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Daily Market Report | October 4, 2021

US FINANCIAL MARKET

Stocks Fall as Investors Weigh Debt Ceiling, Evergrande – Wall Street Journal, 10/4/2021

  • U.S. stocks opened the week lower, as bond yields ticked up and investors weighed uncertainty about the debt ceiling and indebted property developer China Evergrande Group.
  • The S&P 500 dropped 1.2%, dragged down by shares of technology companies. The broad index closed last week down 2.2%. The Nasdaq Composite Index declined 2.1%. The Dow Jones Industrial Average lost 300 points, or 0.9%.
  • Investors are watching negotiations in Congress closely, as lawmakers debate the debt ceiling ahead of a deadline this month to raise it so the government can pay its bills. Meanwhile, Democrats are considering scaling back the next spending package to improve its chances of being passed. The Biden administration is also set to unveil its China trade policy following a review of import tariffs.
  • Shares of China Evergrande and its property-management unit halted trading in Hong Kong on Monday. The subsidiary said this was pending an announcement about a possible takeover bid.
  • Another Chinese developer, Hopson Development, also halted its shares. It said this was pending an announcement about a transaction involving an unnamed Hong Kong-listed target company.
  • The yield on the benchmark 10-year Treasury note ticked up to 1.503% Monday, from 1.464% Friday.
  • Overseas, the pan-continental Stoxx Europe 600 edged up around 0.2%.
  • In Asia, most major benchmarks pulled back. Hong Kong’s Hang Seng Index fell 2.2%, while Japan’s Nikkei 225 Index declined 1.1%. Markets in mainland China are closed until Friday for the Golden Week holiday.

Tesla vehicle deliveries hit another record in Q3, beats analysts’ estimates – Reuters, 10/4/2021

  • Tesla said on Saturday it had delivered a record electric cars in the third quarter, beating Wall Street estimates after Chief Executive Elon Musk asked staff to “go super hardcore” to make a quarter-end delivery push.
  • Tesla has weathered the chip crisis better than rivals, with its overall deliveries surging 20% in the July to September period from its previous record in the second quarter, marking the sixth consecutive quarter-on-quarter gains. .
  • Tesla delivered 241,300 vehicles globally in the July to September quarter, up 73% from a year earlier. Analysts had expected the electric-car maker to deliver 229,242 vehicles, according to Refinitiv data.
  • Tesla said it delivered 232,025 of its Model 3 compact cars and Model Y sport-utility vehicles and 9,275 of its flagship Model S and Model X cars to customers in the quarter.
  • Total production in the third quarter rose over 15% to 237,823 vehicles from the prior quarter.

Airlines Sees Covid-Related Losses Exceeding $200 Billion – Bloomberg, 10/4/2021

  • Airline losses from the coronavirus pandemic are set to surpass $200 billion as travel curbs weigh on corporate and long-haul demand well into 2022, according to the industry’s main lobby.
  • Carriers are poised to post a collective deficit of $11.6 billion next year, the International Air Transport Association said Monday in Boston at its annual meeting. The trade body also increased its loss estimate for this year, and revised upward the shortfall for 2020.
  • The combined $201 billion in net losses over the pandemic-blighted period eclipses close to nine years of industry earnings, based on IATA figures.
  • Passenger traffic — the number of people flying times the distance covered — is expected to reach 40% of pre-pandemic levels this year, rising to 61% in 2022, when the traveler tally should be 3.4 billion.
  • That’s similar to the customer figure for 2014, but about one-quarter down on the 2019 number.
  • Losses this year will total almost $52 billion, IATA predicts, worse than the $48 billion estimated in April, after flights remained limited through the normally lucrative northern summer.

OPEC Opts Against Big Output Boost, Pushing Oil Prices to Seven-Year High – Wall Street Journal, 10/4/2021

  • OPEC and a Russia-led group of oil producers agreed to continue increasing production in measured steps, delegates said Monday, deciding against opening the taps more widely, and driving crude prices to their highest levels since 2014.
  • Instead, the Organization of the Petroleum Exporting Countries and Russia said the group, which calls itself OPEC+, would lift its collective output by 400,000 barrels a day in monthly installments, part of a previously agreed plan to return output to pre-Covid-19 levels.
  • The decision sent oil prices sharply higher. West Texas Intermediate crude, the U.S. benchmark, rose 3% to $78.13.

Apple to Release New Watch on Oct. 15 Following Production Snags – Bloomberg, 10/4/2021

  • Apple Inc. set a release date of Oct. 15 for its latest smartwatch, a sign that it’s coping with production challenges that had dogged the new device.
  • The company plans to begin taking orders for the product — called the Apple Watch Series 7 — this Friday, Oct. 8, starting at 8 a.m. New York time. It will then hit stores a week later, Apple said in a statement on its website.
  • The Series 7 watch was unveiled on Sept. 14, but Apple left the release date vague at the time, saying it would be “later this fall.”
  • The device has a bigger display, marking the first time the company has enlarged the watch’s screen since the Series 4 three years ago.

GM-Backed Cruise Sees Robotaxi Unit Growing Past $50 Billion – Bloomberg, 10/4/2021

  • General Motors’s Cruise autonomous vehicle unit will tell investors this week that it sees a path for its ride-hailing business to reach $50 billion in revenue as it ramps up over the next couple of years, people familiar with the matter said. GM’s shares jumped the most in nearly three months.
  • Cruise Chief Executive Officer Dan Ammann is expected to say that the company plans to charge for rides as soon as next year and could expand in 2023 if Cruise gets the green light from California regulators.
  • The operation will take a starring role as GM makes a case to investors on Oct. 6 and 7 that its push into electric vehicles, self-driving software and connected technologies will soon start increasing the automaker’s revenue, said the people, who asked not to be named because the details haven’t been revealed.
  • Cruise, in which GM has a majority stake, hopes to start charging for rides next year with a modified version of the Chevrolet Bolt electric car.
  • Ammann is expected to say that if California Public Utility Commission approvals are obtained, the company could start offering shared ride services in 2023 with its Origin autonomous shuttle.

Semiconductor chip shortage could extend through 2022, Marvell CEO says – CNBC, 10/4/2021

  • The semiconductor chip shortage that is hamstringing the production of products ranging from cars and computers to appliances and toothbrushes will extend into 2022 and potentially beyond that, the CEO of semiconductor company Marvell Technology said.
  • While several chip producers have announced plans to expand factory capacity, Murphy, who noted his firm is fabless and works with contract manufacturers on its designs, said “that’s not going to kick in until 2023 and 2024 — so there’s this painful period.”
  • That is a more pessimistic view than some of Murphy’s chip industry peers, who have recently said they expect the shortage to wane next year as new factories open.

US ECONOMY & POLITICS

U.S. factory orders increase solidly as manufacturing keeps humming – Reuters, 10/4/2021

  • New orders for U.S.-made goods accelerated in August, pointing to sustained strength in manufacturing even as economic growth appeared to have slowed in the third quarter because of shortages of raw materials and labor.
  • The Commerce Department said on Monday that factory orders increased 1.2% in August. Data for July was revised higher to show orders rising 0.7% in July instead of gaining 0.4% as previously reported.
  • Orders shot up 18.0% on a year-on-year basis.
  • The Commerce Department also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, gained 0.6% in August instead of advancing 0.5% as reported last month.
  • Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the GDP report, rose 0.8%. Core capital goods shipments were previously reported to have increased 0.7% in August.

Democrats Weigh Cutting Programs or Reducing Scope to Trim $3.5 Trillion Bill – Wall Street Journal, 10/4/2021

  • Democrats, working to unite around a far-reaching social policy and climate bill, are weighing two different approaches to reduce its overall cost: eliminating proposed programs entirely or cutting their duration.
  • Mr. Biden told House Democrats that, after negotiations with centrists, he expects the overall tab to fall between $1.9 trillion and $2.3 trillion, according to people familiar with his remarks.
  • Progressive Democrats, who backed the $3.5 trillion level, acknowledged Sunday the need to scale back the legislation to reach a compromise, though they said there’s no agreement on how much.
  • To get to a lower spending range, some lawmakers, including progressives, are looking at shortening the timeline for the proposed spending, aides said, while others, including some centrists, want to focus the funds on a smaller number of programs.
  • Sen. Bernie Sanders (I., Vt.), who originally argued for spending beyond $3.5 trillion, said compromise is needed but $2 trillion was “too little.” Speaking on ABC’s “This Week,” he said, “What the president has said is that there’s going to have to be some give and take and I think that’s right.”

U.S. to Press China on Trade Pact, Keep Tariffs in Place – Wall Street Journal, 10/4/2021

  • The U.S. plans to launch new trade talks with China, but will maintain tariffs on Chinese imports as it presses Beijing to fulfill pledges to buy more U.S. goods and services, according to Biden administration officials.
  • The new initiative is set to be detailed in a policy address Monday by U.S. Trade Representative Katherine Tai, in what would be her first detailed remarks on trade between the world’s two largest economies since she took office in March.
  • Biden administration officials say they plan to keep the tariffs in place—and consider imposing additional levies—as leverage to get China to fulfill terms of the 2020 trade deal with the U.S.
  • A centerpiece of that deal was Beijing’s promise to boost its purchases of U.S. agriculture, energy products and manufactured goods. The pact called for China to increase purchases of goods and services by an extra $200 billion over the course of 2020 and 2021.
  • China missed the goal for goods purchases by nearly 40% in 2020, according to calculations from Chad Bown, a senior fellow at the Peterson Institute for International Economics who has been tracking the effort.
  • As of data for the first 8 months of the year, China is on pace to be 30% short of its goal in 2021.

EUROPE & WORLD

China Evergrande Unit Flags Possible Takeover Bid – Wall Street Journal, 10/4/2021

  • The $7 billion property-management unit of ailing developer China Evergrande Group said it could be the subject of a takeover bid, a deal that could bring in much-needed cash for its parent company.
  • Shares in both Evergrande and its management arm, Evergrande Property Services Group, were halted in Hong Kong on Monday. The subsidiary said the halt was pending an announcement concerning “inside information and a possible general offer for the shares of the company.”
  • A rival developer, Hopson Development Holdings, said Monday that its shares were halted pending an announcement about a transaction involving a Hong Kong-listed target company, which it didn’t name.
  • Hong Kong-listed Hopson is majority-owned by property billionaire Chu Mang Yee, a former local-government official in the mainland who cofounded the business in 1992. His daughter, Chu Kut Yung, succeeded him as chairman last year.

Fumio Kishida Is Elected Prime Minister of Japan – Wall Street Journal, 10/4/2021

  • Japan’s new prime minister, Fumio Kishida, called for more aggressive distribution of wealth to those with lower and middle incomes, including possible new cash handouts for people suffering during the pandemic.
  • While he hasn’t proposed any sharp departures from the policies of his predecessors, Mr. Kishida has taken a more liberal tone, in the American sense of the word, on the economy.
  • He says the world’s third-largest economy has a widening rich-poor gap that needs to be closed through distribution of wealth to those who are falling behind.
  • Mr. Kishida said he would consider cash handouts to single mothers, workers without steady jobs and others suffering during Covid-19. Last year the government distributed nearly $1,000 to every resident.
  • He also said his government would look at tax breaks for companies that use their cash stockpiles to raise workers’ salaries rather than only raising dividends.

Factmonster – TODAY in HISTORY

  • The International Herald Tribune was published for the first time. 1887
  • The Soviet Union launched the first artificial satellite, Sputnik, into orbit around the earth, ushering in the Space Age and Space Race. 1957
  • Pope Paul VI made the first visit to the Western Hemisphere by a reigning pope. He came to New York to address the UN General Assembly. 1965
  • The German parliament met for the first time since the reunification of Germany. 1990

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