will halt production next week at its Fort Wayne plant in Indiana and its Silao plant in Mexico, both of which build pickup trucks. In total, GM is cutting production at eight North American assembly plants in September.
  • GM will halt production at its Wentzville, Missouri plant for two weeks starting Sept. 6 that builds midsize trucks and full-size vans.
  • GM will also halt production at the CAMI Assembly in Canada and San Luis Potosi Assembly in Mexico for two additional weeks. The company builds its Equinox SUV at both plants.
  • GM’s Spring Hill Tennessee plant will cut two weeks of production in September that builds the GMC Acadia, Cadillac XT5 and Cadillac XT6, while its Ramos, Mexico plant will take two additional weeks of downtime for Blazer production, while Equinox production will be down thru the week of Sept. 27.

Ford again trims truck production due to chip shortage – Reuters, 9/2/2021

  • Ford Motor said Wednesday it will again trim U.S. truck production due to the ongoing semiconductor chip crisis that has hit auto industry wide production.
  • The second largest U.S. automaker said it will cut two of three shifts at its Dearborn Truck Plant next week, while its Kansas City Assembly Plant F-150 production will be down.
  • The company’s Kentucky Truck Plant will operate on two shifts the weeks of Sept. 6 and 13 rather than three.

Apple to Allow Media Apps to Link to Own Websites for Payment Options – Wall Street Journal, 9/2/2021

  • Apple said it would allow media apps to create in-app links to sign-up pages on those companies’ websites, allowing the likes of Spotify Technology and Netflix to bypass the iPhone maker’s cut of subscriptions.
  • Spotify and other technology companies for years have said Apple’s restrictions were unfair and anticompetitive.
  • The Cupertino, Calif., company previously prohibited Spotify and others from directing their users to sign-up options outside the App Store.
  • Apple revealed the change Wednesday, saying it was among adjustments made to close an investigation by the Japan Fair Trade Commission and will apply globally to so-called reader apps available through Apple’s App Store.
  • The changes go into effect early next year, Apple said, as governments have questioned the power the company holds over third-party software developers that distribute their digital goods and services through the iPhone and iPad tablet.

Apple to Add Driver’s Licenses to Apple Wallet – Wall Street Journal, 9/2/2021

  • Residents of several states will be able to store and show their driver’s license or ID on their iPhone or Apple Watch’s digital wallet, Apple said.
  • The tech giant on Wednesday said Arizona and Georgia will be the first states to adopt the feature, with Connecticut, Iowa, Kentucky, Maryland, Oklahoma and Utah to follow.
  • Apple Wallet is a platform through which Apple users can display and use digital documentation such as credit cards, concert tickets and boarding passes.
  • Apple in June said its latest operating system update included support for home keys and ID cards in its wallet.

Apple hit with antitrust case in India over in-app payments issues – Reuters, 9/2/2021

  • Apple is facing an antitrust challenge in India for allegedly abusing its dominant position in the apps market by forcing developers to use its proprietary in-app purchase system, according to a source and documents seen by Reuters.
  • The allegations are similar to a case Apple faces in the European Union, where regulators last year started an investigation into Apple’s imposition of an in-app fee of 30% for distribution of paid digital content and other restrictions.
  • The Indian case was filed by a little-known, non-profit group which argues Apple’s fee of up to 30% hurts competition by raising costs for app developers and customers, while also acting as a barrier to market entry.

Purdue Pharma Bankruptcy Plan Approved, Freeing Sacklers From Lawsuits – Wall Street Journal, 9/2/2021

  • OxyContin maker Purdue Pharma won court approval of a $4.5 billion bankruptcy settlement that shields its owners, members of the Sackler family, from lawsuits accusing them of contributing to the nation’s opioid epidemic in exchange for providing funding to combat the crisis.
  • Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., said Wednesday he will confirm a restructuring plan that will transform Purdue into a public benefit company and settle civil lawsuits filed by governments and opioid victims against the drugmaker and its owners.
  • Purdue’s family owners collected more than $10 billion from the company between 2008 and 2017, about half of which went to taxes or was reinvested in the business.
  • Purdue is the latest in a series of drugmakers and distributors to resolve legal liabilities over opioids, which caused nearly 500,000 overdose deaths between 1999 and 2019, according to federal data.
  • The Sacklers have denied wrongdoing and last year separately settled civil allegations with the Justice Department for $225 million, without admitting any liability.

Railroads Brace as Regulator Signals Willingness to Take On Industry – Wall Street Journal, 9/2/2021

  • The obscure federal regulator that threw a wrench into a $30 billion railroad merger this week could have more in store for the nation’s freight railways—with implications for both business and consumers.
  • Like other federal agencies, the five-member Surface Transportation Board has been tasked by President Biden to root out what it considers to be corporate monopolies that hurt smaller companies and consumers.
  • In a closely watched action, the board in coming months is expected to consider a rule to mandate so-called reciprocal switching, the practice in which railroads can be compelled to share access to their tracks with competitors.
  • That would allow shippers to seek competitive bids for moving freight, which in theory could lower shipping costs and the prices ultimately paid by consumers.

Richard Branson’s Virgin Galactic Flight Path Examined by FAA – Wall Street Journal, 9/2/2021

  • Aviation regulators are investigating how Virgin Galactic Holdings Inc.’s spacecraft returned to the ground after taking billionaire entrepreneur Richard Branson to the edge of space, a spokesman for the Federal Aviation Administration said.
  • Virgin Galactic’s Unity space vessel deviated from the flight path it agreed to follow as it came back to the Spaceport America facility in New Mexico on July 11, according to the FAA spokesman.
  • The FAA would be concerned about a spacecraft not following an expected path during re-entry if that shift could potentially affect public safety, according to a person familiar with the agency’s processes. The FAA licenses commercial space operations, including launches and re-entries of spacecraft, restricting airspace for those flights.

WhatsApp fined a record 225 million euro by Ireland over privacy – Reuters, 9/2/2021

  • Facebook’s WhatsApp was fined a record 225 million euro ($266 million) by the Irish data protection regulator on Thursday after the EU privacy watchdog pressured Ireland to raise the penalty for the company’s privacy breaches.
  • WhatsApp said the fine was “entirely disproportionate” and that it would appeal. Still, the Irish fine is significantly less than the record $886.6 million euro fine meted out to Amazon by the Luxembourg privacy agency in July.
  • Ireland’s Data Privacy Commissioner (DPC), the lead data privacy regulator for Facebook within the European Union, said the issues related to whether WhatsApp conformed in 2018 with EU data rules about transparency.

US ECONOMY & POLITICS

U.S. Unemployment Claims Fall to 340,000, Remaining at Pandemic Low – Wall Street Journal, 9/2/2021

  • Jobless claims fell to a new pandemic low as businesses held on to workers despite the surging Delta variant.
  • Initial jobless claims fell by 14,000 to a seasonally adjusted 340,000 in the week ended Aug. 28, the Labor Department said Thursday. That was the lowest level since the pandemic took hold in the U.S. in March 2020. The four-week moving average of claims, which smooths week-to-week volatility, fell to 355,000, also a pandemic low.
  • The number of continuing claims made to regular state programs, a proxy for the number of people receiving benefits through the most common entry point for jobless aid, fell by 160,000 to 2.75 million for the week ended Aug. 21, also the lowest since March 2020.
  • About 12.2 million claims were made for continued unemployment benefits through all programs, including 9.2 million for two temporary federal pandemic programs, for the week ended Aug. 14, the Labor Department said.

Weaker Demand for Imports Narrowed U.S. Trade Deficit in July – Wall Street Journal, 9/2/2021

  • The U.S. trade deficit narrowed in July as consumers and businesses pulled back on purchases of imported goods amid rising Covid-19 cases caused by the Delta variant.
  • The trade gap in goods and services shrank 4.3% from the previous month to a seasonally adjusted $70.1 billion, the Commerce Department said Thursday.
  • Imports fell 0.2% in July from June to $282.9 billion as demand slowed for consumer goods including toys, sporting goods and cellphones. Purchases of industrial supplies and material also declined.
  • Exports expanded 1.3% to $212.8 billion. That was helped in part by a rebound in auto shipments, which had been suppressed by a semiconductor shortage in recent months.
  • Imports of consumer goods fell 3.4% in July, with shipments of toys, games and sporting goods tumbling 22%.
  • Other reports for July had shown that retail sales declined 1.1% while overall consumer spending growth slowed to 0.3%—less than a third of the pace in June.

Democrats Face Tricky Deadlines on Debt Ceiling, Government Shutdown – Wall Street Journal, 9/2/2021

  • Democrats’ efforts to pass trillions of dollars in new spending by the end of September are colliding with a pair of other looming deadlines: keeping the government funded and raising the federal borrowing limit to avoid defaulting on debt payments.
  • With most of Democrats’ focus turned to crafting an expansive $3.5 trillion package of healthcare, education and climate provisions, lawmakers and congressional aides said they would almost certainly have to prevent a partial government shutdown Oct. 1 by passing a short-term extension of its current funding, known as a continuing resolution, or CR.
  • Lawmakers said the spending patch would likely run no longer than until early or mid-December, with the goal of passing full-year bills before the end of the calendar year.
  • Democrats will also need to increase the debt ceiling this fall, with Republicans threatening to withhold help. Adding a debt-limit increase to the spending patch would require bipartisan support in the Senate, where such measures need 60 votes to clear procedural hurdles.
  • Forty-six of the Senate’s 50 Republicans signed a letter in August saying that they wouldn’t vote to increase the federal government’s borrowing limit and that Democrats should be prepared to do so on their own. They cited Democrats’ decision to approve a $1.9 trillion Covid-19 relief package without any GOP support earlier this year.

Majority of Interpreters, Other U.S. Visa Applicants Were Left Behind in Afghanistan – Wall Street Journal, 9/2/2021

  • The U.S. estimates it left behind the majority of Afghan interpreters and others who applied for visas to flee Afghanistan, a senior State Department official said on Wednesday, despite frantic efforts to evacuate those at risk of Taliban retribution.
  • The U.S. still doesn’t have reliable data on who was evacuated, nor for what type of visas they may qualify, the official said, but initial assessments suggested most visa applicants didn’t make it through the crush at the airport.
  • The U.S. and its allies evacuated more than 123,000 people out of Afghanistan on a combination of military, commercial and charter flights in the final weeks of the mission.
  • The State Department says it doesn’t have reliable data on the composition, but it says about 6,000 were U.S. citizens. It says fewer than 200 Americans that wanted to leave have been left behind.
  • Among the visa applicants left behind was an Afghan interpreter who was part of a 2008 mission to rescue then- Sen. Joe Biden and two other senators when their helicopter made an emergency landing in blinding snow in a valley 20 miles southeast of Bagram Air Field.

EUROPE & WORLD

China expected to keep curbs on int’l flights throughout H1 2022 – Air China to analysts – Reuters, 9/2/2021

  • China’s aviation regulator is likely to keep the current tight caps on international flights throughout the first half of 2022, analysts cited Air China as saying this week.
  • The Civil Aviation Administration of China (CAAC) last month said that weekly international flights were at only 2% of 2019 levels, as more flights were suspended amid a rising number of imported COVID-19 cases.
  • China’s three biggest airlines, Air China, China Southern Airlines and China Eastern Airlines, said in their earnings calls that CAAC’s restrictions on international flights may continue until the first half of 2022, given the government’s COVID-19 prevention approach around the Beijing Winter Olympics in February, Parash Jain, head of shipping, ports and Asian transport research at HSBC, said in a note on Wednesday.
  • This would push a full recovery further out to 2024, Jain added.

Ryanair passenger numbers rise in August to 11.1 million – Reuters, 9/2/2021

  • Ryanair on Thursday said it flew 11.1 million passengers in August, 75% of the number the budget airline carried in August 2019 before COVID-19 pandemic hammered the industry.
  • Chief Executive Michael O’Leary had told Reuters on Tuesday that the airline was on target to exceed its 10.5 million target for August this year.
  • The Irish airline, Europe’s largest by passenger numbers, said the load factor for August was 82%, which means an average of 18% seats were not filled during the month.
  • O’Leary had said in his interview with Reuters that capacity should return to pre-pandemic levels in October, saying he expected numbers to be close to 90% in September.
  • But he said the airline was likely to fly with an average of 15%-20% empty seats on planes this winter compared with 7%-8% before the pandemic.

BMW to reduce carbon emissions in car life cycle 40% by 2030 – Reuters, 9/2/2021

  • BMW plans to reduce carbon emissions across the life cycle of its vehicles – including the production process – at least 40% from 2019 levels by 2030, the carmaker said on Thursday, up from a previous target of a third.
  • In order to achieve this, the Munich-based automaker intends to increase the proportion of recycled and reusable materials used in manufacturing its vehicles from 30% to 50%, it said in a statement released ahead of the IAA Mobility conference in Munich next week.
  • Like its competitors, the company has warned that its revenues in coming months could be plagued by chip shortages and raw material prices, despite reporting stronger than expected profits in its latest quarterly results.

Alibaba Pledges $15.5 Billion as Chinese Companies Extol Beijing’s ‘Common Prosperity’ Push – Wall Street Journal, 9/2/2021

  • Alibaba Group Holding Ltd. vowed to spend the equivalent of $15.5 billion fostering social equality, becoming the latest in a series of big Chinese companies to take up Beijing’s drive for what it calls “common prosperity.”
  • Alibaba said Thursday it would spend 100 billion yuan, the equivalent of $15.48 billion, by 2025 in support of Beijing’s common prosperity campaign, confirming a report in the Zhejiang News, an outlet run by the provincial branch of the Communist Party.
  • A fifth of the money would help develop Alibaba’s home province of Zhejiang, the local news media outlet said. The ruling Communist Party’s top leadership designated the eastern province as a showcase locality for common prosperity in May.

Factmonster – TODAY in HISTORY

  • The great fire of London broke out, destroying much of the city, including St. Paul’s Cathedral. (1666)
  • The U.S. Treasury Department was established. (1789)
  • Vice President Theodore Roosevelt gave his “speak softly and carry a big stick” speech, regarding foreign policy, at the Minnesota State Fair. (1901)
  • Japan’s formal surrender in World War II was celebrated as Victory over Japan (V-J) Day. (1945)

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