Daily Market Report | September 27, 2021
US FINANCIAL MARKET
Stocks Waver; Oil Prices Near Three-Year High – Wall Street Journal, 9/27/2021
- U.S. stocks wobbled in early trading Monday, bond yields rose and oil hit its highest level in nearly three years, as investors bet on further economic reopening, but remained concerned about supply-chain disruptions.
- Global benchmark Brent crude gained 1.9% and traded at $78.70 a barrel, hitting the highest level since Oct. 2018.
- The yield on the 10-year benchmark U.S. Treasury note ticked up to 1.494% Monday from 1.459% Friday, reaching the highest intraday level since June.
- European sovereign bond yields climbed as well, with the German 10-year bund yield reaching minus 0.201%, the highest since July.
- The Shanghai Composite Index slipped 0.8%, while Hong Kong’s Hang Seng Index edged up 0.1%.
- Evergrande shares rallied 8%, but remained down more than 80% for the year.
- Rolls Royce jumped 9%, rising for a second trading session after the jet-engine maker won a deal to supply the U.S. Air Force fleet of B-52 bombers.
- Cinema chain Cineworld advanced 11% as a new James Bond film spurred an uptick in bookings.
- Fresh data showed a 1.8% rise in new U.S. orders for durable goods in August, stronger than economists expected, as business investment and consumer spending picked up.
Facebook Pauses Instagram Kids Project – Wall Street Journal, 9/27/2021
- Facebook will pause the development of its Instagram for kids project, Adam Mosseri, head of Instagram, said in an interview on the “Today” show Monday.
- The social-media app, owned by Facebook, had been developing a version for children that would be ad free and allow parents to monitor their children’s activity.
- The new platform was to be designed for children younger than 13.
- Instagram bars children younger than that from its platform, but acknowledges that many join anyway.
Lockheed to deliver fewer F-35 jets than expected to U.S. in 2022 – Reuters, 9/27/2021
- Lockheed Martin said on Monday it had agreed with the Pentagon to deliver 151 to 153 F-35 fighter aircraft in 2022, fewer than the 169 jets it had hoped to deliver.
- The weapons maker also said it was expecting to deliver 156 aircraft to the United States beginning 2023 and for the “foreseeable future”.
- The U.S. government is Lockheed’s biggest customer, accounting for three quarters of its sales last year.
- The F-35 is United States’ most advanced fighter jet and Lockheed said over 700 F-35s have been delivered so far to the country and its partners.
FedEx investors approve CEO Fred Smith’s pay – Reuters, 9/27/2021
- FedEx investors approved billionaire CEO Fred Smith’s $54 million pay plan on Monday at the company’s annual meeting, after it came under scrutiny by a union for including a re-instated cash bonus and extra stock options.
- The Teamsters labor union said the pay package amounted to “double dipping” because Smith received stock options instead of a cash bonus last year after the pandemic hit, and then later was also awarded the cash bonus.
- FedEx asked investors to support its executives’ pay packages in a supplementary securities filing made this month, explaining that the board’s compensation committee made “decisions in real-time, based on the best information available.”
ISS urges Tesla investors not to re-elect James Murdoch, Kimbal Musk – Reuters, 9/27/2021
- Proxy advisory firm Institutional Shareholder Services (ISS) is recommending that Tesla investors not re-elect directors James Murdoch and Kimbal Musk because the board approved excessive compensation packages to non-executive board members.
- Tesla shareholders will cast ballots on Oct. 7 on cutting director terms to two years, eliminating a supermajority vote requirement to approve certain changes, and who will sit on the electric car maker’s board.
- Murdoch, who was chief executive officer of 21st Century Fox and is the son of media magnate Rupert Murdoch, and Kimbal Musk, a restaurant entrepreneur and brother of Tesla CEO Elon Musk, are both running for re-election to the board.
- The board currently has nine members but will have eight after the annual meeting because director Antonio Gracias is not running again.
- Elon Musk, who owns 17.2% of the company’s stock, was reelected to the board a year ago with 98.8% of the vote.
- The meeting will be held virtually at Tesla’s factory in Austin.
Google Pushes to Overturn EU’s $5 Billion Antitrust Decision on Android – Wall Street Journal, 9/27/2021
- Google started its appeal Monday to overturn a $5 billion antitrust fine imposed by the European Union, contending that its Android operating system for mobile devices has boosted competition rather than foreclosing it.
- The tech giant presented oral arguments in Luxembourg before the EU’s second-highest court, in its appeal to overturn the 2018 decision from the bloc’s antitrust enforcer.
- That decision was the largest of three antitrust fines totaling more than $9 billion that the EU has levied against Google in the past half decade.
- It also ordered changes to the distribution agreements buttressing one of the company’s biggest growth engines: search ads on mobile phones.
- While the appeal is under way, Google has had to comply with the decision, offering all users of new Android phones in the EU a choice screen of alternative search engines
Pfizer begins study of oral drug for prevention of COVID-19 – Reuters, 9/27/2021
- Pfizer said on Monday it has started a large study testing its investigational oral antiviral drug for the prevention of COVID-19 infection among those who have been exposed to the virus.
- The drugmaker and its rivals, including U.S.-based Merck & Co and Swiss pharmaceutical Roche, have been racing to develop an easy-to-administer antiviral pill for COVID-19.
- The mid-to-late-stage study will test Pfizer’s drug, PF-07321332, in up to 2,660 healthy adult participants aged 18 and older who live in the same household as an individual with a confirmed symptomatic COVID-19 infection.
- In the trial, PF-07321332, designed to block the activity of a key enzyme needed for the coronavirus to multiply, will be administered along with a low dose of ritonavir, an older medication widely used in combination treatments for HIV infection.
- To date, Gilead Sciences’ intravenous drug remdesivir is the only approved antiviral treatment for COVID-19 in the United States.
US ECONOMY & POLITICS
U.S. core capital goods orders, shipments rise strongly in August – Reuters, 9/27/2021
- New orders and shipments of key U.S.-made capital goods increased solidly in August amid strong demand for computers and electronic products, keeping business spending on equipment on track for another quarter of robust growth.
- Demand for goods is being driven by businesses desperate to replenish inventories, depleted in the first half the year.
- Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 0.5% last month, the Commerce Department said on Monday.
- Data for July was revised higher to show these so-called core capital goods orders gaining 0.3% instead of the previously reported 0.1%.
- Shipments of core capital goods advanced 0.7% last month after increasing 0.9% in July.
- Orders for computers and electronic products rose 1.4% last month.
- Raw materials shortages and a resurgence in COVID-19 cases, driven by the highly contagious Delta variant of the coronavirus prompted economists to slash their estimates for third-quarter GDP to as low as 3.5% annualized rate from as high as a 9% pace.
- The economy grew at a 6.6% pace in the second quarter.
- Orders for civilian aircraft soared 77.9%. Boeing reported on its website that it had received 53 aircraft orders last month compared to 31 in July.
Boston Fed Leader Rosengren Announces Early Retirement Amid Trading Controversy – Wall Street Journal, 9/27/2021
- Mr. Rosengren, 64 years old, said in a statement released by the Boston Fed that he was leaving as he had qualified for a kidney transplant to deal with a long-running condition.
- In most cases, regional Fed leaders must retire at 65, and Mr. Rosengren was due to leave the bank next June.
- His retirement follows the recent disclosure that Mr. Rosengren traded stocks and other investments while also helping to set monetary policy.
- Recently disclosed information from the Boston Fed showed that Mr. Rosengren, who would have held a voting role on the rate-setting Federal Open Market Committee next year, had traded stocks and other investments related to the real-estate industry last year.
Congress Heads Into Tumultuous Week Pressured by Converging Deadlines – Wall Street Journal, 9/26/2021
- A slew of high-stakes deadlines will collide on Capitol Hill this week, setting up potentially chaotic negotiations against the backdrop of expiring government funding and the threat of a possible U.S. default.
- Democratic leaders are trying to shepherd two complicated legislative packages: a roughly $1 trillion bipartisan infrastructure bill and a sprawling healthcare, education and climate package whose proposed $3.5 trillion price tag and contents are still under intense debate within the party.
- At the same time, the government’s funding is set to expire at 12:01 a.m. on Friday, Oct. 1, which would partially shut down the government if Congress doesn’t act.
- The Senate is expected to vote Monday evening on a measure extending the government’s funding through Dec. 3, 2021, and suspending the debt limit into December 2022, but it is expected to be blocked by Republicans, leaving the matter unresolved.
- Democrats do have the ability to raise the debt ceiling on their own, by revising their current budget resolution either to increase the debt limit as a stand-alone bill or fold it into the $3.5 trillion budget package they are currently writing.
EUROPE & WORLD
Pledging stability, German SPD seeks three-way alliance to succeed Merkel – Reuters, 9/27/2021
- German Social Democrat Olaf Scholz vowed on Monday to strengthen the European Union and keep up the transatlantic partnership in a three-way coalition government he hopes to form by Christmas to take over from Angela Merkel’s conservatives.
- Scholz’s Social Democrats (SPD) came first in Sunday’s national election, just ahead of the conservatives, and aim to lead a government for the first time since 2005 in a coalition with the Greens and the liberal Free Democrats (FDP).
- The SPD, Germany’s oldest party, won 25.7% of the vote, up five percentage points from the 2017 federal election, ahead of Merkel’s CDU/CSU conservative bloc on 24.1%, provisional results showed.
- The Greens came in with 14.8% and the FDP won 11.5%.
- Merkel, who did not seek a fifth term as chancellor, will stay on in a caretaker role during the coalition negotiations that will set the future course of Europe’s largest economy.
Panic Buying in U.K. Creates Shortages at Gas Stations – Wall Street Journal, 9/27/2021
- The Covid-19 pandemic and the U.K.’s departure from the European Union have resulted in a shortage of tanker drivers to ferry fuel across the country.
- Panic buying started last week after media reports that a handful of gas stations had to close due to dwindling supplies.
- To ease pressure on hauliers, the government is temporarily relaxing visa restrictions to allow in 5,000 truck drivers from across the EU.
- It has also drafted in the military to help clear a backlog of people waiting to take truck driving tests.
- The Petrol Retailers Association, which represents independent fuel retailers, said Sunday almost two-thirds of its members were out of fuel
- According to the association, there are 8,300 gas stations in the U.K. Existing supplies are being given priority to highway gas stations to avoid tailbacks.
Evergrande Worries Help Fuel Selloff at Chinese Developer Sunac – Wall Street Journal, 9/27/2021
- Investors sold down securities from Sunac over two trading sessions, after a document circulated online showing a Sunac unit asking for government help to ease its liquidity difficulties.
- Sunac’s Hong Kong-listed shares fell 9.4% Monday to close at their lowest in more than four years, building on a near-7% decline in the previous trading session.
- Its U.S.-dollar-denominated bonds also retreated, with 7% bonds due in July 2025 quoted at about 81 cents on the dollar by late afternoon Monday in Hong Kong, according to Tradeweb.
- This debt was quoted above 98 cents on the dollar at the start of the month, and as recently as July Sunac was able to raise $500 million of new debt funding from bond investors.
- Late Monday in Hong Kong, Sunac said it had bought back and would cancel some bonds due in 2024 with a face value of $33.6 million.
Top Netflix Hit ‘Squid Game’ Sparks Korean Media Stock Surge – Bloomberg, 9/26/2021
- A dramatized survival game in the vein of “Hunger Games,” the show currently tops the global rankings on Netflix, and is the first Korean drama to claim the No. 1 spot in the U.S. on the service, according to data from streaming ratings firm FlixPatrol.
- Bucket Studio, which holds a stake in the agency representing Squid Game’s lead actor Lee Jung-Jae, has surged more than 70% in the past three trading sessions.
- Showbox whose predecessor had invested in Siren Pictures, the show’s privately owned production company — jumped more than 50% last week before slipping Monday.
- Netflix on Saturday held its first-ever Global Fan Event with a sneak peek of its upcoming films and TV shows.
Factmonster – TODAY in HISTORY
- Warsaw, Poland, was surrendered to the Nazis after weeks of resistance. (1939)
- Typhoon Vera battered the Japanese island of Honshu, killing almost 5,000 people. (1959)
- The Warren Commission report concluded that there was no conspiracy in the assassination of President John F. Kennedy; Lee Harvey Oswald acted alone. (1964)
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