US FINANCIAL MARKET
Stocks Waver; Metals Rally on Hopes of Reduced U.S.-China Tensions – Wall Street Journal, 9/10/2021
- U.S. stocks wavered on Friday and remained on track to end a choppy week with losses.
- The S&P 500 ticked up less than 0.1%. The benchmark index on Thursday fell for a fourth consecutive session, marking its longest losing streak since June.
- Stocks remain close to record highs, but turned volatile in September after climbing for much of the summer.
- Money managers point to an array of factors behind the choppiness. They include high valuations and the prospect that the Federal Reserve may soon start to unwind some of the stimulus it lavished on markets near the start of the coronavirus crisis.
- Metal prices rallied after a phone call between Presidents Biden and Xi Jinping raised hopes of a cooling in tensions and potential reduction in tariffs between the U.S. and China. Copper prices, which are sensitive to relations between the world’s two largest economies, rose 1.9% to $9,574 a metric ton on the London Metal Exchange.
- China has already sold from state stockpiles of metals to curb the rally in commodity prices, which pushed factory-gate prices to their fastest monthly rise in 13 years in August.
- Aluminum prices rose around 1.5% to $2,817 a metric ton. A coup in Guinea, a major bauxite producer, has added fresh impetus to aluminum prices that were already on the rise due to snarled supply chains and strong demand.
- In the bond market, the yield on 10-year Treasury notes ticked up to 1.323% from 1.300% Thursday. Yields, which move inversely to bond prices, are on track to end the week roughly flat.
- Overseas markets were broadly higher. The Stoxx Europe 600 rose 0.3%, led by retail, technology and basic-resource stocks.
- In Asia, the Shanghai Composite Index edged up 0.3% after the call between Presidents Biden and Xi. A White House statement said the “two leaders discussed the responsibility of both nations to ensure competition does not veer into conflict.”
- Japan’s Nikkei 225 continued to rally in the wake of Prime Minister Yoshihide Suga’s decision to step down, which some investors say could lead to more fiscal stimulus. The Nikkei 225 added 1.3%.
Biden Orders Shots for Millions, Calling Unvaccinated a Threat – Bloomberg, 9/10/2021
- President Joe Biden said he’d order all executive branch employees, federal contractors and millions of health-care workers to be vaccinated against the coronavirus, and that his administration would issue rules requiring large private employers to mandate shots or testing.
- Biden also delivered some of his harshest criticism yet of the 25% of U.S. adults who’ve so far not been inoculated, saying that they’re dragging out the pandemic that has claimed more than 650,000 lives in the U.S.
- “My message to unvaccinated Americans is this: What more is there to wait for? What more do you need to see?” he said. “We’ve been patient, but our patience is wearing thin. And your refusal has cost all of us, so please, do the right thing.”
- Under Biden’s new approach, the Department of Labor’s Occupational Safety and Health Administration will develop an emergency regulation requiring companies with 100 or more employees to require staff to be vaccinated or tested weekly, and to give paid time off to get inoculated.
- Biden will also require vaccinations for more than 17 million health-care workers at Medicare and Medicaid participating hospitals and in other health-care settings, a significant expansion of an existing requirement aimed at nursing homes.
- Biden will call on states to require vaccines in all schools — a call sure to go unheeded in deeply Republican parts of the country — and on large entertainment venues to require patrons to prove vaccination or a negative test.
- He said he’d boost weekly shipments of monoclonal antibodies to states by 50% this month.
Kroger expects smaller decline in same-store sales on grocery demand – Wall Street Journal, 9/10/2021
- Kroger said on Friday it expected a smaller decline in annual same-store sales as nerves around this summer’s surge in coronavirus infections kept Americans stocking up on groceries.
- Kroger forecast a 1% to 1.5% fall in adjusted same-store sales for the full year, compared with a previous forecast of a decline between 2.5% and 4%. Analysts on average expect same-store sales to decline 2.9%, according to Refinitiv data.
- Total company sales were $31.7 billion in the second quarter, compared to $30.5 billion for the same period last year.
- Same-store sales, excluding fuel, fell 0.6% in the second quarter ended Aug. 14 from a year earlier, when people stockpiled groceries and cleaning products at the height of COVID-19 lockdowns. Analysts on average expected a 2.8% decline.
- Gross margin was 21.4% of sales for the second quarter.
Grubhub, DoorDash, Uber Eats Sue New York City Over Fee Caps – Wall Street Journal, 9/10/2021
- DoorDash, Grubhub and Uber’s Eats division are suing New York City over its law permanently capping the amount of commissions the apps can charge restaurants to use their services, the latest move in a growing clash between the platforms and local regulators.
- The three largest food-delivery companies filed the suit in federal court in New York late Thursday, contending that the fee cap is harmful and constitutes government overreach.
- The limit on fees has cost the companies hundreds of millions of dollars combined through July, they said in the suit.
- A permanent cap will likely require them to rewrite contracts with restaurants, reduce marketing in the city and raise fees for consumers, the companies said in the complaint.
UPS to Acquire Same-Day Delivery Startup Roadie to Speed Service – Bloomberg, 9/10/2021
- United Parcel Service agreed to acquire Roadie, a same-day delivery startup, looking to speed service and expand into atypical parcels such as oversized packages and perishable goods.
- The acquisition, for an undisclosed amount, comes after UPS began a pilot with Atlanta-based Roadie to test same-day deliveries.
- Roadie will operate under its name as a separate company, and packages won’t cross over between the startup and UPS’s traditional network.
- The purchase is part of Carol Tome’s strategy as UPS chief executive officer to accelerate service as the industry moves toward same-day delivery.
- Tome is also concentrating on UPS’s core package operations, having sold the company’s freight trucking business earlier this year.
GM CFO sees “more stable” chip supplies in 2022, reaffirms 2021 outlook – Reuters, 9/10/2021
- General Motors Chief Financial Officer Paul Jacobson reaffirmed the automaker’s 2021 profit outlook and said the company expects a “more stable year” in 2022 for semiconductor supplies.
- Jacobson said during a conference call with investors that GM still expects to deliver pre-tax profits for 2021 in the range of $11.5 billion to $13.5 billion forecast last month, and said 10% pre-tax margins for GM’s North American operations are “quite achievable” in 2022 even as the company ramps up investment in electric vehicles.
- Jacobson cautioned that GM’s third quarter wholesale deliveries could be down by 200,000 vehicles because of chip shortages, and because GM shifted production into the second quarter as it managed semiconductor supplies.
GM’s pickup money machine gets a technology tune-up – Reuters, 9/10/2021
- General Motors will give its best-selling Chevrolet Silverado large pickup truck models a makeover next spring to fix competitive shortcomings that have left Chevy in third place in one of the most lucrative vehicle market segments in the world.
- Catching up with rival trucks from Stellantis and Ford, most 2022 Silverado models will get larger dashboard screens and new connectivity technology featuring built-in Google voice commands and software.
- Chevrolet also will add a 420-horsepower Silverado ZR2 designed for rugged off-road adventures – or to give the appearance that the owner would have them. The Silverado ZR2 will chase Ford’s F-series Raptor and the Ram TRX from Stellantis, which are attention-getting performance models for those brands.
- Ram and Ford have their own upgrades coming for 2022. Ram trucks will get enhanced infotainment systems.
- Ford is touting a hybrid system available on the F-150 pickup that can power a house, and promoting its all-electric F-150 Lightning coming next spring.
US ECONOMY & POLITICS
U.S. Producer Prices Increased in August by More Than Forecast – Bloomberg, 9/10/2021
- Prices paid to U.S. producers increased in August by more than forecast as persistent supply chain disruptions squeeze production costs higher.
- The producer price index for final demand increased 0.7% from the prior month and 8.3% from a year ago, a fresh series high, Labor Department data showed Friday. Excluding the volatile food and energy components, the so-called core PPI advanced 0.6%, and was up 6.7% from August of last year.
- The PPI report showed prices for goods increased 1% after a 0.6% gain in the prior month, while the cost of services rose 0.7%.
- Producer prices excluding food, energy, and trade services — a measure often preferred by economists because it strips out the most volatile components — rose 0.3% from the prior month and increased 6.3% from a year earlier.
- The PPI data come ahead of next week’s consumer price index report, which is forecast to show a 0.4% advance in the CPI from the prior month and a 5.3% increase from August of 2020.
U.S. wholesale inventories rise; inventories-to-sales ratio lowest in seven years – Reuters, 9/10/2021
- U.S. wholesale inventory accumulation slowed in July, lagging further behind sales, and it is now taking wholesalers the shortest time in seven years to clear shelves.
- The Commerce Department said on Friday that wholesale inventories rose 0.6% as estimated last month.
- Stocks at wholesalers increased 1.2% in June. Wholesale inventories climbed 11.5% in July from a year earlier.
- Inventories are a key part of gross domestic product.
- The component of wholesale inventories that goes into the calculation of GDP increased 0.7% in July.
- Sales at wholesalers increased 2.0% in July after accelerating 2.3% in June.
- At July’s sales pace it would take wholesalers 1.20 months to clear shelves, the fewest since July 2014, from 1.22 in June.
U.S. applications to start a business fall in August – Reuters, 9/10/2021
- Applications to start new U.S. businesses declined in August for just the third time this year and the first time since June as the recent surge in coronavirus cases put entrepreneurs on hold.
- The Commerce Department said on Thursday that business applications fell 4.7% to a seasonally adjusted 427,842 last month.
- The data is derived from business applications for tax identification numbers.
- There were a seasonally adjusted 50,564 applications from corporations, down 2.5% from July.
- Applications for businesses with planned wages totaled 51,240, a decrease of 3.7% from the prior month.
Fed Officials Prepare for November Reduction in Bond Buying – Wall Street Journal, 9/10/2021
- Federal Reserve officials will seek to forge agreement at their coming meeting to begin scaling back their easy money policies in November.
- Many of them have said in recent interviews and public statements that they could begin reducing, or tapering, their $120 billion in monthly purchases of Treasurys and mortgage-backed securities this year.
- While they are unlikely to do so at their meeting on Sept. 21-22, Fed Chairman Jerome Powell could use that gathering to signal they are likely to start the process at their following session, on Nov. 2-3.
- Under the plans taking shape, officials could reduce those purchases at a pace that allows them to conclude asset buying by the middle of next year.
Democrats Float Partnership, Buyback Taxes to Fund $3.5 Trillion Spending Plan – Wall Street Journal, 9/10/2021
- Senate Democrats offered proposals Friday for tighter tax rules on partnerships and an excise tax on stock buybacks, as lawmakers look to plug gaps in their fast-moving, $3.5 trillion healthcare, education and climate legislation.
- Finance Committee Chairman Ron Wyden of Oregon detailed possible changes to partnership taxation that could raise more than $172 billion over a decade. Sen. Sherrod Brown (D., Ohio), along with Mr. Wyden, is releasing a bill that would impose a 2% excise tax on publicly traded companies’ stock buybacks.
- Lawmakers have talked about a proposal as large as $3.5 trillion over a decade, potentially all paid for with spending cuts and tax increases. But they have struggled to find enough tax increases that have support among all Democrats.
- The House Ways and Means Committee began considering its piece of the proposal on Thursday, with Democrats largely united on the paid-leave program and retirement-policy changes and Republicans objecting.
Treasury Could Hit Debt Ceiling Deadline by Mid-October, Analysts Say – Wall Street Journal, 9/10/2021
- The government will likely run out of cash and could begin to miss payments on its obligations some time between mid-October and mid-November, according to a new projection from the Bipartisan Policy Center, a Washington think tank.
- Treasury Secretary Janet Yellen on Wednesday said her agency may run out of room to keep paying the government’s bills on time during the month of October, unless Congress lifts the federal borrowing limit, which was reinstated on Aug. 1 after a two-year suspension.
- The Treasury has been using extraordinary measures since then to conserve cash and keep making payments to bondholders, Social Security beneficiaries, veterans and others.
- A significant majority of those measures, such as temporarily suspending investments in some federal employee retirement programs, have already been exhausted, said Shai Akabas, the director of economic policy at the Bipartisan Policy Center.
- Most of the resources the Treasury has left include cash on hand, which at the end of August amounted to roughly $356 billion, he said.
Democrats Advance Plan to Require Employers to Offer Retirement Plans – Wall Street Journal, 9/10/2021
- Democrats have included a provision in their $3.5 trillion healthcare, education and climate bill that would require companies without retirement plans to automatically enroll workers in individual retirement accounts.
- The House Ways and Means Committee on Thursday voted 22-20 to approve the measure, which committee chairman Richard Neal, (D., Mass.) has supported for years.
- Should the package pass, the move could significantly broaden access to workplace retirement savings accounts, especially for employees of small businesses, many of which offer no plan at all.
- Some small business groups say the requirement would be too onerous for small employers.
- Starting on Jan. 1, 2023, the provision would require employers to deduct at least 6% from workers’ paychecks and automatically increase that savings rate by 1 percentage point a year until reaching 10% of pay.
EUROPE & WORLD
China vehicle sales fall for fourth month on chip shortages – Reuters, 9/10/2021
- China’s vehicle sales slid 17.8% in August from a year earlier, falling for a fourth consecutive month, as the world’s biggest car market was hard hit by a global shortage of semiconductors.
- Overall sales in China stood at 1.8 million vehicles in August, data from the China Association of Automobile Manufacturers (CAAM) showed.
- China’s vehicle sales jumped 13.7% in the first eight months of 2021 from the same period a year ago, as the market recovered from pandemic lows.
- CAAM now expects 2021 growth to be slower than a previously forecast 6.5%, said Chen Shihua, a senior official at CAAM.
Toyota cuts production target by 3% on parts and chips shortages – Reuters, 9/10/2021
- Toyota Motor cut its annual production target by 300,000 vehicles on Friday as rising COVID-19 infections slowed output at parts factories in Vietnam and Malaysia, compounding a global shortage of auto chips.
- Unlike other big global automakers that were forced earlier to scale back production plans, Toyota had managed to avoid cuts to output because it had stockpiled key components along a supply chain hardened against disruption following northeast Japan’s devastating earthquake in 2011.
- The Japanese carmakers’ announcement on Friday is a further sign that no part of the global car industry has escaped the effects of a pandemic that has sapped sales and is hobbling their ability to take advantage of the recovery in demand that followed the initial waves of COVID-19.
- Toyota now expects to build 9 million vehicles in the year to March 31, rather than 9.3 million. It did not revise its 2.5 trillion yen ($22.7 billion) operating profit forecast for the business year.
Chip shortage pushes Reliance, Google to delay India smartphone launch – Reuters, 9/10/2021
- Indian conglomerate Reliance Industries delayed the launch of a low-cost smartphone it is developing with Google to November, citing an industry-wide semiconductor shortage.
- The “ultra-affordable” smartphone, developed jointly by Reliance’s telecom arm and Google, was set to be rolled out from Sept. 10.
- The annual festive season in India typically lasts for 30 days, beginning in October and ending with Diwali — set for Nov. 4 this year. Indians usually make big-ticket purchases from jewellery to gadgets and cars around this period.
- The additional time will also help mitigate the current industry-wide global semiconductor shortages, Jio added.
- Elias Howe of Massachusetts received a patent for his sewing machine. (1846)
- Twenty black students entered public schools in Birmingham, Mobile, and Tuskegee, Alabama, after President John F. Kennedy sent National Guardsman to end the standoff with Alabama Governor George Wallace. (1963)
- Switzerland became the 190th member of the United Nations. (1990)