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Daily Market Report | September 9, 2021

US FINANCIAL MARKET

Stocks Rise As Jobless Claims Fall – Wall Street Journal, 9/9/2021

  • U.S. stock indexes rose Thursday after jobless claims hit a new pandemic low, while Hong Kong stocks took a leg down after Chinese authorities pressed ahead with online-gaming restrictions.
  • The S&P 500 and the Dow Jones Industrial Average both added 0.3% after initially opening slightly lower.
  • The technology-heavy Nasdaq Composite rose 0.4%.
  • Fresh figures showed that the number of Americans who applied for first-time unemployment benefits, a metric that is seen as a proxy for layoffs, fell to 310,000 in the week ended Sept. 4.
  • Claims have trended lower since mid-July, despite the surge in Delta-variant cases.
  • Overseas, Hong Kong’s Hang Seng Index declined 2.3% by the end of the trading session, its biggest one-day drop in over six weeks.
  • Shares of Chinese videogame giants Tencent Holdings and NetEase tumbled Thursday in Hong Kong after authorities summoned the companies and ordered them to follow new rules for the online-gaming industry.
  • Shares of GameStop fell nearly 10% after the videogame retailer reported mixed second-quarter results.
  • Lululemon Athletica shares jumped more than 11% after it posted revenue that exceeded its guidance and analysts’ expectations.
  • In bond markets, the yield on the 10-year Treasury note was unchanged from Wednesday at 1.333%.
  • Overseas, the pan-continental Stoxx Europe 600 fell 0.2%.
  • The European Central Bank said Thursday it will slow down its purchase of government bonds through an emergency program that was meant to bolster credit markets and growth during the pandemic.
  • The yield on Germany’s 10-year bund ticked down to minus 0.340% from minus 0.327% Wednesday.
  • Other major indexes in Asia broadly closed lower. South Korea’s Kospi fell 1.5%, Australia’s S&P / ASX 200 contracted 1.9% and Japan’s Nikkei 225 declined 0.6%. China’s Shanghai Composite Index bucked the trend, gaining 0.5%.

Biden to Require All Federal Workers, Government Contractors Be Vaccinated Against Covid-19 – Wall Street Journal, 9/9/2021

  • President Biden is requiring that all federal workers and millions of government contractors be vaccinated against Covid-19, a person familiar with the plans said.
  • Mr. Biden will unveil executive orders setting those requirements on Thursday as part of a broader plan to combat the spread of the coronavirus.
  • One order requires all federal executive branch workers to be vaccinated, and the other directs that the same standard be extended to employees of contractors that do business with the federal government, the person said.
  • Mr. Biden in a speech is expected to detail other proposals to more aggressively combat the pandemic.
  • The president is expected to call for more regular testing for Covid-19, including in schools, to urge businesses to adopt vaccination requirements, and to discuss other steps such as increasing access to Covid-19 treatments, people familiar with the plan said.

U.S. Airlines Warn of Dimming Outlook Amid Delta Variant – Wall Street Journal, 9/9/2021

  • The air-travel rebound is taking a hit from the Delta variant as Covid-19 cases rise, though airlines said the setback will be short-lived.
  • Carriers including United Airlines, American Airlines, Delta Air Lines, Southwest Airlines and JetBlue Airways said Thursday that bookings slowed down and cancellations increased in August as customers grew more alarmed and began rethinking their plans.
  • United said that it is trimming flying capacity to match falling demand in the remainder of the year.
  • The airline no longer expects to report an adjusted pretax profit this quarter, and said it will likely lose money in the fourth quarter if current trends continue.
  • The airline now says its total third-quarter revenue will be 33% lower than it was two years ago, after previously anticipating revenue would grow over that period.
  • Other carriers also said that the current drop-off is less severe than the wild swings in demand that accompanied previous upticks in Covid-19 case numbers, and they expect travel demand to accelerate again once case counts level off.
  • Delta Air Lines said its booking trends have stabilized in the past 10 days.

Lululemon gives upbeat full-year forecast on strong workout apparel demand – Reuters, 9/9/2021

  • Lululemon Athletica forecast annual revenue and profit above estimates on Wednesday, as demand for its comfortable leggings and sports bras remained strong despite the easing of coronavirus restrictions.
  • Net revenue rose by 61% to $1.45 billion in the second quarter, beating estimates of $1.34 billion, according to IBES data from Refinitiv.
  • On an adjusted basis, Lululemon earned $1.65 per share, compared with estimates of $1.19 per share.
  • The owner of Mirror home-fitness platform said it now expects annual net revenue to be in the range of $6.19 billion to $6.26 billion, above estimates of $5.94 billion.
  • Lululemon forecast full-year adjusted earnings per share to be between $7.38 and $7.48, compared with the average analyst estimate of $6.91.

GameStop falls more than 7% despite posting narrower loss and rising sales – CNBC, 9/9/2021

  • Shares of video game retailer GameStop fell more than 7% in extended trading Wednesday after the company reported its second-quarter loss narrowed on a year-over-year basis.
  • Sales rose to $1.18 billion from $942 million a year earlier.
  • For the quarter ended July 31, the company reported a net loss of $61.6 million, or 85 cents per share.
  • In the year-earlier period, GameStop reported a loss of $111.3 million, or $1.71 per share.
  • On an adjusted basis, GameStop lost 76 cents per share.
  • According to Refinitiv, analysts were expecting the company to lose 67 cents a share on revenue of $1.12 billion.
  • The retailer did not provide an outlook for the coming quarters or take questions during its earnings conference call. It was the first call since CEO Matthew Furlong and CFO Mike Recupero joined GameStop’s leadership.

Boston Beer falls nearly 10% as weak hard seltzer demand forces it to pull earnings guidance – CNBC, 9/9/2021

  • Boston Beer, the parent of alcoholic beverage brands like Samuel Adams and Angry Orchard, pulled its earnings guidance Wednesday amid a big slowdown in sales of its hard seltzer brand Truly.
  • At the end of July, the company pointed to “decelerating growth trends” in hard seltzer sales to justify its weaker-than-expected quarterly earnings and revenue for the second quarter, which sent its stock tumbling 26% at the time.
  • Those results also led the company to cut its full-year forecast, lowering its expected adjusted earnings to between $18 per share and $22 per share for 2021. Its prior outlook was for a profit between $22 per share and $26 per share.
  • “The Company now expects to incur hard seltzer-related inventory write-offs, shortfall fees payable to third-party brewers and other costs that will be expensed during the remainder of fiscal 2021,” Boston Beer said Wednesday.

As ‘buy now, pay later’ surges, a third of U.S. users fall behind on payments – Reuters, 9/9/2021

  • A third of U.S. consumers who used “buy now, pay later” services have fallen behind on one or more payments, and 72% of those said their credit score declined, a new study published by personal finance company Credit Karma showed.
  • The study, conducted by software firm Qualtrics, surveyed 1,044 adult consumers in the United States last month to measure their interest in buy now pay later (BNPL) and found 44% had used these services before.
  • The latest survey found younger consumers were more likely to miss payments. More than half of Gen Z or millennial respondents– those born between the early 1980s and mid-to-late 1990s– said they had missed at least one payment.
  • That compares with 22% of Gen X, who were born in the early 1960s to early 1980s, and 10% of Baby Boomers, those born between the mid-1940s and 1980.
  • Most consumers who used BNPL services said the purchase was for $500 or less, on average. Low-cost purchases were most common among Gen Z, nearly half of which have used BNPL services to pay for expenses of $100 or less, the survey found.

GM extends Michigan plant shutdown over Bolt EV recall – Reuters, 9/9/2021

  • General Motors said on Thursday it will extend a shutdown of a Michigan assembly plant by two weeks in the aftermath of a new recall of its Chevrolet Bolt electric vehicles over battery issues.
  • The largest U.S. automaker said the extension of the production halt at its Orion Assembly plant that will go through at least Sept. 24 was “a result of a battery pack shortage” related to the recall that followed reports of 10 battery fires.
  • GM said it will not resume Bolt production or sales until it is satisfied that the recall remedy will address the fire risk issue.
  • GM in August widened its recall of the Bolt to more than 140,000 vehicles to replace battery modules, at a cost now estimated at $1.8 billion. The automaker said it would seek reimbursement from GM battery supplier LG

US ECONOMY & POLITICS

U.S. Jobless Claims Hit New Pandemic Low as Employers Retain Workers – Wall Street Journal, 9/9/2021

  • Filings for jobless benefits last week fell and reached a fresh pandemic low, extending a downward trend as employers hold onto workers despite the Delta variant of Covid-19.
  • Initial unemployment claims, a proxy for layoffs, moved lower in the week ended Sept. 4 to 310,000 from a slightly upwardly revised 345,000 the prior week, the Labor Department reported Thursday. The four-week moving average, which smooths out weekly volatility in the data, fell to 339,500, also a pandemic low.
  • Americans filed roughly 11.9 million ongoing claims for unemployment benefits through all programs, including two special pandemic programs, during the week ended Aug. 21, the most recent data available.

U.S. Economic Growth Slowed Over the Summer Due to Delta Variant, Fed’s Beige Book Says – Wall Street Journal, 9/9/2021

  • The U.S. economic recovery slowed and prices continued rising over the summer as a resurgence of Covid-19 cases linked to the Delta variant led consumers to pare back spending and persistent supply chain problems hampered businesses, the Federal Reserve said in a report Wednesday.
  • “The deceleration in economic activity was largely attributable to a pullback in dining out, travel, and tourism in most Districts, reflecting safety concerns due to the rise of the Delta variant,” the report said.
  • Supply problems and a shortage of available workers also held back growth in some sectors, such as auto and home sales, the Fed said. Many respondents told the Fed that shipping delays and higher freight costs have harmed their businesses.
  • Firms also continued to struggle with finding workers, prompting many to raise wages and offer more-flexible schedules. A trucking company in the Cleveland area said it had already offered five wage increases so far this year.

Fed officials say bond taper could still start this year – Reuters, 9/9/2021

  • The August slowdown in job growth won’t throw off the Federal Reserve’s plans to reduce its asset purchases this year, four Federal Reserve officials said on Wednesday, though some cautioned a final decision requires more data.
  • In comments published overnight in the Wall Street Journal, Atlanta Fed president Raphael Bostic, a voting member on policy this year who had been nearing a decision to “taper” the $120 billion in monthly bond purchases, now says it is unlikely the Fed will announce a plan at its September 21-22 meeting.
  • His comments echoed those of other Fed officials who signaled the U.S. central bank remains on track to trim its $120 billion in asset purchases this year, despite the slowdown in jobs growth seen in August and the impact of the recent COVID-19 resurgence.
  • Dallas Fed President Robert Kaplan in a separate appearance said he still supports a gradual wind down of monthly asset purchases starting in October, as long as the economic outlook does not fundamentally change.

Democrats Jockey Over Healthcare, Taxes in $3.5 Trillion Package – Wall Street Journal, 9/9/2021

  • Democrats faced fresh intraparty disagreements over the details of their $3.5 trillion healthcare, education and climate bill, as House Democrats began releasing drafts of segments of the legislation in a race to attempt to complete it in the coming weeks.
  • Among the topics Democrats are wrestling with are the funding for and duration of the three central healthcare provisions of the bill: an extension of expanded Affordable Care Act subsidies; Medicare coverage for dental care; and an effort to provide healthcare coverage for some people in Republican-led states that haven’t expanded Medicaid.
  • The House Ways and Means Committee, which has jurisdiction over a broad swath of the bill, released on Tuesday proposals for a 12-week paid leave program, additional retirement support, and expanding Medicare to cover hearing, vision and dental care, among other programs.
  • Sen. Joe Manchin (D., W.Va.), a pivotal centrist in the 50-50 Senate, has repeatedly signaled his opposition to spending $3.5 trillion and adding to the budget deficits.

EUROPE & WORLD

ECB Eases Stimulus Program Amid Robust Growth – Wall Street Journal, 9/9/2021

  • The European Central Bank said it would slightly scale back its massive bond-buying program amid robust economic growth and inflation in the eurozone, turning the corner on its stimulus despite a resurgence in Covid-19 cases globally and signs of slowdowns in China and the U.S. that have prompted caution from the Federal Reserve.
  • While the ECB’s move isn’t yet a plan to end its easy-money policies, it does signal the bank’s confidence in the eurozone economy’s ability to weather the rise of Covid-19 infections due to the Delta variant, with business and consumer confidence remaining buoyant.
  • In a statement, the ECB said it would conduct purchases under its €1.85 trillion emergency bond-buying program, equivalent to $2.2 trillion, at a “moderately lower pace” in future than it has over the past six months.
  • The ECB had decided in March to conduct purchases at a “significantly higher pace” amid worsening financial-market conditions.

Commodity Boom Pushes China’s Factory Inflation to 13-Year High – Wall Street Journal, 9/9/2021

  • Higher commodity costs drove China’s factory-gate prices to rise in August by their fastest pace in 13 years, defying aggressive moves by Beijing to tame a rally in metals prices.
  • Robust demand for coal, steel and other raw materials pushed China’s producer-price index 9.5% higher in August from a year earlier, the fastest increase since August 2008, when it rose 10.1%, according to China’s National Bureau of Statistics.
  • To curb the rally in commodity prices, Chinese authorities have been selling from state stockpiles while clamping down on hoarding and speculation among producers—all with limited effect on producer prices, which have climbed steadily since the spring.
  • At the same time, China’s efforts to rein in steelmaking—part of broader carbon emissions reduction measures—have pushed up the price of steel, a key input for the real-estate sector.

Chinese Videogame Stocks Fall After Summons From Regulators – Wall Street Journal, 9/9/2021

  • Shares of Chinese videogame giants Tencent and NetEase dropped Thursday, after authorities summoned the companies and ordered them to follow new rules for the online-gaming industry.
  • The two companies and others were ordered to follow recent regulations imposing much tighter restrictions over minors’ playing time, to step up content control and censorship, and to refrain from unfair competition, the state-owned news agency Xinhua said.
  • Hong Kong-traded stock in Tencent and NetEase fell 8.5% and 11%, respectively, helping send Hong Kong’s Hang Seng Tech index down 4.5%. Video-platform operators Bilibili and Kuaishou Technology, which both derive a substantial portion of revenue from game-related businesses, fell 8.9% and 6.9%, respectively.
  • Companies that attended the meeting understood new online-games approvals will be put on hold until they complete system upgrades to comply with Beijing’s new anti-addiction requirements for underage users, people familiar with the matter said.

Factmonster – TODAY in HISTORY

  • California became the 31st state. (1850)
  • The National Broadcasting Company (NBC) was created by the Radio Corporation of America. (1926)
  • The People’s Democratic Republic of Korea (North Korea) was created. (1948)
  • Communist Chinese leader Mao Zedong died in Beijing at age 82. (1976)

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