Daily Market Report | November 19, 2021
US FINANCIAL MARKET
Stocks Waver as Bond Yields, Oil Drop – Wall Street Journal, 11/19/2021
- U.S. stocks were mixed Friday and investors piled into the safety of the dollar and government bonds after fresh Covid-19 restrictions in Europe clouded prospects for the global economic recovery.
- The S&P 500 opened flat, after the index closed at an all-time high Thursday. The Dow Jones Industrial Average declined 0.4%, while the tech-heavy Nasdaq Composite climbed 0.3%.
- Oil prices were hammered by concerns about energy demand amid renewed lockdowns. Global benchmark Brent crude declined 2.9% and traded at $78.90, the lowest level since September.
- Covid-19 cases are rising in the U.S. and Europe, according to data from Johns Hopkins University. The Austrian Chancellor announced Friday that his country would go into a nationwide lockdown starting Monday, with restaurants and retail sectors to close. Areas in Germany are also going into a partial lockdown next week.
- U.S.-listed travel companies also took a hit. Airbnb declined 4%, and Carnival cruise line fell 3.9%.
- The yield on the benchmark 10-year Treasury note dropped to 1.534% Friday from 1.586% Thursday. The equivalent German bund yield fell as low as minus 0.342%, its lowest in over nine weeks. Bond prices rise when yields decline.
- Safe-haven currencies strengthened, with the WSJ Dollar Index up 0.4%. The Japanese yen appreciated 0.4% against the dollar.
- The Turkish lira weakened for a ninth straight day, falling to a fresh record low. It traded at 11.2 lira to $1 in the wake of the central bank cutting interest rates again, despite surging inflation.
- In Asia, major benchmarks were mixed. The Shanghai Composite Index rose 1.1% and Japan’s Nikkei 225 added 0.5%.
- Hong Kong’s Hang Seng Index declined 1.1%, weighed down by Alibaba, which slid more than 10% Friday after cutting its growth forecast. The e-commerce giant’s stock is down over 14% this week.
- U.S. health regulators cleared booster doses of the Covid-19 vaccines from Pfizer and BioNTech and from Moderna for all adults in the U.S., widening the booster campaign as officials worry about a recent uptick in cases.
- The authorization is the latest in a rapid—and for many people, confusing—series of moves by federal health authorities in recent months aiming to shore up people’s immune defenses to help the U.S. stay ahead of the pandemic.
- In Moderna’s booster application, the company presented data from a study of nearly 300 people indicating a half-dose booster given at least six months after initial vaccination restored antibody levels.
Semiconductor Stocks Soar as Chip Shortage Persists – Wall Street Journal, 11/19/2021
- The global chip shortage has been bad news for people trying to buy cars and companies looking to manufacture appliances. But it has been great news lately for investors in semiconductor stocks, some of which have been performing at the top of the S&P 500 over the past month.
- Three months ago, semiconductor companies generally expected that supply and demand might reach a balance by the middle of 2022, said Chris Caso, an analyst covering semiconductors at Raymond James.
- Earnings season shifted that forecast further out.
- “When we talk about the supply and demand balance, which is where we kind of get back to normal, we probably are not going to see normal for most of 2022,” Mr. Caso said. He said the imbalance might even stretch into 2023.
- Analysts expect that earnings from semiconductor and semiconductor-equipment companies in the S&P 500 grew 56% in the third quarter from a year earlier—more than the 40% profit growth projected from the full membership of the stock index, according to FactSet. Sales growth from the group is also expected to exceed that of the S&P 500.
- A bipartisan coalition of state attorneys general said Thursday it is investigating how Instagram attracts and affects young people, amping up the pressure on parent company Meta Platforms over potential harms to its users.
- Led by eight states, including Massachusetts and Nebraska, the coalition is focused on “the techniques utilized by Meta to increase the frequency and duration of engagement by young users and the resulting harms caused by such extended engagement.”
- The attorneys general said they are investigating whether the company, formerly known as Facebook, violated consumer protection laws and put the public at risk.
- Other attorneys general involved in coordinating the effort include California, Florida, Kentucky, New Jersey, Tennessee and Vermont. The full list of states that are joining the probe isn’t yet public, but a spokeswoman for Massachusetts said it was broad and nationwide.
Microsoft Pressures Activision Blizzard – Wall Street Journal, 11/19/2021
- Microsoft’s videogame boss said the company is evaluating its relationship with Activision Blizzard in the wake of a Wall Street Journal article about its chief executive’s handling of sexual-misconduct issues at the videogame company.
- Xbox maker Microsoft made the remarks in a letter to employees Thursday, a day after the head of Sony Group’s PlayStation business said in a letter to that company’s employees that Sony has asked Activision how it plans to address the Journal’s reporting.
- Sony was Activision’s largest customer in 2020 and Microsoft was its fourth largest, accounting for 17% and 11% of revenue, respectively, according to a securities filing.
- Roku, the nation’s biggest pathway to streaming services, wants to become an entertainment force in its own right.
- The streaming hub said it plans to develop more than 50 original shows in the next two years as part of an effort to make it a destination for free content. The company is also looking to better monetize the 155 million people who live in homes with Roku devices, about half of whom currently watch the Roku Channel.
- The four-year old Roku Channel lets users watch free ad-supported content that Roku licenses from more than 200 other media outlets.
- Roku, which powers more smart TVs and streaming boxes in the U.S. than any of its competitors, sells less than 30% of the ads when viewers watch content in other apps on its platform, but 100% of the ads when viewers watch the Roku Channel.
Nike Launches Virtual Play Place on Roblox – Wall Street Journal, 11/19/2021
- Nike has launched a virtual play place on Roblox’s online game platform that lets players dress their digital avatars in Nike sneakers, hats or backpacks.
- The announcement Thursday comes after the sneaker company filed trademark applications last month indicating it wanted to sell digital versions of its sneakers, clothing and other goods stamped with its swoosh logo in virtual worlds, such as videogames or other online platforms.
- Nikeland on Roblox is free to play, Nike said. In the virtual world based on the company’s headquarters in Beaverton, Ore., users can play tag or dodgeball or create their own games.
- Roblox is the largest pure-play U.S. videogame company by market capitalization. It had an average of 47.3 million daily active users at the end of September—many of them kids. The company has been working to expand its user base, and play a role in the metaverse.
Boeing Dreamliner Defects Bog Down Production – Wall Street Journal, 11/19/2021
- Boeing has further slowed production of 787 Dreamliners as it addresses defects that are delaying deliveries of new jets and complicating airlines’ plans, people familiar with the matter said.
- The plane maker is holding off completing the new wide-body jets at its North Charleston, S.C., factory as workers and engineers address problems related to areas surrounding passenger and cargo doors on aircraft already under construction, these people said.
- The latest production slowdown began in recent days and could last a few weeks as Boeing seeks expertise from other aerospace manufacturers in addressing the door issue, some of these people said.
- In late October, Boeing disclosed it was producing about two Dreamliners a month, down from a planned monthly rate of five, to resolve production issues.
US ECONOMY & POLITICS
House Passes Roughly $2 Trillion Social Spending and Climate Bill – Wall Street Journal, 11/19/2021
- The House passed a roughly $2 trillion education, healthcare and climate package on Friday, as Democrats corralled their slim majority to approve the centerpiece of President Biden’s economic agenda after months of wrangling.
- While the House vote puts Democrats closer to unifying their fractious centrist and progressive wings behind the bill, the party will still need to move the legislation through the evenly divided Senate. There, lawmakers are planning to change or pare back some of the bill’s provisions in the coming weeks.
- Democrats initially hoped to pass the bill Thursday night, but an eight-and-a-half-hour speech by House Minority Leader Kevin McCarthy (R., Calif.) slamming the legislation prompted Democrats to postpone the vote until later Friday morning.
- The CBO found that the bill would contribute $367 billion to the deficit over 10 years; Democrats have argued that revenue not captured in the CBO score shows that the bill is more than fully paid for.
- For technical reasons, the CBO’s bottom line doesn’t include $207 billion in revenue that the scorekeeper estimates would result from pouring roughly $80 billion into tax-enforcement efforts at the Internal Revenue Service. Adding that revenue to the CBO’s other estimates would make the bill’s 10-year deficit about $160 billion.
- The Biden administration says its IRS spending would generate $480 billion, not $207 billion; in its view, that would tip the bill over to reducing the deficit, and many Democrats appear willing to accept that perspective.
Two Democrats Oppose Powell for Fed Chair, Citing Climate Change – Wall Street Journal, 11/19/2021
- Two liberal Democratic senators said Friday they would oppose a second term for Federal Reserve Chairman Jerome Powell because they want the central bank to play a more aggressive role addressing climate change.
- Sens. Jeff Merkley (D., Ore.) and Sheldon Whitehouse (D., R.I.) issued a statement calling on President Biden to appoint a Fed chair “who will ensure the Fed…shares the administration’s view that fighting climate change is the responsibility of every policy maker. That person is not Jerome Powell.”
- Three Senate Democrats have publicly opposed a second term for Mr. Powell. The other is Sen. Elizabeth Warren (D., Mass.). None of them have endorsed an alternative candidate.
EUROPE & WORLD
- Austria became the first European country to introduce a general vaccination mandate and return to a nationwide lockdown in reaction to a rapid rise in Covid-19 infections and hospitalizations despite mass immunization.
- The decision comes as a warning sign to other Western countries, including the U.S., that had hoped to put the pandemic behind them thanks to successful vaccination campaigns.
- It was prompted by the fact that hospitals in several regions are operating close to their capacity, raising concerns that the resurgence in infections could overwhelm the healthcare system and push death rates up.
- All residents of Austria will need to take a Covid-19 vaccine as of Feb. 1 to be able to participate in most aspects of public life including working outside the home, the government said Friday.
- As of Monday and for a maximum period of 20 days, residents will only be able to leave their homes with a valid reason, including going to work.
- All nonessential businesses will close and employers will be asked to let people work from home. Schools and kindergartens will remain open, but parents are advised to enroll children into online classes.
- China Evergrande Group is selling its entire stake in streaming services firm HengTen Network Group for HK$2.13 billion ($273.5 million), as the cash-strapped developer struggles to avoid a debilitating default on its debts.
- However, S&P Global Ratings said in a report on Thursday that a default is still “highly likely” for the world’s most indebted developer despite its recent bond coupon payments because it has a bigger test in March and April next year, facing a total of $3.5 billion maturities in dollar bonds.
- “The firm has lost the capacity to sell new homes, which means its main business model is effectively defunct. This makes full repayment of its debts unlikely,” it said.
- The Shenzhen-based real estate company has been stumbling from deadline to deadline in recent weeks as it grapples with more than $300 billion in liabilities, $19 billion of which are international market bonds.
Britain to add booster shots to COVID-19 travel pass – Reuters, 11/19/2021
- Britain’s health ministry on Friday said it would add booster shots to the COVID-19 pass for outbound international travel, though it added they would not be added to the domestic pass at this time.
- The health ministry said that travellers who have had a booster or a third dose would be able to demonstrate their vaccine status through the National Health Service (NHS) COVID Pass from Friday, adding that a booster was not necessary to travel into England.
India to Repeal Farming Laws Protested by Tens of Thousands – Wall Street Journal, 11/19/2021
- Prime Minister Narendra Modi said the government would abandon an effort to deregulate the agricultural sector, bowing to massive farmer protests sparked by laws passed last year and dealing a major setback to his efforts to overhaul India’s economy.
- The protests, which began after the laws were passed in September 2020, showed no signs of relenting and led to a deadly clash in October.
- Mr. Modi decided to withdraw the laws with his ruling Bharatiya Janata Party facing elections in two big farming states early next year—Uttar Pradesh and Punjab.
- Starting last November, thousands pitched tents on the outskirts of New Delhi, and many stayed put during the freezing winter and long stretches of the pandemic. The majority were from the northern states of Punjab, Haryana and Uttar Pradesh, which are most dependent on the government system.
Japan Plans $490 Billion Stimulus to Jolt Struggling Economy – Wall Street Journal, 11/19/2021
- Japan’s government approved a $490 billion package to support recovery from the Covid-19 pandemic after recent economic struggles, including cash payments to most families and some smaller companies.
- The size of the package was nearly double what analysts were expecting earlier this month and amounts to about one-tenth of Japan’s gross domestic product.
- The headline size of the package is ¥55.7 trillion, equivalent to $490 billion. While some of that amount doesn’t involve direct government spending or comes from money already budgeted, a significant amount of new spending and government debt issuance is expected.
- Most families with children will get cash payments and vouchers worth nearly $900 for each child aged 18 or younger.
- The government will provide financial aid of up to the equivalent of $22,000 each for smaller companies that can demonstrate they were affected by the pandemic. Wage increases for nurses and care workers are also planned.
Japan Inflation Shows Continued Pulse as Gas Prices Surge – Bloomberg, 11/19/2021
- Higher energy costs caused Japanese consumer prices to edge up for a second month in October, with Prime Minister Fumio Kishida expected later Friday to deliver a stimulus package that includes countermeasures to ease the pain from more expensive fuel.
- Consumer prices, excluding those for fresh food, increased 0.1% compared with a year earlier, the ministry of internal affairs reported. The result matched the median forecast from analysts.
- Overall gains were limited by plunging mobile phone fees, even as gas prices at the pump surged 21%.
- Stripping out the phone factor, core inflation is closer to 1.7%, according to a Bloomberg calculation.
Factmonster – TODAY in HISTORY
- Lincoln delivered his Gettysburg Address at the dedication of the national cemetery on the Civil War battlefield of Gettysburg, Pa. (1863)
- Egyptian president Anwar Sadat became the first Arab leader to visit Israel. (1977)
- Ronald Reagan and Mikhail Gorbachev met for the first time in Geneva. (1985)
- Milli Vanilli’s Grammy award was rescinded after it was discovered they didn’t do their own singing. (1990)
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