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Daily Market Report | February 7, 2022

US FINANCIAL MARKET

U.S. Stocks Inch Higher Amid Earnings – Wall Street Journal, 2/7/2022

  • The S&P 500 edged higher Monday amid earnings from major companies including Hasbro and Tyson Foods, building on last week’s strong gains.
  • The broad stock-market gauge added 0.3%. The Nasdaq Composite climbed around 1%.
  • The Dow Jones Industrial Average hugged the flatline in morning trading.
  • Peloton jumped 26% after The Wall Street Journal reported that the stationary-bike company was drawing interest from Amazon and other potential suitors. Spirit Airlines added 16% after it said it was merging with Frontier Group.
  • Tyson Foods climbed 9.7% after it said it expected its sales for the year to be at the upper end of its guidance. Hasbro fell 3.2% after reporting revenue and profit that beat Wall Street’s estimates.
  • The yield on the benchmark 10-year Treasury note hovered at 1.925% Monday from 1.930% Friday.
  • Companies scheduled to post results this week include Pfizer and KKR on Tuesday and Uber Technologies and Walt Disney on Wednesday. Coca-Cola, PepsiCo and Twitter are slated for Thursday.
  • Overseas, the pan-continental Stoxx Europe 600 added 0.6%. European government bond yields extended last week’s gains as markets continued to price in hawkish signals from the European Central Bank’s press conference on Thursday.
  • Benchmark 10-year Italian and Greek bond yields rose to the highest levels since spring 2020.
  • In Asia, major benchmarks were mixed. The Shanghai Composite Index climbed 2% on reopening after China’s New Year holiday week, despite a private gauge of China’s services sector slipping to a five-month low.

Tyson Posts Higher Quarterly Profit on Price Increases, Strong Demand – Wall Street Journal, 2/7/2022

  • Profit rose more than expected at Tyson Foods in the three months through December, with strong demand and higher pricing offsetting challenges the meatpacker has faced from labor shortages and rising costs.
  • Overall, Tyson’s quarterly sales reached $12.93 billion, a rise from $10.46 billion in the same three-month period a year earlier.
  • Per-share earnings more than doubled to $3.07, or $2.87 after adjusting for one-time items.
  • Analysts surveyed by FactSet were expecting sales of $12.17 billion and adjusted earnings of $1.93 a share.
  • Tyson, which also produces brands such as Jimmy Dean, Hillshire Farm and Ball Park, sold 3.6% more chicken by volume year over year, backed by greater production and brisk demand.
  • Pork volumes were roughly flat year over year, while beef volume was down by 6.2%.
  • The company increased beef prices the fastest, by nearly a third year over year.
  • Chicken prices were 20% higher, while pork prices rose 13%.
  • Tyson said it is expecting revenue to come in near the top of a previously issued guidance range projecting $49 billion to $51 billion in sales this fiscal year.

Hasbro swings past estimates as Spider-Man movie fuels toy demand – Reuters, 2/7/2022

  • Hasbro trounced analysts’ estimates for quarterly revenue and profit on Monday, bolstered by demand for toys based on the latest Spider-Man movie and a rebound in its television production business.
  • Hasbro’s fourth-quarter net revenue rose 17% to $2.01 billion, beating analysts’ estimates of $1.87 billion. The jump came despite the company falling short on its target for holiday season inventory due to global supply-chain disruptions.
  • On an adjusted basis, the company earned $1.21 per share, topping estimates of 88 cents, according to Refinitiv IBES estimates, on price increases that helped offset a surge in costs.
  • Still, shares reversed from premarket to trade down 2% as the company warned it expects surging freight and raw material costs to pinch profit margins for most of this year, despite another round of price increases planned for the second quarter.

James Hardie sets higher profit view as U.S. housing market boom continues – Reuters, 2/7/2022

  • James Hardie, the world’s largest fibre cement maker, on Monday raised its annual profit forecast for the fourth time this fiscal year, and guided to even higher earnings next year, driven by a boom in the housing sector in North America.
  • Quarterly net sales were $900 million, up 22% from last year, with its North America segment contributing $644.9 million.
  • It also posted adjusted net income of $154.1 million in the December quarter, up from $123.3 million a year ago.
  • The Dublin-based firm said it now expects adjusted net income between $620 million and $630 million for fiscal 2022, up from its earlier forecast of $605 million to $625 million.
  • For fiscal 2023, it forecast adjusted profit of between $740 million to $820 million.

Peloton surges on reports of buyout interest from Amazon, Nike – Reuters, 2/7/2022

  • Peloton Interactive’s shares jumped 22% premarket on Monday after reports of takeover interest from Amazon.com and Nike in the exercise bike maker that recently lost a majority of its share gains made during the pandemic.
  • Amazon is exploring an offer for Peloton, a source told Reuters on Friday. The Financial Times also reported sportswear company Nike was weighing a bid for Peloton, which touched new records last year as its bikes sold like hot cakes during the pandemic when people were stuck at home.
  • Cowen analyst John Blackledge said Peloton’s management would not be receptive to a deal, as current CEO and president hold more than 50% of voting shares and are more likely to continue to pursue the company’s long-term strategy independently.

Frontier to Buy Spirit Airlines in Cash-and-Stock Deal – Wall Street Journal, 2/7/2022

  • Frontier Group Holdings agreed to buy Spirit Airlines for $2.9 billion in cash and stock in a deal that would create a discount airline juggernaut.
  • The companies valued the deal at $6.6 billion, including the assumption of net debt and operating leases.
  • Upon the deal’s close, Frontier will own about 51.5% of the combined company, and its chairman, William Franke, will become chair of the combined company’s board.
  • Shares of Spirit rose more than 12% in premarket trading Monday after the deal was announced, while Frontier stock fell more than 2%.
  • The two airlines said together they will be able to grow more quickly than they would apart, allowing them to bring additional cheap service to underserved routes in the U.S., Latin America, and the Caribbean and to hire an additional 10,000 workers by 2026.

Dating app owner Bumble buys France’s Fruitz in first acquisition – Reuters, 2/7/2022

  • Bumble said on Monday it has bought France’s Fruitz in its first acquisition, as the dating app company tries to strengthen its foothold in Europe, where it plays catch-up with Tinder owner Match Group.
  • Launched in 2017, Fruitz is a freemium dating app popular with Gen Z and used across Europe.
  • It allows users to convey their dating preferences through four fruit metaphors – cherries, grapes, watermelons, and peaches.
  • Data from research firm Apptopia showed that Bumble was downloaded about 2.4 million times in the United States during the fourth quarter, while Match reached 10.5 million downloads.

Tesla Subpoenaed by SEC About Complying With Musk Settlement – Bloomberg, 2/7/2022

  • Tesla received another subpoena from the U.S. Securities and Exchange Commission about a subject that keeps coming up: Elon Musk’s tweeting in 2018 that he was considering taking the carmaker private.
  • The SEC issued the subpoena Nov. 16, seeking information about Tesla’s governance processes and compliance with a settlement reached with the agency in September 2018, the company said in a regulatory filing.
  • Ten days before the SEC issued its November subpoena, Musk took an over-the-weekend Twitter poll asking whether he should sell 10% of his Tesla stake. The carmaker’s shares plunged 16% the following two trading days.
  • Tesla didn’t elaborate in its filing Monday about what prompted the SEC’s subpoena. Press officials for the agency declined to comment.

DP World posts 9.4% rise in 2021 container volumes – Reuters, 2/7/2022

  • Ports giant DP World on Monday reported a 9.4% rise in 2021 container volumes, though growth rates moderated in the fourth quarter which the Dubai state company said was expected due to the impact of COVID-19, inflation and supply chain issues.
  • DP World said it handled 77.9 million shipping containers across its portfolio with its Asia Pacific & India, and Americas & Australia regions both recording double digit growth.
  • Chairman Sultan Ahmed bin Sulayem said there had been an encouraging start to 2022 and that DP World expected the portfolio to “continue to deliver growth”.

US ECONOMY & POLITICS

U.S., Japan Set to Announce Pact to End Trump-Era Steel Tariffs – Bloomberg, 2/7/2022

  • The U.S. and Japan are set to announce an agreement Monday that will end tariffs imposed on Japanese steel under former President Donald Trump, people familiar with the situation said.
  • Washington will suspend the 25% levy on incoming steel imports from Japan up to a certain threshold, with anything beyond that still subject to additional charges, according to the people who declined to be identified because the details are private.
  • The solution mirrors the accord that the U.S. reached with the European Union in October that ended punitive measures on as much as $10 billion of each other’s goods.
  • The truce doesn’t cover aluminum imports, which remain subject to a 10% tariff, the people said.

Lawmakers Signal Stopgap Spending Bill Needed as Talks Continue – Wall Street Journal, 2/7/2022

  • Negotiators remained locked in talks about overall spending levels for the current fiscal year and special items such as Covid-19 funding, with lawmakers set to turn this week to a short-term bill to keep the government running if no deal is reached.
  • Senate Appropriations Committee Chairman Patrick Leahy (D., Vt.), Sen. Richard Shelby (R., Ala.) and their House counterparts have intensified their conversations in recent weeks for an omnibus spending bill, and Republicans presented a formal offer to Democrats on Wednesday for fiscal 2022 spending.
  • No breakthrough emerged, and lawmakers anticipate that Congress will need to pass another interim spending measure to keep the government operating beyond Feb. 18, when a current measure expires.
  • Rep. Jim Clyburn (D., S.C.), the majority whip, signaled that lawmakers were prepared to fall back on a continuing resolution to keep the government funded.

There’s Never Been a Worse Time to Buy a Home in a Poll of U.S. Households – Bloomberg, 2/7/2022

  • The share of Americans who say it’s a good time to buy a house hit an all-time low of 25% in a monthly Fannie Mae survey.
  • “Younger consumers — more so than other groups — expect home prices to rise even further,” said Doug Duncan, Fannie Mae’s chief economist. “They also reported a greater sense of macroeconomic pessimism.”
  • In the January survey, 69% of respondents said it’s a good time to sell, an all-time high in the series that dates back to 2010.
  • The lack of affordable houses, made even more acute by the Covid-19 crisis, is hitting the younger generations the hardest.
  • An analysis from Zillow Group showed that home prices are rising the fastest in family-friendly suburbs, a trend that’s set to persist as a record number of millennials approach what’s traditionally been home-buying age for Americans.
  • And the rental market isn’t helping either. The Fannie Mae survey found that consumers expect rents to increase by a record this year.

EUROPE & WORLD

Putin to Meet Macron as France Tries to Flex Diplomatic Muscle Over Ukraine – Wall Street Journal, 2/7/2022

  • When President Emmanuel Macron of France meets Russia’s Vladimir Putin on Monday he will embark on a round of shuttle diplomacy aimed at defusing the Ukraine crisis and opening an era for European countries to play a bigger role in the continent’s defense.
  • The diplomacy provides an opportunity for Mr. Macron to burnish his credentials as a statesman before he faces re-election in April. The French public has long expected its leaders—from Gen. Charles de Gaulle to former President Nicolas Sarkozy—to act with autonomy on the world stage.
  • French officials say Mr. Macron’s history with Mr. Putin allows him to play a unique role in mediating between Russia and the U.S. In a phone call with Mr. Macron last week, the Russian president described the Frenchman as a “quality interlocutor,” according to an aide to Mr. Macron.

Israel Launches Investigation Into Ballooning Spyware Scandal – Wall Street Journal, 2/7/2022

  • Israeli authorities launched a state inquiry on Monday into allegations that the country’s police illicitly used spyware to hack the phones of political activists, senior government bureaucrats and people close to former Prime Minister Benjamin Netanyahu.
  • The national investigation, led by the public security minister who oversees the police, adds a new dimension to a political firestorm here over Israelis being targeted by homegrown spyware that infects smartphones.
  • The investigation followed a report in Israeli newspaper Calcalist that police unlawfully targeted one of Mr. Netanyahu’s sons and two of his top communication aides, along with mayors, ministry officials and a leading businessman.
  • The uproar began in January with reports that police used spyware against political opponents of Mr. Netanyahu.
  • On Monday, the allegations prompted calls for a thorough investigation from across Israel’s political spectrum and from Israel’s own national police commissioner, Kobi Shabtai, who took office in January 2021, after the period of alleged wrongdoing.

Factmonster – TODAY in HISTORY

  • The 11th Amendment to the Constitution was ratified. (1795)
  • Disastrous fire destroyed more than 1,500 buildings in downtown Baltimore. (1904)
  • The Beatles arrived in the U.S. for the first time. (1964)
  • The Communist Party of the Soviet Union allowed other parties to compete for power. (1990)

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