Market Brief: July 17, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Friday, July 17, 2020
Mostly Higher. Stocks finished Friday’s session mostly higher, though the Dow Jones Industrial Average lost ground for a second consecutive day, in a lightly traded session. Investors monitored a continued rise in Covid-19 cases and the prospect for additional fiscal stimulus in Europe and the U.S. The Dow fell around 63 points, or 0.2%, to end near 26,672, according to preliminary figures, while the S&P 500 finished around 9 points higher, up 0.3%, near 3225. The Nasdaq Composite gained around 29 points, or 0.3%, to close near 10,503. Shares of video-streaming giant Netflix slumped 6.5% after the company reported strong subscriber growth and earnings that topped estimates but raised investor worries over the second-half outlook. Tech shares, which have been a pocket of strength for equities this year, saw a setback this week, with the Nasdaq Composite seeing a 1.1%
weekly decline while the S&P 500 advanced 1.3%, and the Dow gained 2.3%.
DJIA 26,671.95 -62.76
S&P 500 3,224.73 9.16
NASDAQ 10,503.19 29.36
US 10-Year Note 0.62 0.01
Dollar Index 95.95 -0.40
Crude Oil 40.58 -0.17
Gold 1,812.50 12.20
Global Dow 2,959.62 6.09
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
Netflix’s Coronavirus Subscriber Boom Comes to an End
It turns out, there are limits even for Netflix. The streaming video giant’s shares traded lower Friday amid signs that the company’s Covid-19 driven growth spurt is coming to an end.

In the June quarter reported late Thursday, Netflix added 10.1 million net new subscribers, above the company’s forecast of 7.5 million, but falling short of Wall Street estimates that had reached 12 million or higher. Netflix is forecasting just 2.5 million net adds in the September quarter, well shy of analyst expectations.

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New Home Construction Leapt 17% in June
The Commerce Department on Friday said housing starts in June were at a seasonally adjusted annual rate of 1.186 million, up 17% from May’s revised figure of 1.011 million but 4% below the year-earlier rate. Single-family homes were built at a rate of 831,000, and multifamily buildings at a rate of 350,000.

New permits were authorized at a seasonally adjusted annual rate of 1.24 million, up 2.1% from May but 2.5% below the year-earlier reading. Single-family permits were granted at a rate of 834,000, up 12%, versus 368,000 permits for multifamily buildings.

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‘We Are in Truly New Territory.’ Mortgage Rates Drop Below 3% for the First Time.
Mortgage rates for a 30-year fixed loan fell below 3% for the first time since at least 1971, according to Freddie Mac‘s weekly mortgage survey. They could continue to fall if current trends continue, one expert told Barron’s.

The average 30-year fixed-rate mortgage fell to 2.98% for the week ending July 16, the report said, not including fees and points. That marks the first time in 50 years that rates have fallen below 3%, Sam Khater, Freddie Mac’s chief economist, said in a release.

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British Airways Retired the Boeing 747. Here’s What That Means.
International Consolidated Airlines Group airline British Airways is retiring the “queen of the skies,” meaning the Boeing 747 jumbo jet.

The move, while not a shock, says a lot about the state of the industry—as well as the impact of new airplane models, like the Boeing 737 MAX, on airline operations. British Airways blamed the “devastating impact of the Covid-19 pandemic,” saying air travel demand isn’t expected to hit 2019 levels until 2023 or 2024. Coronavirus has had an unprecedented impact on commercial aerospace, and the industry sees a very slow recovery—save for an efficacious vaccine.

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Cruise Stocks Are Lower Because the CDC Made It Official: No Sailing This Summer
The Centers for Disease Control and Prevention has extended its no-sail order for cruise lines through Sept. 30, formally locking down U.S. ports through the prime summer sailing season.

The move was expected, but the stocks of the three big U.S. cruise operators were down midafternoon Friday amid a mostly higher broader market. The cruise companies have been shut down by the pandemic since mid-March. Carnival, however, said recently that it plans to begin sailings from Germany next month.

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It Has Been a Huge Week for SPAC Mergers. Here’s What You Missed.
Special-purpose acquisition companies, or SPACs, are on pace for a banner year in 2020. The previously obscure blank-check companies have raised more money, done more deals, and attracted a broader base of sponsors and investors than they ever have through the first half of a year—by a wide margin.

This week has seen the SPAC boom shift into overdrive, with a flood of merger and initial public offering announcements. And there is plenty more to come.

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BlackRock Easily Beat Earnings Expectations. Here’s How It Did It.
BlackRock’s second-quarter earnings jumped 22% to a higher-than-expected $7.85 a share, while net flows plunged during the period of market uncertainty. The earnings increase partly reflected a lower share count after BlackRock bought back some of PNC Financial Services’ massive stake in the asset manager.

Analysts tracked by Bloomberg had expected BlackRock to report second-quarter earnings of $6.96, with estimates ranging from $6.37 to $7.61. BlackRock repurchased $1.1 billion of shares during the quarter, and its weighted-average diluted shares fell 1% to 15.7 million shares during the quarter.

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Watch Sports Betting Boom Once Major U.S. Sports Resume
Sports betting could hit record levels once major U.S. sports resume soon because of pent-up demand and abbreviated seasons that will magnify the importance of each game.

That was one of the takeaways of Morgan Stanley analyst Thomas Allen from the SBC Digital North America Summit that ended Thursday. The summit bills itself as the largest online betting and gaming event.

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Vietnam Is Booming Economically. Not Its Stock Market.
Vietnam is a bundle of contradictions for investors. Economically, the country is an all-star. Growth was cruising around 7% annually before this year. Exports are climbing the value chain from apparel to electronics. The population of 100 million is young, educated, and urbanizing at a rate around 1 million a year.

Governance-wise, Vietnam is a mess. Foreign stock ownership is capped. Arcane trading bottlenecks choke liquidity and elevate prices well above what’s listed on the exchange. These and other problems have kept the country in frontier market status, with inclusion in the MSCI emerging market indexes years away, at best.

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Maserati Goes Electric with a Ghibli Hybrid
On July 16 Maserati introduced the first hybrid in its history, the 2021 Ghibli Hybrid. It’s no Prius—the car offers 330 horsepower and 331 pound feet of torque, fairly close to the output of the regular twin-turbo V6 Ghibli, which offers 345 horsepower.

The last-generation Ghibli went on sale in 2013, and a fairly impressive (for a supercar) 100,000 were sold. But the car was getting rather dated, so the update was long awaited. The new car is what’s called a “mild hybrid,” meaning it gets electric assistance to its two-liter, direct-injected turbo four. Yes, a four-cylinder Maserati.

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