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Daily Market Report | September 20, 2021

US FINANCIAL MARKET

Stock Market Falls on Chinese Property Fears – Wall Street Journal, 9/20/2021

  • U.S. stocks fell in early trading, pointing to an extension of recent losses on Wall Street as concerns regarding China’s indebted property sector rippled into global markets.
  • The S&P 500 dropped 1.6% Monday, after the broad stocks gauge posted its biggest two-week decline since February.
  • The Dow Jones Industrial Average lost 1.6%, or 535 points, and the technology-focused Nasdaq Composite Index fell 1.9%.
  • Market participants increasingly believe that Beijing will let Evergrande fail and inflict losses on its shareholders and bondholders.
  • China’s leaders are pushing Evergrande and other real-estate companies to reduce their debts, as they try to tame the mainland’s housing markets after years of runaway growth.
  • In other signs investors were shifting from riskier assets to safer ones, oil prices dropped, Treasury yields skidded and the dollar strengthened.
  • Futures for Brent crude, the benchmark in international energy markets, fell 1.8% to $73.95 a barrel.
  • Yields on 10-year Treasury notes, which move inversely to the price of the bonds, slipped to 1.319% from 1.369% Friday.
  • Elsewhere, the Stoxx Europe 600 dropped 2.4%, putting the index on track for its biggest one-day decline this year amid losses for basic-resource companies, banks and insurers.

Rising Energy Stocks Defy Market’s September Slide – Wall Street Journal, 9/20/2021

  • Shares of oil-and-gas companies are leading the S&P 500’s 11 sectors so far this month, rising nearly 2%.
  • The broad U.S. stock-market index, meanwhile, has fallen 2%, stung by losses across nearly all of the other major market segments.
  • A crimp in the supply of oil has pushed prices higher, helping to put energy stocks on a different path than the rest of the stock market.
  • Natural-gas prices in the U.S. hit more than $5 per million British thermal unit due to production bottlenecks and increased demand.
  • Demand has been even greater in Europe, where an insufficient amount of wind has helped push natural-gas prices above $20, creating a bonanza for U.S. exporters, said Stewart Glickman, an energy analyst with CFRA.
  • Some commodity analysts predict Brent crude prices will reach $100 a barrel in the third quarter, up from about $75 now.

Elon Musk’s Push to Expand Tesla’s Driver Assistance to Cities Rankles a Top Safety Authority – Wall Street Journal, 9/19/2021

  • Tesla is readying a major upgrade of its driver-assistance software, but the top federal crash investigator says the move might be premature.
  • The upgrade is expected to add a feature intended to help vehicles navigate cities, expanding the suite of driver-assistance tools that had been designed mainly for highways.
  • The NTSB, which investigates crashes and issues safety recommendations though it has no regulatory authority, has urged Tesla to clamp down on how drivers are able to use the company’s driver-assistance tools.
  • Tesla’s new city-driving tool is part of its Full Self-Driving package.
  • Tesla sells the suite for $10,000 or a monthly subscription that costs up to $199.
  • New Street Research estimated in July that roughly 360,000 people had purchased the Full Self-Driving system, covering about one-fifth of the Tesla fleet at the time.

Twitter Seeks to Settle 2016 Class Action Lawsuit for $800 Million – Reuters, 9/20/2021

  • Twitter said on Monday it would pay $809.5 million to settle a shareholder class action lawsuit from 2016 that alleged the company misled investors about its daily and monthly user engagement numbers.
  • The micro-blogging site expects to pay the settlement amount with cash on hand, it said, adding that the amount would be paid in the fourth quarter of this year.
  • Twitter also said it expects to record a charge for this settlement during the third quarter.
  • The case commenced in 2016 in the United States District Court for the Northern District of California.

Pfizer, BioNTech Say Covid-19 Vaccine Is Safe for Children Aged 5 to 11 – Wall Street Journal, 9/20/2021

  • Pfizer said it would share the results with regulators in the U.S. and other countries and seek emergency use authorization in the U.S. as early as the end of the month.
  • The vaccine generated levels of antibodies that were similar to those of younger adults, meeting the study’s measurements of success, according to the companies.
  • Pfizer and BioNTech said they hadn’t yet determined vaccine efficacy—how well it protects against Covid-19—for children in the age group.
  • Pfizer said a review of data for 2,268 children in the trial showed that those who received two 10 microgram doses had antibody levels one month after the second dose similar to those found in people aged 16 to 25 years who received 30 microgram doses in a separate Pfizer study.

Oracle uses AI to automate parts of digital marketing – Reuters, 9/20/2021

  • Once primarily known for its database software, Oracle is competing against firms like Adobe and Salesforce to sell cloud-based software used for marketing business-to-business products that typically cost thousands of dollars or more.
  • Oracle’s Fusion Marketing system, as the product announced Monday is called, uses artificial intelligence to automatically assemble marketing campaigns and determine whether the people who interact with emails or advertisements might eventually buy a product, sending their contact information to sales teams.
  • To do it, the system sucks in data from a variety of sources.
  • Some of the data, like email contact lists, will come from the Oracle customers who use the system.
  • And some of the data will come from massive marketplaces of third-party data that Oracle has acquired in recent years to grow its digital advertising business.

CVS Makes Hiring Push Amid Worker Shortage, Increased Covid-19 Vaccine Demand – Wall Street Journal, 9/20/2021

  • The largest U.S. pharmacy chain by stores said it plans to add 25,000 employees this week in a single-day hiring spree to prepare for a potential surge in demand from booster shots and as more people seek Covid-19 tests and flu vaccines.
  • CVS employees and customers at some locations have described chaotic stores, hours long lines and phones that go unanswered as the chain addresses a national labor shortage.
  • The U.S. has relied heavily on retail pharmacies for nationwide Covid-19 testing and vaccine distribution through a federal partnership with nearly two dozen retail pharmacy chains, including Walmart, Kroger and Rite Aid, as well as CVS and Walgreens.
  • The hiring event, planned for Friday, aims to fill 19,000 open positions while adding another 6,000 jobs at roughly 10,000 locations nationwide.
  • Pharmacy technicians will comprise 14,000 of the new hires, with the remaining jobs going to pharmacists, nurses and retail workers.
  • Pharmacy technician wages start at $16 an hour. Pharmacy techs make $17.50 an hour on average in the U.S., with higher pay going to those who work in hospitals, according to the U.S. Bureau of Labor Statistics.
  • A pharmacy tech working at a retail setting makes $16.55 an hour on average while the same job in a hospital averages $19.80 an hour.

US ECONOMY & POLITICS

Democrats Press Ahead With Debt-Limit Vote Amid Standoff With GOP – Wall Street Journal, 9/20/2021

  • The standoff has alarmed Wall Street analysts and business leaders, who in recent weeks have issued warnings about a rising risk of a technical default, in which the government might be unable to make all of its regular payments in full and on time.
  • Democrats are tackling the debt ceiling at the same time they are working to resolve a thicket of issues regarding their $3.5 trillion social-welfare and climate plan, including splits over the overall price tag, prescription-drug costs, tax changes and climate proposals.
  • House Democrats plan to hold a vote this week on a measure to suspend the debt limit and a short-term measure extending the government’s funding beyond its expiration at month’s end.
  • A combined spending and debt-ceiling package could pass the Democratic-led House over GOP opposition, but such a measure would have a tough time in the Senate, where at least 10 Republicans would need to join Democrats in advancing the bill through the evenly divided chamber.
  • Treasury Secretary Janet Yellen has said her agency could run out of cash to keep paying the government’s bills some time in October.
  • Raising the debt limit wouldn’t facilitate future spending, and Congress would still need to raise the debt limit this fall even if no new major spending programs are enacted.

U.S. to Require Most Foreign Travelers Be Vaccinated for Entry – Bloomberg, 9/20/2021

  • The measures, to be announced by President Joe Biden’s administration on Monday, amount to a sweeping reform of strict entry rules imposed on visitors to the U.S. to try to curb the spread of the virus.
  • The new rules will take effect in November, according to the Financial Times, which reported the changes earlier.
  • The U.S. will also relax entry rules for vaccinated travelers from the U.K. and European Union, a measure that will spur a rebound in trans-Atlantic travel.
  • European network carriers in particular rely on U.S. flights to generate earnings after losing market share to discount operators and high-speed trains on short-haul routes.
  • The U.S. currently bars direct entry to people who aren’t citizens or permanent residents if they’ve been within the Schengen area of Europe or the U.K. within the past 14 days, regardless of vaccination status.

In Overwhelmed Del Rio, Texas, Migrants Cross the Border Freely – Wall Street Journal, 9/19/2021

  • Close to 13,000 migrants, many originally from Haiti, are now in Del Rio, according to officials in the area, overwhelming the resources of local, state and federal authorities.
  • All entered the U.S. illegally and are expected to try to claim asylum in the U.S. Depending on their circumstances, some will be returned to their native countries before they can apply.
  • Others will be allowed to await the results of their asylum claims in the U.S., a process that can take years due to court backlogs.
  • Most of the migrants massed under the bridge in Del Rio are originally from Haiti, but other migrants came from Cuba and the Central American nations of El Salvador, Guatemala and Honduras, the source of a large portion of illegal immigration to the U.S. in recent years.

EUROPE & WORLD

Pro-Putin Party Wins Control of Russia’s Parliament – Wall Street Journal, 9/20/2021

  • Russia’s ruling party won control of two-thirds of the seats in the Russian parliament, a showing that will allow the government to enact changes to the constitution and bolsters the power of President Vladimir Putin.
  • With 99.7% of ballots counted, the pro-Kremlin United Russia party had won around 50% of votes in the election, according to Russia’s electoral commission on Monday.
  • It was followed by the Communist Party of the Russian Federation with 19% and the Liberal Democratic Party of Russia with 7.5%.
  • Such a majority would make it easier for Mr. Putin to back any effort he makes to extend his time in power beyond his current term, which expires in 2024.
  • Mr. Putin’s approval rating has slipped to 61% in August from close to 90% in 2015, according to independent pollster Levada Center, as standards of living have stagnated in recent years.

Canadian Election Threatens Justin Trudeau’s Grip on Power – Wall Street Journal, 9/20/2021

  • After calling for an election meant to secure a stronger mandate, Canadian Prime Minister Justin Trudeau instead faces a tight vote as Canadians head to the polls on Monday.
  • Yet this bid to shore up support seems to have fallen flat, with polling over the weekend indicating Mr. Trudeau’s Liberals and the Conservative Party are in a tight race, with the possibility that Liberals could lose seats in Parliament instead of gaining a majority.
  • An Ipsos poll issued Sunday had the Conservatives at 32% and Liberals at 31%.
  • Projections from polling aggregator 338Canada suggest the Liberal Party will win 147 of the legislature’s 338 spots versus 127 for the Conservatives, which for the Liberals would mark a decline from 155 seats at Parliament’s dissolution last month, and down from the 184 won in 2015 when Mr. Trudeau first took power.

EU Foreign Ministers to Discuss Submarine Dispute on Monday – Reuters, 9/20/2021

  • European Union foreign ministers will meet on Monday to discuss Australia’s scrapping of a $40 billion submarine order with France, a move that has enraged Paris and cast a shadow over free trade talks between the EU and Australia.
  • The meeting will take place on the sidelines of the United Nations General Assembly in New York at 2200 GMT, a spokesperson for the European Commission told reporters in Brussels.
  • Australia said last week it would cancel an order of conventional submarines from France and instead build at least eight nuclear-powered submarines with U.S. and British technology after striking a security partnership with those countries under the name AUKUS.
  • It is not clear if the dispute will have implications for the next round of EU-Australia trade talks, scheduled for Oct. 12.

Market Contagion Tests Xi’s Resolve on Evergrande, Property Curbs – Bloomberg, 9/20/2021

  • After months of treating the crisis at indebted developer China Evergrande Group as largely contained, investors on Monday rushed to price in the risk that President Xi will miscalculate as he tries to curb China’s property-market excesses without derailing the economy.
  • The resulting market turbulence may add pressure on Chinese leaders to tap the brakes on policy tightening, or at least take steps to limit the fallout.
  • Chinese authorities, who recently hired advisers to look into Evergrande, have provided no public assurances that there’s a state-led plan to resolve the crisis.
  • Evergrande has around $300 billion worth of liabilities, more than any other property developer in the world.
  • It’s a whale in China’s high-yield dollar bond market, accounting for about 16% of outstanding notes.
  • Some $83.5 million of interest on a five-year dollar bond comes due Thursday, and failure to pay within 30 days may constitute a default.
  • Evergrande also needs to pay a 232 million yuan ($36 million) coupon on an onshore bond the same day.

Factmonster – TODAY in HISTORY

  • Victor Emmanuel II, the first king of modern Italy, seized the Papal States from the French. (1870)
  • Chester A. Arthur was sworn in as the 21st president of the United States, succeeding James A. Garfield, who had been assassinated. (1881)
  • Independent Counsel Robert Ray announced the end of the Whitewater investigation, saying there was insufficient evidence to charge President Clinton and his wife, Hillary. (2000)
  • President George W. Bush addressed the nation and a joint session of Congress about terrorism. He also named Tom Ridge as head of the new Office of Homeland Security. (2001)

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