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Daily Market Report | September 14, 2021

US FINANCIAL MARKET

Stocks Decline After Inflation Slows – Wall Street Journal, 9/14/2021

  • Stocks fell on Tuesday after fresh data showed that inflation climbed at a slower pace than economists expected in August.
  • The S&P 500 declined 0.3% in morning trading. The Dow Jones Industrial Average lost more than 200 points, or 0.6%.
  • The technology-heavy Nasdaq Composite slipped 0.1%.
  • The Labor Department’s consumer-price index (CPI) rose a seasonally adjusted 0.3% in August from July—lower than the 0.4% that economists surveyed by The Wall Street Journal expected.
  • The rise is slower than the 0.5% monthly increase in July, and down markedly from June’s 0.9% pace.
  • Many Fed officials have said in recent interviews and public statements that they could begin reducing, or tapering, their monthly purchases of bonds by the end of this year if the economy performs as they anticipate.
  • Both inflationary pressures and the recovery in the labor market are likely to be key gauges that could influence their timing.
  • The Fed has said it expects inflation to be temporary. But some investors say it could prove stickier than anticipated.
  • Bond yields fell on Tuesday’s inflation data. The yield on the benchmark 10-year U.S. Treasury note dropped to 1.295% from 1.323% Monday. Yields fall when bond prices rise.
  • Overseas, the pan-continental Stoxx Europe 600 ticked up 0.1%.
  • Major Asian stock indexes were mixed. China’s Shanghai Composite contracted 1.4%, and Hong Kong’s Hang Seng declined 1.2%. South Korea’s Kospi and Japan’s Nikkei 225 each added roughly 0.7%.

Oracle Falls After Sales Miss Estimates on Cloud App Growth – Bloomberg, 9/14/2021

  • The world’s second-largest software maker said revenue rose 3.8% to $9.73 billion in the fiscal first quarter.
  • Analysts polled by Bloomberg projected $9.77 billion, on average.
  • Profit, excluding some items, was $1.03 a share, the Austin, Texas-based company said Monday in a statement.
  • Analysts estimated 97 cents a share.
  • In the fiscal first quarter, revenue from cloud services and license support increased 6% to $7.37 billion, falling just short of analysts’ estimates of $7.4 billion.
  • Cloud license and on-premise license sales dropped 8% to $813 million.
  • Oracle said sales of its Fusion application for managing corporate finances rose 32% in the period — compared with 46% growth reported in the fiscal fourth quarter.
  • Revenue from NetSuite’s financial software, targeted to small- and mid-sized businesses, rose 28%, after a 26% gain in the previous period.
  • Chief Executive Officer Safra Catz said revenue in the current period will gain 3% to 5% from a year earlier, meeting the average projection of $10.2 billion, or a 4% year-over-year increase.
  • Profit will be $1.09 to $1.13 a share. Analysts, on average, estimated $1.09.

Apple Event: New iPhone Lineup to Be Revealed Tuesday – Wall Street Journal, 9/14/2021

  • After weeks of turbulent headlines, Tim Cook is expected to take the virtual stage Tuesday in an attempt to return attention to the key driver of Apple’s success: the iPhone.
  • The Cupertino, Calif., tech giant is likely to reveal its newest phones and smartwatch during the annual September event, which will be livestreamed on the company’s website from 1 p.m. ET instead of being held in person because of Covid-19 precautions.
  • The new iPhone is not expected to offer dramatic changes compared with last year’s highly anticipated debut of phones, which can use ultrafast 5G cellular connections.
  • The company is expected to keep the small, medium and large sizes, while offering improvements to cameras and batteries, a person familiar with the matter said. Apple is also expected to reveal its newest smartwatch.
  • Apple on Tuesday is expected to unveil a watch with a different appearance than the round curves.

Gary Gensler Outlines SEC Agenda in Senate Hearing – Wall Street Journal, 9/14/2021

  • Securities and Exchange Commission Chairman Gary Gensler on Tuesday testified to lawmakers about a far-reaching policy agenda that could shake up Wall Street firms’ business models and require heftier disclosures from public companies.
  • In prepared remarks to the Senate Banking Committee, Mr. Gensler emphasized the SEC’s mission of protecting investors.
  • He also highlighted the challenges stemming from emergent technologies such as cryptocurrency and sophisticated data analytics used by financial firms and urged lawmakers to beef up the SEC’s resources.
  • “More retail investors than ever are accessing our markets,” Mr. Gensler said in prepared remarks. “We need to be sure that the Commission has the resources to protect them,” he will add, noting that the SEC’s staff has declined 4% since fiscal 2016.

Amazon Adding 125,000 Workers in U.S., Opening Dozens of Facilities – Wall Street Journal, 9/14/2021

  • Amazon.com plans to add 125,000 employees throughout its U.S. warehouse operations as the technology giant prepares for the holiday shopping period, in which a tight labor market is set to make it more challenging to find staff.
  • The company also said Tuesday that it plans to open 100 facilities across the country in September, deepening its pool of locations used to store, sort and ship its packages.
  • Amazon, which has had a starting wage of $15 an hour, said its minimum wage has gone up in many locations and now averages more than $18 across the nation. In some areas, for example, Amazon said it has offered pay of up to roughly $22.50 an hour.
  • Last week, the company said it would cover the cost of tuition and books for staff pursuing bachelor’s degrees at various universities nationwide, joining Walmart and other companies offering the prospect of a free college education to potential workers.
  • In some locations, Amazon has dangled bonuses ranging from $1,000 to $3,000. It has also offered $100 bonuses for hires that show proof of a Covid-19 vaccination.

Chevron to Triple Low-Carbon Investment – Wall Street Journal, 9/14/2021

  • Chevron is tripling spending in its new low-carbon unit, which Chief Executive Mike Wirth said he increasingly sees as a viable business.
  • The San Ramon, Calif., oil giant is pledging to spend $10 billion through 2028 on biofuels, hydrogen production, carbon capture and other technologies, up from a prior commitment of around $3 billion.
  • The increased green investment still represents a fraction of what Chevron is spending on oil and gas projects. In December, Chevron said its capital spending would range from $14 billion to $16 billion a year through 2025. The planned low carbon investment would amount to roughly 10% of that.

Boeing raises jet demand forecast on pandemic recovery – Reuters, 9/14/2021

  • Boeing revised up long-term demand forecasts on Tuesday, as a snapback in commercial air travel in domestic markets like the United States tempers the more gloomy industry predictions seen at the height of coronavirus lockdowns last year.
  • The U.S. planemaker, which dominates jet sales together with Europe’s Airbus, forecast 43,610 commercial jet deliveries over the next 20 years worth $7.2 trillion, an increase of 500 units from the 43,110 projected a year ago.
  • On a shorter 10-year view, which is more sensitive to the severe fallout on airlines from the COVID-19 pandemic, Boeing sees 19,330 deliveries, up from last year’s forecast of 18,350.
  • The 10-year projection is 6% shy of the forecast it published in 2019, but the drop from pre-crisis levels has narrowed from 11% a year ago.
  • Boeing sees domestic flying at pre-crisis levels in 2022 followed by regional traffic in 2023 and international in 2024.

U.S. awarding $482.3 million in aviation manufacturing assistance – Reuters, 9/14/2021

  • The U.S. Transportation Department said it was offering $482.3 million in aviation manufacturing assistance to 313 businesses, including up to $75.5 million to Spirit AeroSystems.
  • Of the 313 companies receiving funds, 188 of them – 60% – had fewer than 100 employees at the end of calendar year 2020.
  • The funds will help support as many as 22,500 jobs nationwide.

Pentagon awards Lockheed Martin $6.6 billion sustainment contract for F-35 fighter jets – Reuters, 9/14/2021

  • The Pentagon has awarded Lockheed Martin annualized contracts worth up to $6.6 billion to support operations and sustainment of the global F-35 fleet, its F-35 Joint Program Office said on Monday.
  • The air vehicle sustainment contract is for fiscal year 2021, with options for years 2022 and 2023, and is intended to reduce sustainment costs, the office said.
  • Separately, Lockheed said that the contract would include supporting base and depot maintenance, pilot and maintainer training while also covering supply chain management for part repair and replenishment.

US ECONOMY & POLITICS

Inflation Eased in August, Though Still High – Wall Street Journal, 9/14/2021

  • Inflation cooled slightly in August but remained strong, as a surge in Covid-19 infections slowed economic growth and pandemic-related shortages of labor and supplies continued to drive up prices.
  • The Labor Department said last month’s consumer-price index rose a seasonally adjusted 0.3% in August from July, slower than the 0.5% one-month increase in July, and down markedly from June’s 0.9% pace.
  • Prices eased for autos, with used vehicle prices dropping sharply, and hotel rates and airline fares declined in August from July.
  • The department’s consumer-price index rose 5.3% in August from a year earlier, down from the 5.4% pace in June and July, on an unadjusted basis.
  • The so-called core price index, which excludes the often volatile categories of food and energy, climbed 4% from a year before, they estimate, compared with 4.3% in July.

Americans’ Incomes Fell in 2020, Census Figures Show – Wall Street Journal, 9/14/2021

  • American incomes fell last year as the U.S. dealt with the economic fallout from the Covid-19 pandemic, the Census Bureau said Tuesday.
  • Median household income was $67,500 in 2020, down 2.9% from the prior year. In 2019, the year before the pandemic took hold, the nation’s median household income set what was then an inflation-adjusted record going back to 1967, when the bureau began using its current methodology.
  • The poverty rate in 2020 was 11.4%, an increase of 1 percentage point from 2019 and the first increase after five consecutive years of declines.
  • That translated to 37.2 million people in poverty, an increase of 3.3 million from 2019.
  • The bureau also said the proportion of Americans without health insurance for all of 2020 was 8.6%, essentially unchanged from 2018.
  • About 28 million Americans lacked health insurance, according to the survey.

U.S. consumers’ inflation expectations highest since 2013, NY Fed says – Reuters, 9/14/2021

  • U.S. consumers’ expectations for how much inflation will change over the next year and the coming three years rose last month to the highest levels since 2013, according to a survey released on Monday by the New York Federal Reserve.
  • Year-ahead inflation expectations increased for the 10th straight month to a median of 5.2% in August, according to the monthly survey of consumer expectations. Inflation expectations over the next three years increased to a median of 4.0%.
  • Both metrics are at the highest they’ve ever been for the survey, which was launched in 2013.
  • Expectations for how much home prices will increase over the next year dropped again in August for the third straight month, but were still elevated at a median of 5.9%, the survey found.
  • Food prices are expected to grow by 7.9% over the next year, up from 7.1% in July. Rent is expected to increase by 10% over the next 12 months and the price of medical care is expected to rise by 9.7% over the next year – both up 0.2 percentage point from July.

Senate Republicans Vow to Block Treasury Nominations Until Nord Stream II Firm Is Sanctioned – Wall Street Journal, 9/14/2021

  • Senior Senate Republicans on Monday threatened to indefinitely hold up the nominations of five top Treasury Department officials if the Biden administration doesn’t blacklist the firm managing Russia’s Nord Stream 2 pipeline project.
  • Sen. Pat Toomey (R., Pa.) and Ted Cruz (R., Texas) said they are prepared to approve the nominations, including two national security posts that oversee sanctions and counterterror finance, if the Treasury Department blacklists Russia-owned Nord Stream 2 AG.
  • The Biden administration has implemented sanctions against several firms that have provided support to the project but not against Nord Stream 2 AG, saying that it would irritate relations with critical ally Germany and do little to stop the project, given that it was near completion.
  • Nord Stream 2 is designed to accommodate the transmission of 55 billion cubic meters of gas annually, the company said.

SALT Cap Rollback for Two Years Debated by House Democrats – Bloomberg, 9/14/2021

  • House Democrats are considering a two-year repeal as one of their potential paths to undoing the $10,000 cap on the federal deduction for state and local taxes.
  • Senior Ways and Means Committee Democrat Bill Pascrell of New Jersey said the temporary rollback is one of the “main considerations” before the Democratic caucus now.
  • Restoring the full SALT deduction would cost the U.S. Treasury $88.7 billion in lost revenue for 2021 alone, according to the Joint Committee on Taxation.
  • A multiyear repeal would cost considerably more, eating into resources that some Democrats would like to spend on other priorities.
  • But New York Representative Alexandria Ocasio-Cortez of New York and some other party progressives have called the SALT deduction a give-away to the rich because most of the benefits flow to high-income households.

EUROPE & WORLD

China Evergrande Hires Financial Advisers as Protests Erupt at Its Offices – Wall Street Journal, 9/14/2021

  • China Evergrande Group moved closer to a potential restructuring of its $89 billion debt burden by hiring outside advisers, while the property developer’s financial problems spilled over into angry protests at several of its offices.
  • The real-estate giant warned Tuesday that “ongoing negative media reports” had hurt home buyers’ confidence in Evergrande, and would likely mean significantly lower sales in September, which is typically a strong month for China’s property industry. Contracted sales in August had fallen 13% month-on-month to the equivalent of $5.9 billion.
  • Evergrande said it had hired a unit of Houlihan Lokey, a U.S. investment bank with a reputation for handling restructuring work, and Hong Kong-based Admiralty Harbour Capital as financial advisers.
  • The Shenzhen-based group had the equivalent of about $89 billion in borrowings at the end of June, 42% of which are due in less than a year. It disposed of the equivalent of $2.2 billion of assets in the first half of the year.

Japan’s Nikkei 225 Returns to Bubble-Economy Level Seen in 1990 – Bloomberg, 9/14/2021

  • Japanese stocks advanced for a third day, lifting the Nikkei 225 Stock Average to a level last seen during the nation’s bubble economy more than three decades ago.
  • The blue-chip gauge closed at 30,670.10 in Tokyo, surpassing this year’s previous peak in February to end at the highest since August 1990.
  • Japan has been the world’s best-performing major stock market over the past two weeks amid hopes for new leadership, an acceleration of vaccinations and a reshuffle in the Nikkei 225 that will add heavyweights Nintendo, Keyence and Murata Manufacturing.

Factmonster – TODAY in HISTORY

  • President McKinley died of gunshot wounds inflicted by an assassin. Vice President Theodore Roosevelt succeeded him. (1901)
  • Congress passed the Selective Service Act, providing for the first peacetime draft in U.S. history. (1940)
  • The Soviet space probe Luna 2 became the first man-made object to reach the Moon when it crashed onto the lunar surface. (1959)
  • Princess Grace of Monaco died from injuries sustained in a car crash the previous day. (1982)

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