Samsung Electronics Expects 53% Increase in Operating Profit
Company is lifted by strong demand for memory chips that offset weaker device sales—hurt by component shortages
SEOUL— Samsung Electronics Co. expects a 53% rise in operating profit for the second quarter, lifted by strong demand for memory chips that offset weaker device sales hurt by component shortages.
The world’s largest smartphone and memory-chip maker forecasts operating profit of 12.5 trillion South Korean won, equivalent to about $11 billion, for the quarter ended June 30. Samsung projects revenue of 63 trillion won, up 19% from the prior year.
The South Korean firm’s outlook handily topped market expectations and indicated ongoing strength for tech giants—and especially chip makers, which have seen greater pricing power during a historic supply crunch.
A year ago, during the pandemic’s first months, Samsung saw a double-digit drop in revenue for electronics products such as smartphones and television sets. But demand for components surged as people shifted more of their lives online. Results have remained strong ever since.
Analysts estimates gathered by S&P Global Market Intelligence were about 10.9 trillion won in operating profit and 61.2 trillion won in revenue.
Samsung reports full earnings later this month. The Suwon, South Korea-based company is considered an industry bellwether because it is both a major electronics maker and a components supplier to the world’s biggest tech firms, including Apple Inc. and Sony Group Corp.
Behind Samsung’s earnings are stronger memory-chip prices. Shortages haven’t been as acute for memory chips, which go inside everything from smartphones to laptops to gaming consoles. In recent months, corporate investment into data centers that require large quantities of servers is on the rise, fueling demand for memory chips, industry analysts said.
Demand for computing devices, which include servers, has remained strong, and prices of DRAM and NAND flash memory have in recent months increased by 16% and 5%, respectively, from early this year, said Sanjeev Rana, a senior tech analyst at CLSA, a Seoul-based brokerage. Samsung is the biggest maker of DRAM and NAND chips.
“Memory chips are not in as short supply as automotive chips, but memory- supply dynamics are indeed favorable for pricing right now,” Mr. Rana said.
Samsung has in recent years generated most of its operating profits from chips. In the company’s first quarter, severe weather knocked out production facilities in Texas, causing hundreds of millions of dollars of losses. Those plants have since resumed normal operations, adding to the current quarter’s strength.
Going forward, Samsung is geared to increase investment in its semiconductor division. It has pledged to invest up to $17 billion toward building a new chip plant in the U.S. It has broken ground on a production line in Pyeongtaek, South Korea.
The same forces helping Samsung’s components business have taken a toll on its smartphone unit. A significant reason: a shortage of key chip components.
Samsung is likely to see its smartphone shipments decline by 20% from the previous quarter, said Doh Hyun-woo, an analyst at NH Investment & Securities in Seoul, in a recent note to investors.
Part of that drop is attributable to Covid-19 outbreaks in key growth markets including India, which sapped consumer demand. Some major components suppliers to Samsung’s handset business, such as Qualcomm Inc., have warned of production bottlenecks.
In March, Koh Dong-jin, the company’s mobile chief, warned that chip shortages would hurt its business in the April-to-June quarter. Samsung makes roughly one of every five smartphones shipped globally.
At the start of the year, Samsung’s mobile business was a bright spot, with first-quarter operating profits rising by roughly 65% over the prior year. The results were helped by an earlier release of its Galaxy S21 flagship phone, which made its debut about a month ahead of its usual timetable. Phone rivals such as China’s Huawei Technologies Co. and LG Electronics Inc. have stumbled, handing Samsung bigger opportunities to snap up market share.
In the coming weeks, Samsung is expected to unveil a new foldable smartphone. After introducing the industry’s first mainstream foldable device nearly two years ago, Samsung hasn’t seen blockbuster success, with about two million such devices sold last year, according to Mr. Rana’s estimates.
This year, Samsung could sell between six million and seven million foldable devices, Mr. Rana said.
Samsung Electronics’s shares are down about 2% this year, compared with the roughly 12% gain of the South Korean stock market’s benchmark Kospi index.
Reese Witherspoon’s Media Company, Hello Sunshine, Is Exploring a Sale
Company behind ‘Big Little Lies’ and ‘The Morning Show’ began pursuing a sale after receiving interest from suitors including Apple
Hello Sunshine, the media company founded by actress and entrepreneur Reese Witherspoon whose titles include the hit HBO drama “Big Little Lies,” is exploring a sale, according to people familiar with the matter.
The company began pursuing a sale in recent months after receiving interest from multiple suitors including Apple Inc., one of the people said. People close to the situation say the company could be valued at as much $1 billion in a deal.
Hello Sunshine is working with investment bankers as it explores its options, the people familiar with the matter say. There is no guarantee the company will find a buyer.
Hello Sunshine’s production slate also includes Hulu’s “Little Fires Everywhere,” a limited series starring Ms. Witherspoon and Kerry Washington as mothers in suburban Ohio, and Apple’s “The Morning Show,” which stars Ms. Witherspoon and Jennifer Aniston as morning show hosts.
Hello Sunshine is owned by Ms. Witherspoon and her partners, Seth Rodsky and Jim Toth, a former agent at Creative Artists Agency who is Ms. Witherspoon’s husband. The company’s management team also has equity in the venture.
AT&T Inc. also owns a stake in Hello Sunshine through its 2018 purchase of Otter Media. Emerson Collective, the philanthropic organization founded by Laurene Powell Jobs, also owns a stake.
Hello Sunshine doesn’t disclose its finances. Time magazine reported in April that the company expected to be profitable for the first time this year.
Hello Sunshine could be an acquisition target for streaming-video companies looking to add high-profile titles. Streaming companies have been racing to better compete with heavyweights such as Netflix Inc. and Walt Disney Co. Hollywood studio MGM agreed to sell itself to Amazon.com Inc. in late May for around $6.5 billion. Earlier in May, AT&T and Discovery Inc. reached a deal to combine their media assets into a new, publicly traded company.
A sale of Hello Sunshine would be a milestone in Ms. Witherspoon’s three-decade career, which has included major roles in films including “Legally Blonde,” “Wild” and “Election.” Ms. Witherspoon won the Academy Award for best actress in 2006 for her performance as June Carter in “Walk the Line,” the 2005 biopic of country music legend Johnny Cash.
Hello Sunshine also has a popular book club, Reese’s Book Club, which earlier this year introduced a free app, and Ms. Witherspoon frequently uses her Instagram feed to promote its monthly books. Hello Sunshine receives a portion of the revenue from book purchases that result when members click through to e-commerce sites from its app. The company has corporate partnerships as well.
WHO Urges Covid-19 Treatment With Roche and Sanofi Anti-Inflammatory Drugs
The recommended drugs, Actemra and Kevzara, target the haywire immune response to infections
The World Health Organization recommended that certain hospitalized Covid-19 patients be given a type of anti-inflammatory drug found to reduce the risk of death by 13% in the sickest patients when taken in combination with steroids.
The global public-health agency updated its Covid-19 treatment guidelines on Tuesday to strongly recommend that people with severe or critical disease be given drugs tocilizumab and sarilumab to combat the haywire inflammatory immune reaction of some patients.
The drugs are designed to block a protein called interleukin-6, or IL-6, that is thought to play a role in the hyper-inflammation experienced by some Covid-19 patients.
The WHO said the drugs are the first found to be effective against Covid-19 since the agency recommended the use of steroids in September.
“Patients severely or critically ill with Covid-19 often suffer from an overreaction of the immune system, which can be very harmful to the patient’s health,” the WHO said in a statement. “Interleukin-6 blocking drugs—tocilizumab and sarilumab—act to suppress this overreaction.”
The WHO said patients should be given either tocilizumab, sold under the brand-name Actemra by Roche Holding AG’s RHHBY 0.72% Genentech unit, or Sanofi SA SNY -1.79% and Regeneron Pharmaceuticals Inc.’s REGN -0.24% sarilumab, which has the brand name Kevzara.
Still, the WHO raised concerns about the price and availability of the drugs in low- and middle-income countries. The agency called on the drugs’ manufacturers to reduce prices and increase supplies, especially in countries where infections are surging.
“IL-6 receptor blockers remain inaccessible and unaffordable for the majority of the world,” WHO Director-General Tedros Adhanom Ghebreyesus said.
Companies are working on coronavirus booster shots, as some early studies suggest antibody levels against Covid-19 wane with time, making boosters more necessary. We explore what that means for individual consumers. Illustration: Laura Kammermann/The Wall Street Journal
The list price of Actemra is about $2,300 per dose, a Genentech spokeswoman said. The company already markets an intravenous form of the drug that can be used to treat hospitalized Covid-19 patients.
A Sanofi spokeswoman said Kevzara’s U.S. list price is about $1,830 a dose. The company doesn’t currently market a form of the drug that can be given with an IV.
Researchers began studying IL-6 drugs early in the pandemic but a number of large studies failed to show the drugs worked or produced inconclusive results.
Positive data from trials conducted by U.K. researchers in recent months, however, has helped rekindle interest and led regulators to reconsider authorizing their use.
The U.S. Food and Drug Administration last month cleared Roche’s Actemra for emergency use in certain hospitalized patients when used in combination with steroids.
Sanofi and Regeneron don’t plan to seek FDA authorization for Kevzara in severe or critically ill Covid-19 patients because their studies didn’t show a statistically significant benefit, the Sanofi spokeswoman said. The companies previously said they didn’t anticipate conducting further studies of Kevzara for Covid-19.
Sanofi is in discussion with the WHO and national health authorities about how to best support patients who might benefit from IL-6 blockers, the spokeswoman said. However, the spokeswoman noted that Kevzara isn’t authorized for Covid-19 by any health authorities. Because of Kevzara’s lengthy and complex manufacturing process, Sanofi’s priority is to maintain continuous supplies for patients taking the drug for its approved purpose of treating rheumatoid arthritis, the spokeswoman said.
The WHO’s revised treatment recommendations coincided with new research into the drugs’ effectiveness.
The WHO said its researchers found, in a review of 27 clinical trials including more than 10,000 patients, that the drugs reduced the odds of death by 13% compared with standard care alone in severely-ill or critical patients.
The data were published on Tuesday in the Journal of the American Medical Association.
Across all patients studied, the risk of death was 21% for patients who received the IL-6 blockers in combination with steroids, compared with an assumed 25% death among those who received usual care or placebo, the researchers said.
Two University of California, San Francisco, researchers—Michael Matthay, a doctor treating respiratory-failure patients, and infectious-disease specialist Annie Luetkemeyer—said in an editorial accompanying the study that IL-6 drugs hold promise for hospitalized patients with worsening disease who require substantial oxygen assistance “but are not yet merited for widespread use among patients with mild disease nor with prolonged invasive mechanical ventilation.”
How Mutations Have Shaped the Covid-19 Pandemic
The Delta variant is rapidly taking over the U.S. Here is a look at how SARS-CoV-2 has evolved, frustrating efforts to contain it
The Delta variant of the Covid-19 virus is quickly becoming the dominant type of coronavirus in the U.S., making it one of most aggressive variants to take hold in the country.
Delta is the latest in a series of variants that have spread throughout the U.S. Like all viruses, coronaviruses mutate as they reproduce. Some of these genetic changes make them better at infecting human cells or evading our immune defenses. As newer, better-adapted variants emerge, they push aside earlier versions of the virus. Here is a look at how this process has played out across the U.S. since the start of the pandemic.
A.1
Descended from the ancestral version of the Covid-19 virus that was first detected in China, the A.1 lineage is associated with some of the earliest cases of Covid-19 in the U.S., including the outbreak in Washington state that was first detected in January 2020. Its numbers diminished as other variants took hold in the country.
B.1
Associated with the early 2020 outbreak in northern Italy, the virus developed a mutation called D614G, which helped make it better at infecting cells, allowing it to outcompete earlier variants. The B.1 lineage went on to become the dominant version both globally and in the U.S.
B.1.2
Derived from B.1, the B.1.2 variant came to account for more than 40% of U.S. samples of the new coronavirus by late last year, as it spread rapidly in the South and Southwest. Since then, its prevalence has shrunk steadily.
Regional variants: Epsilon and Iota
As U.S. Covid-19 cases were hitting new highs last winter, scientists detected the increased presence of two variants in New York and California.
The variants are now referred to as Epsilon (for California’s) and Iota (for New York’s). The World Health Organization began calling significant variants by letters of the Greek alphabet to destigmatize countries in which they were first detected.
The Epsilon variant was first identified in California in January. It has a mutation called L452R, which may make it better at infecting cells. Studies suggest Epsilon is about 20% more transmissible than early versions of the virus. By February, the variant accounted for 15% of samples nationwide.
The Iota variant began circulating in New York as early as November. It has a mutation called E484K, which may help it evade the body’s immune defenses. By April, Iota accounted for 40% of positive Covid-19 tests in New York City and 15% of samples nationally.
Alpha
First detected in December in the U.K., the Alpha variant combines an arsenal of mutations that help make it about 50% more transmissible than early versions of the virus. One of these, P681H, may facilitate the virus’s entry into cells. Alpha reached the U.S. in January. By March, it had pushed aside other variants to become the dominant type nationally.
Delta variant
The variant was first detected in India last October, where it helped fuel a devastating Covid-19 surge that set records for new infections and deaths. Delta has several of the mutations found in other variants, as well as related mutations affecting the same stretches of genetic code. Researchers think it is about 60% more transmissible than the Alpha variant.
The variant has spread to more than 70 countries.
Based on genome samples, Delta is edging out Alpha in the U.S. From the last week of May to the third week of June, Delta’s prevalence increased almost six-fold as Alpha’s dropped by more than 40%.
As Delta expands its footprint in the U.S., its potential toll on public health remains uncertain. Studies suggest that the Pfizer and AstraZeneca vaccines help reduce rates of hospitalization among patients infected with the variant. But with less than half the country fully vaccinated, many could still be at risk, particularly in parts of the South where vaccination rates are low.
Binance ‘temporarily suspends’ payments from EU’s Sepa network
Latest block comes after flurry of regulatory pushbacks against crypto exchange
Binance said it will suspend euro bank deposits from one of Europe’s key payments networks in the latest sign of how the crypto firm is losing key connections to the conventional financial system following a regulatory crackdown.
In an email to users on Tuesday, the exchange said that from 8am universal co-ordinated time on Wednesday, customers would no longer be able to deposit funds through the Single Euro Payments Area, or Sepa, schemes. Its move was due to “events beyond our control”, the exchange said.
The network, an EU project that aims to harmonise euro payments across the region, allows consumers to send euros across three dozen countries.
Binance, which typically accesses Sepa through payment intermediaries, described the move as “temporary”. But the restriction marks the latest prohibition on customers moving funds on to the exchange from conventional banks and other types of financial accounts. Deposits through the UK’s Faster Payments network have also been disabled over the past week. Barclays, one of the region’s biggest lenders, said on Monday that it is barring UK clients from buying cryptocurrencies on the exchange using bank cards.
Withdrawals are still possible through Sepa and Faster Payments, according to Binance’s website. The European Payments Council, which runs Sepa, could not immediately be reached for comment.
Clear Junction, a payments processor that has provided Binance access to both Faster Payments and Sepa, did not immediately respond to a request for comment.
Regulators around the world have been cracking down on the sprawling company, which has processed more than $5tn in trades this year and says it lacks a formal headquarters.
The UK’s financial watchdog last month said Binance is not authorised to run a crypto asset operation in the country, while Japan recently warned the exchange that it was doing unauthorised crypto business with Japanese citizens. Thailand has launched a criminal investigation into the company, while the Cayman Islands, where Binance is incorporated, has said the group is not licensed to do crypto business in the jurisdiction.
Binance customers have been able to circumvent bars on depositing traditional currencies by transferring their digital coins from another crypto exchange or cryptocurrency wallet.
Binance added that users were still able to buy coins and assets on their credit and debit cards. It was “working hard to find a solution with our partners”, it added.
The exchange also allows customers to transfer euro payments through a network called Sofort, which is widely used in Germany, Austria and Switzerland.
Binance confirmed the authenticity of the email to clients, but declined to comment on its relationship with payment partners.
South Korean regulators crack down on IPOs as fears of bubble rise
Tencent-backed Krafton scales back bumper listing on concerns over rich valuations
South Korean regulators are stepping up scrutiny of big initial public offerings as rich valuations prompt concerns over bubbles in the Asian market.
Krafton, the company behind global hit game PlayerUnknown’s Battlegrounds, last week lowered its IPO price more than 10 per cent and cut the deal size by almost a quarter under pressure from financial regulators. Krafton, which is backed by Chinese internet group Tencent, had sought to raise $5bn in what was expected to be Korea’s largest-ever listing.
The listing’s decreased ambitions came as South Korea’s IPO market heads for a record year fuelled by retail investors, who often expect companies to double on their trading debuts. Gaming, biotech and shipbuilding companies are rushing to go public as the Kospi index trades near all-time highs.
But some listings have stoked concerns about stretched valuations. Shares in Hybe, the company behind K-pop superstars BTS, and internet group Kakao Games, initially fell sharply following listings last year.
Krafton reduced its IPO size to Won4.3tn ($3.8bn) after Korea’s Financial Supervisory Service asked for more information on how it came up with its listing price, which gave it a market capitalisation of about Won24tn. Krafton expects the Seoul listing, which will no longer be South Korea’s biggest ever, to happen on August 10.
“We asked the company to clear some uncertainty that can affect investor judgment,” said an FSS official. “We need more information on how the company calculated its IPO pricing and whether there are specific similarities with companies in comparison.”
Krafton’s price-to-earnings ratio, a gauge used by investors to value stocks, has been estimated at 40.4 times 2020 earnings, compared with 30.8 for its more profitable local competitor NCSoft.
Following the FSS request, Krafton refiled its IPO prospectus and admitted investment risks related to its dependence on PUBG, which generated 97 per cent of its first-quarter revenues.
“We’re trying to lengthen the game’s life cycle and develop new games but if sales of Battlegrounds fall, that could negatively affect our earnings and financial status,” the company said. It also dropped comparisons between itself and the Walt Disney Company and Warner Music Group from the prospectus.
“Companies tend to price their IPOs at higher prices relative to their fundamentals, given strong demand out there,” said Hwang Sei-woon, a researcher at Korea Capital Market Institute. “Regulators are concerned about possible criticism from investors if the companies fail to live up to the hype.”
Concerns about high valuations have intensified since Hybe raised more than $4bn in an IPO last year when it was known as Big Hit Entertainment, and ecommerce company Coupang’s $3.5bn listing in New York in March.
SD Biosensor, a Covid-19 test kit maker that plans to go public this month, has slashed its IPO price range almost 40 per cent after receiving a similar FSS warning.
There were also concerns among analysts over the valuation of Kakao Bank, an internet-only lender, which plans to raise as much as $2.3bn in an IPO at the end of the month. That would propel its expected market cap past Korea’s big traditional lenders.
“It is not desirable for regulators to intervene with the IPO pricing, which should be decided by the market,” said Hwang. “But IPO prices are likely to get lower as the current high valuations mean limited upside potential.”
UK railway reforms lack urgency, says parliamentary watchdog
Report questions ‘over-optimism’ in Whitehall over capacity to deliver ‘once in a generation’ overhaul
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Reforms of the UK’s railways risk being undermined by a lack of urgency and a convincing plan to encourage passengers back after the pandemic, according to a report from the parliamentary spending watchdog.
The House of Commons public accounts committee said that while the Department for Transport was aware of the need for wholesale improvement of the rail industry, it was “concerned that the department has neither the necessary urgency nor appreciates the scale of the task ahead”.
The British railway sector is on the cusp of the biggest shake-up to its model since the 1990s, after ministers recognised the need for a complete overhaul of the franchise system.
The DfT unveiled plans in May for a new state-run rail body in a White Paper. The Great British Railways will oversee both trains and track infrastructure and will pay private companies to run services on tightly specified contracts.
The parliamentary report, released on Wednesday, said the White Paper was the first step towards much-needed change but warned its implementation “carries significant risks”. It questioned whether there was “over-optimism” in Whitehall over the capacity to deliver the “once in a generation” reform.
“There is everything to play for in delivering a rail system that delivers for passengers and encourages greener travel,” said Meg Hillier, chair of the committee and an opposition Labour MP.
“But there are still many moving parts and a huge challenge to balance costs. The government needs to show it can act with urgency and put passengers’ experience at the centre of its reforms,” she added.
The committee’s report also questioned the new system of contracts on which train operating companies have been put on an interim basis, which largely pass fare and revenue risk to the taxpayer.
Ministers believe they had no option but to move rapidly to a new funding structure to keep trains running during the pandemic and have made changes to the model over the past year. But the committee said it was not clear whether the new system would “fairly distribute risk between government and operators”.
The evidence for the report was taken before the White Paper was released. The DfT said its plans would end “a fragmented, unsustainable system” and that contracts were subject to “rigorous scrutiny to protect taxpayers”.
“Our proposals will ensure greater value for money for taxpayers and a better deal for passengers — with affordable fares and the punctual, reliable services they deserve as people return to the railways,” the department said.
The committee also said a “targeted and timely intervention” is needed to get people back on to trains as part of the recovery from the pandemic, particularly as passengers are returning to cars faster than to public transport.
Ministers have unveiled more flexible ticketing to reflect new hybrid working patterns, but the committee also called for the railways to be better joined up with other modes of other public transport. Without that, there was a risk of a “car-led” recovery that would jeopardise net zero targets, the MPs said.
The committee also said it was “disappointed” with progress on electrification to help decarbonise the railways and questioned whether Network Rail would be able to meet its financial efficiency targets.
UK households face energy bills surcharge to fund nuclear plants
Ministers plan legislation for new financing model to underpin building of £20bn Sizewell C reactor
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British households face paying a surcharge on their energy bills to pay for new nuclear power stations in the UK as the government draws up legislation to underpin the new financing plan.
Ministers aim to unveil legislation in the autumn that would enable Sizewell C, a £20bn nuclear power plant, proposed by France’s EDF for England’s east coast, to go ahead through a financing model called the regulated asset base, said several people briefed on the government’s thinking.
This model would mean that energy bill payers start contributing towards the cost of the plant at Sizewell in Suffolk long before it generates any electricity.
Boris Johnson has said he wants the government to reach a final investment decision on “at least one” new nuclear power station before the next general election as the UK strives towards a 2050 net zero emissions target.
The prime minister last year endorsed nuclear as an important source of low-carbon power generation alongside wind and solar.
With 3.2 gigawatts of electricity generation capacity, Sizewell C would produce enough power for 6m households and could contribute to Britain’s energy supply for more than six decades.
The regulated asset base financing model is commonly used for large infrastructure projects in the UK, such as the Thames Tideway “super sewer” in London, because it cuts the cost of capital, but it has yet to be applied to complex nuclear power stations.
Under the model, owners of a power station could add chunks of the value of a partly built plant to what would be its regulated asset base in stages during the risky construction phase. They could then charge an agreed regulatory return on this value to UK households through their energy bills, in a move designed to cover financing costs.
State-backed EDF has said the steady returns guaranteed by the regulated asset base model would allow it to attract low-risk investors such as pension funds and would lead to overall savings for consumers.
But the model is deeply unpopular with nuclear sceptics, who have said it would expose consumers to construction risks, notably any cost overruns.
EDF is planning to use a design called the European Pressurised Reactor at Sizewell C, but budgets have spiralled at other projects deploying similar technology, including the Hinkley Point C plant under construction in Somerset.
The Department for Business, Energy and Industrial Strategy said: “New nuclear will play a crucial part in this government’s plans to achieve a secure, low-carbon, affordable energy future.
“The government is continuing to explore a regulated asset base funding model with nuclear project developers, which remains a credible option to help secure private investment and cost consumers less in energy bills long term.”
The Treasury is supportive of the regulated asset base model, said several people briefed on the department’s stance. The Treasury declined to comment.
EDF Energy, the French utility’s UK arm, has been lobbying the government for legislation to underpin the regulated asset base model.
Simone Rossi, chief executive of EDF Energy, told a Reuters event last month that legislation was “an essential prerequisite for [Sizewell C] to be enabled” and that it was now “really, really essential”.
Executives at EDF have made clear that the company will not shoulder all the construction costs and risks of another nuclear power station, as it has with Hinkley Point C.
EDF and its junior partner in Hinkley Point C, the Chinese state-owned company CGN, are financing the plant in return for a generous electricity price of £92.50 per megawatt hour guaranteed by the government.
The price, which was controversial with environmental groups, was agreed in 2012 and rises in line with inflation.
UK ministers entered formal negotiations with EDF over the financing of Sizewell C in December. The government said at the time that consideration would be given “to the potential role of government finance in construction, provided there is clear value for money for consumers and taxpayers”.
Stephen Thomas, emeritus professor of energy policy at the University of Greenwich, said he imagined that the government would have to take a “strategic stake” in Sizewell C “as a signal to investors that this won’t be allowed to collapse, and ditto EDF”.
It is not yet clear what role CGN will play in Sizewell C. CGN is financing 20 per cent of the development costs of the Suffolk plant alongside EDF but some Conservative MPs are opposed to Chinese involvement in critical UK infrastructure. CGN declined to comment.
Closing Stock Market SummaryThe S&P 500 declined 0.2% on Tuesday in an uneven session, snapping a streak of seven straight record closes. The benchmark index opened at a marginal all-time high, then dipped as much as 0.9% into negative territory before cutting its losses in the afternoon.
The Nasdaq Composite (+0.2%) set intraday and closing record highs with a modest gain, while the Dow Jones Industrial Average (-0.6%) and Russell 2000 (-1.4%) underperformed but closed off their lows. Declining issues outpaced advancing issues by roughly a 2:1 margin at the NYSE and Nasdaq.
Peak growth concerns were attributed to the broader decline, as the June ISM Manufacturing Index decelerated to 60.1% (Briefing.com consensus 63.0%) from a record-high 64.0% in May and a study out of Israel suggested that Pfizer's (PFE 39.27, -0.46, -1.2%) COVID-19 vaccine was less effective in preventing contraction of the Delta variant versus previous strains.
These growth concerns were manifested in some rotation out of value and into growth stocks; the sharp declines in the cyclical S&P 500 energy (-3.2%), financials (-1.6%), materials (-1.4%), and industrials (-0.9%) sectors; weaker oil ($73.42, -1.83, -2.4%) and copper ($4.25/lb, -0.03, -0.5%) prices; and a six-basis-point decline in the 10-yr yield to 1.37%.
The information technology (+0.4%) and consumer discretionary (+0.8%) sectors closed higher, largely due to sizable gains in Apple (AAPL 142.02, +2.06, +1.5%) and Amazon.com (AMZN 3675.74, +164.76, +4.7%). The real estate (+0.9%) and utilities (+0.4%) sectors also closed higher, benefiting from the lower rates.
The 4.7% move in Amazon shares was noteworthy, coinciding on the first trading day of Andy Jassy as CEO and amid news the Pentagon canceled the $10 billion JEDI cloud award that was originally given to Microsoft (MSFT 27.66, +0.01, unch).
Regarding the late-day comeback effort, it seems plausible that investors digested the news flow and decided to buy the dip in part due to a recognition that the market's record-setting streak happened despite the peak growth narrative. Others viewed today as a natural cool-down session for the market.
In other interesting developments, OPEC+ was unable to agree to further production increases, which temporarily boosted WTI futures to a six-year high, and China's DiDi Global (DIDI 12.49, -3.04, -19.6%) dropped 20% at the NYSE after its app was removed from app stores in China for violation of laws and regulation.
The 2-yr yield decreased three basis points to 0.21%. The U.S. Dollar Index increased 0.4% to 92.54.
Reviewing Tuesday's economic data, which featured the ISM Non-Manufacturing Index for June:
- The ISM Non-Manufacturing Index for June decreased to 60.1% (consensus 63.0%) from a record-high 64.0% in May. The dividing line between expansion and contraction is 50.0%. The June reading marks the thirteenth straight month of growth for the services sector.
- The key takeaway from the report is the understanding that services sector activity is still running at a fast pace, although it has moderated since May with some of the slowdown driven by services companies experiencing difficulties with employee turnover and finding qualified candidates.
- The final reading for the June IHS Markit Services PMI checked in at 64.6, which was slightly lower from the preliminary reading of 64.8.
Looking ahead, investors will receive the weekly MBA Mortgage Applications Index, the JOLTS report for May, and the FOMC Minutes from the June meeting on Wednesday.
- S&P 500 +15.6% YTD
- Russell 2000 +15.2% YTD
- Nasdaq Composite +13.8% YTD
- Dow Jones Industrial Average +13.0% YTD