US FINANCIAL MARKET

Stocks Slip to Start the Fourth Quarter – Wall Street Journal, 10/1/2021

• U.S. stocks slipped Friday on the first day of a new month and a new quarter, as the market continued to struggle with the collection of issues that drove it down earlier in the week.
• The Dow Jones Industrial Average—which snapped a five-quarter winning streak Thursday—was trading mostly flat.
• The S&P 500 lost 0.2% after the broad stocks index closed out its biggest monthly loss since March last year.
• The S&P had fallen 3.3% from Monday through Thursday, which would be its biggest decline since a 5.6% drop in late October 2020.
• On the economic front, U.S. consumer spending rose 0.8% in August, the Commerce Department said.
• The pickup signals the U.S. economic recovery is gaining steam heading into autumn.
• Investors though are still contending with lingering worries over property giant China Evergrande Group and whether Congress can resolve its battles over U.S. spending plans.
• House Democrats delayed plans to vote on a roughly $1 trillion infrastructure bill Thursday, as they came up short on reaching agreement around a separate social policy and climate package.
• Surging prices for natural gas in Europe and Asia have raised concerns that the bout of inflation will last longer than many money managers had expected. Meantime, rising energy costs are expected to take a toll on growth in the world economy.
• Energy prices cooled somewhat Friday. Futures for U.S. crude oil rose 0.1% to $75.11. Dutch natural-gas futures—which have surged almost fivefold in 2021 and are the benchmark in European gas markets—slipped 1.3% to 96.50 euros a megawatt-hour.
• That is equivalent to about $112 a megawatt-hour.
• The combination of central bank tightening and rising prices has sent bond yields higher this week.
• On Friday, however, the yield on 10-year Treasury notes fell to 1.483% from 1.528% the day before. Yields move in the opposite direction to bond prices.
• Overseas markets also retreated. The Stoxx Europe 600 dropped 0.4%, led lower by shares of banks, oil-and-gas companies and basic-resources producers.
• In Asia, Japan’s Nikkei 225 lost 2.3% and South Korea’s Kospi fell 1.6%. Markets in Hong Kong and mainland China were closed for a holiday.

Merck Surges as Covid Pill Looks to Ease Hospital Strains – Bloomberg, 10/1/2021

• Merck shares posted their biggest gain in 12 years after the company’s experimental pill slashed the risk of getting seriously ill or dying from Covid-19 in a study, findings that could eventually yield a simple way to treat many virus patients before they ever reach the hospital.
• The drug, known as molnupiravir, reduced the risk of hospitalization or death by 50% in an interim analysis of a late-stage clinical trial, Merck and partner Ridgeback Biotherapeutics LP said in a statement on Friday.
• The study results were so encouraging that Merck and closely held Ridgeback, in consultation with independent trial monitors and the U.S. Food and Drug Administration (FDA), elected to stop enrolling patients and begin the process of gaining regulatory clearance.
• If the medication reaches the market, it would mark an important milestone in the pandemic.
• While there are several drugs available to treat Covid-19, they can be either cumbersome to give to patients, or intended for use in only the most seriously ill.

DHL Raising Rates for U.S. Shippers by 5.9% – Wall Street Journal, 10/1/2021

• DHL Express plans to raise rates for shipments for U.S. customers by an average of 5.9% starting Jan. 1, effectively matching a FedEx price increase for next year in an action that will raise costs for parcel shippers.
• The company, which operates mostly international delivery services in the U.S. with limited domestic operations, increased rates by an average of 4.9% for 2021, and by 5.9% on average for 2020.
• FedEx last month said it would raise its prices across its services next year by an average of 5.9%, the first time in eight years that the carrier or rival United Parcel Service Inc. went beyond a 4.9% annual increase.
• UPS hasn’t announced its plans for rates in 2022.

GM auto sales fall for first time in four quarters – Reuters, 10/1/2021

• General Motors on Friday reported a drop in U.S. auto sales for the first time in four quarters, hit by worsening semiconductor chip shortages and low inventories.
• Chip shortages and supply chain disruptions have crimped production at automakers worldwide, forcing them to cut production and in some cases, to produce vehicles without chips and park them at their facilities.
• “While supply has been constraining sales in recent months, underlying demand conditions remain strong,” said Elaine Buckberg, GM’s chief economist.
• The No. 1 U.S. automaker said third-quarter sales fell to 446,997 vehicles, down 218,195 vehicles from a year earlier.

Lordstown Motors to Sell Former GM Factory in Ohio to Foxconn – Wall Street Journal, 10/1/2021

• Electric-truck maker Lordstown Motors said Thursday it plans to sell its auto factory in Ohio to contract assembler Foxconn Technology Group, marking a major pivot for the cash-strapped startup as it works to bring its first pickup to market.
• The two companies have entered into a nonbinding agreement for Lordstown to sell the facility and property, with the exception of certain assets, for a purchase price of $230 million, said Lordstown Motors Chief Executive Daniel Ninivaggi.
• Lordstown Motors said Thursday that it has hired Jefferies LLC to advise the company on its financing options.
• The EV maker said it has a cash balance of $210 million to $240 million as of Sept. 30.

Zoom’s Nearly $15 Billion Acquisition of Five9 Rejected by Shareholders – Wall Street Journal, 10/1/2021

• Zoom Video Communications’ nearly $15 billion bid to acquire contact center company Five9 was shot down Thursday, dashing a major expansion plan for a video-conferencing powerhouse that has battled scrutiny over its perceived ties to China.
• Five9 issued a news release saying that the deal failed to gain enough votes from its shareholders and that the merger plan had been “terminated by mutual agreement” between the two companies.
• The rejected bid comes after proxy advisory firm Institutional Shareholder Services recommended Five9 shareholders vote against the acquisition, highlighting concerns about Zoom’s slowing growth as many people go back to more in-person meetings.
• Glass, Lewis & Co., another proxy advisory firm, also advised Five9 shareholders to vote against the deal over similar concerns.

Lumber Prices Stage a Late Season Rally – Wall Street Journal, 10/1/2021

• Futures are up almost 40% since late August, while pricing service Random Lengths said that its framing composite index, which tracks on-the-spot sales, has added 27%.
• Analysts and industry executives don’t expect the gains to be the start of a wild ride like the one in spring that sent two-by-fours into orbit and then plunging back to earth.
• Yet, the recent upturn shows how some of this year’s surge in the price of raw materials is lingering.
• At $627.50 per thousand board feet, lumber futures are nearly as expensive as they ever were before the pandemic.
• Analysts say prices need to climb higher to balance supply with demand.
• That could be a shock to builders and other buyers expecting market-equilibrium lumber prices to be closer to the $357 that futures averaged between 2015 and 2019.

Amid supply chain snarls, retailers pitch early holiday shopping – Reuters, 10/1/2021

• Target, Pottery Barn, Ulta Beauty, Gap and PacSun are among retailers promoting holiday decor and gifts as early as mid-September amid a global supply-chain logjam that threatens to limit availability of some merchandise later during the holiday season.
• Americans are expected to spend about $1.3 trillion this holiday season, a 7% to 9% increase over last year, according to Deloitte.
• Black Friday, the day after Thanksgiving, generally marks the start of the season in the United States, although major retailers typically start advertising holiday merchandise in early November.
• Target is launching holiday promotions between Oct. 10 and 12, compared to Oct. 13 last year.
• Pottery Barn’s Instagram posts as of Sept. 17 feature $250 Christmas wreaths.
• It is pushing out holiday messages several days earlier than in 2020, and more than a month earlier than in 2019.
• The company was unavailable to comment on the timing of its holiday advertising.
• Gap is previewing its gift guides in October in hopes of prodding shoppers to begin making purchases before the holiday gift-giving scramble.
• PacSun, which began planning for the holidays about four weeks earlier this year, will hold its pre-holiday digital campaign events in mid-October, similar to its timing in 2020, President Brieane Olson said.

Global equity funds see higher outflows on rate hike concerns -Lipper – Reuters, 10/1/2021

• Outflows from global equity funds ramped up in the week to Sept. 29 on expectations that major central banks would lift interest rates soon amid concerns that inflation could persist for longer.
• According to data from Lipper, investors sold a net $1.21 billion in global equity funds in the week, compared with net selling of $174 million in the previous week.
• U.S. equity funds faced net selling of $6.24 billion, however Asian and European equities drew net purchases of $3.25 billion and $0.15 billion respectively.
• Global bond funds saw net inflows for the 10th week in a row, although purchases fell 22% compared with the previous week.
• Among commodity funds, energy funds saw their first net inflow in seven weeks at $25 million, while precious metals funds faced outflows of a net $931 million.