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Daily Market Report | October 19, 2021

US FINANCIAL MARKET

U.S. Stocks Rise as Companies Report Earnings – Wall Street Journal, 10/19/2021

  • U.S. stocks rose as investors parsed earnings reports for insight into how companies are coping with inflation and supply-chain disruptions.
  • Shares of Johnson & Johnson rose 2.3% after the company logged a larger profit in its third quarter than a year earlier, lifted by higher sales in its pharmaceutical, medical-device and consumer-health divisions.
  • Travelers shares climbed 2.4% after the insurance company beat estimates for revenue and core income per share.
  • Procter & Gamble shares fell 1.6% after the consumer-product giant said it was raising prices on a host of household staples, as costs for freight and raw materials rose faster than anticipated.
  • In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 1.609% Tuesday from 1.583% Monday..
  • Fresh data showed that construction of new homes in the U.S. decreased in September after rising in August. Builders have been caught between strong demand from buyers—spurred in part by low interest rates—and shortages of materials, labor and lots.
  • Overseas, the pan-continental Stoxx Europe 600 rose 0.1%, while most major indexes in Asia closed higher.
  • China’s Shanghai Composite gained 0.7%, and Hong Kong’s Hang Seng climbed 1.5%.
  • South Korea’s Kospi and Japan’s Nikkei 225 each added about 0.7%.

FDA Nearing Approval for Mixing and Matching Covid-19 Booster Shots – Wall Street Journal, 10/19/2021

  • The Food and Drug Administration is moving to soon allow people to receive booster shots that are different from their first Covid-19 vaccine doses, people familiar with the matter said.
  • The FDA won’t recommend any booster over the others but will permit people to get a booster shot that is different from the shot they first received, one of the people familiar with the matter said.
  • The FDA is seeking to authorize mixing and matching as soon as this week, the people familiar with the matter said. The FDA is also expected to approve Moderna and Johnson & Johnson boosters this week, according to a person familiar with the matter.

Higher Sales Across Divisions Lift Johnson & Johnson as Healthcare Sector Recovers – Wall Street Journal, 10/19/2021

  • Johnson & Johnson’s sales climbed in the latest quarter compared with the same stretch of last year, reflecting a return of more doctor’s visits and medical procedures after the pandemic disrupted the industry.
  • The company’s revenue rose 11% year over year in the third quarter to $23.34 billion.
  • Its results are closely watched in the healthcare sector because its products span multiple categories.
  • Medical-device sales grew 7.6% amid a higher level of surgical procedures.
  • Pharmaceutical sales were up 14%, the result of more prescriptions of drugs for multiple myeloma, inflammatory diseases and other conditions.
  • Johnson & Johnson’s sales of consumer products such as Tylenol, Motrin and skin-care lines rose 5.7%.
  • Earnings were $1.37 a share—up from $1.33 a year ago—or $2.60 a share after stripping out one-time items.
  • Wall Street analysts had been forecasting sales of $23.64 billion and adjusted earnings of $2.35 a share, according to FactSet.
  • After the latest quarter’s earnings growth, Johnson & Johnson raised its forecast for full-year profits. It now expects adjusted earnings of $9.77 a share to $9.82 a share in 2021, compared with its July outlook of $9.60 a share to $9.70 a share.

Procter & Gamble to Raise Prices on More Staples – Wall Street Journal, 10/19/2021

  • Procter & Gamble is raising prices on a host of household staples as costs for freight and raw materials rise faster than the consumer-product giant anticipated.
  • During the latest quarter, P&G’s net sales rose 5% to $20.3 billion, higher than the consensus forecast of $19.8 billion from analysts polled by FactSet.
  • P&G said organic sales, a measure that strips out deals and currency moves, increased 4% in the quarter ended Sept. 30.
  • Profit fell slightly. The company said core earnings per share fell 1% to $1.61.
  • Costs are rising faster than P&G forecast. P&G now expects to spend $2.1 billion more on transportation and raw materials such as pulp and resin for the fiscal year ending June 2022. The company in July predicted a $1.9 billion increase.
  • Despite the higher expenses, P&G maintained its sales and profit outlooks for the year, saying increased revenue and cost reductions will enable the company to stay on track.

Kansas City Southern Stock Slips on Third-Quarter Earnings Miss – The Street, 10/19/2021

  • Kansas City Southern posted a split decision Tuesday as the U.S. railroad operator missed Wall Street’s third-quarter earnings expectations but beat revenue estimates.
  • Revenue registered $744 million, up 13% from a year earlier and surpassing the FactSet consensus $722.4 million.
  • The revenue increase resulted primarily from mix, higher fuel surcharge, and the strengthening of the Mexican peso against the U.S. dollar, the company said.
  • Overall, carload volumes were down 3% from a year ago, due primarily to such factors as auto-plant shutdowns driven by the global microchip shortage and increased regulation of refined fuel product shipments into Mexico, resulting in supply-chain disruptions.
  • Kansas City Southern reported income of $156.5 million, or $1.71 a share, compared with $190.2 million, or $2.01 a share, a year earlier.

Halliburton posts Q3 profit as drilling rebounds, eyes jump in customer spending – Reuters, 10/19/2021

  • U.S. oilfield firm Halliburton on Tuesday posted its third consecutive quarterly profit and said customer spending in the United States could jump 20% next year, as stronger oil prices and drilling activity boost demand for services and equipment.
  • Houston-based Halliburton posted adjusted net income attributable to the company of $248 million, or 28 cents per share, in the three months ended Sept. 30, up from the $100 million or 11 cents per share reported a year earlier.
  • Its third-quarter profit was in line with analysts’ estimates, while revenue of $3.86 billion was slightly under consensus expectations of $3.912 billion, according to Refinitiv IBES.
  • “I see a multi-year upcycle unfolding. Structural global commodity tightness drives increased demand for our services, both internationally and in North America,” Halliburton Chief Executive Officer Jeff Miller said.

Travelers Profit Falls 20% on Hurricane Ida, Auto Claims – Wall Street Journal, 10/18/2021

  • Property-casualty insurer Travelers posted a 20% decline in net income in the third quarter, weighed down by storm damage and car-wreck related claims.
  • The company said it recorded net written premiums, a closely watched measure of revenue, of $8.32 billion, up 7% compared with the prior-year quarter, with growth in all its key segments.
  • The company, part of the Dow Jones Industrial Average, reported a net income of $662 million, a decline from $827 million in the prior-year quarter.
  • Travelers said its third-quarter catastrophe losses totaled $501 million pretax, compared with $397 million in pretax losses a year earlier. This year’s losses were primarily from Ida but also severe storms in several regions of the U.S.
  • The company’s personal-insurance unit, which combines results for car and home insurance, posted a loss of $2 million, down from income of $392 million in the year-earlier period.

Instacart to Buy Smart Grocery Cart Startup in Biggest Deal Yet – Bloomberg, 10/19/2021

  • Instacart is acquiring Caper AI, a startup that makes self-checkout shopping carts, for $350 million in cash and stock in an effort to tap more areas of growth ahead of the online grocery giant’s anticipated public stock offering.
  • New York-based Caper, which was founded in 2016, uses image-recognition cameras and weight sensors to automatically detect items as they’re placed in the cart, eliminating the need to individually scan groceries.
  • The “smart” carts are also equipped with a payment terminal that allows customers to check out without having to wait in line.
  • The acquisition is Instacart’s fifth since its founding in 2012, and the largest yet as the company ramps up investments to boost its technology offerings for retailers.

Foreign Investment Rebounds but Strained Factories Miss Out – Wall Street Journal, 10/18/2021

  • Foreign investment by businesses around the world surged in the first six months of 2021 as rich economies rebounded strongly from the effects of the pandemic, but fresh bets on manufacturing fell despite widespread signs that capacity isn’t up to meeting resurgent demand.
  • The United Nations on Monday said businesses made new overseas investments valued at $852 billion in the first half of this year, an increase of $373 billion from the same period a year earlier. Of that total, three-quarters went to rich countries as businesses responding to the prospect of a speedy recovery driven by the rapid deployment of effective Covid-19 vaccines.
  • While foreign investment in rich countries more than doubled compared with the first half of 2020—with investment in the U.S. up 88%—businesses cut their new commitments in the world’s poorest countries by 9%.
  • Unctad said it is now likely that the flow of foreign investment this year will exceed pre-pandemic levels. The agency previously had expected that to happen in 2022 or later.

US ECONOMY & POLITICS

U.S. Housing Starts Fell Last Month, Led by Multifamily Slowdown – Bloomberg, 10/19/2021

  • U.S. housing starts decreased in September, driven by a pullback in multifamily construction, as lingering supply-chain constraints, shortages of skilled labor and elevated materials costs continue to challenge builders.
  • Residential starts fell 1.6% last month to a 1.56 million annualized rate, according to government data released Tuesday.
  • The median estimate in a Bloomberg survey called for a 1.62 million pace.
  • Applications to build, a proxy for future construction, fell 7.7% to an annualized 1.59 million units in September, the largest monthly decline since February. The drop was driven by a sharp decrease in multifamily permits.
  • Single-family starts were unchanged in September at an annualized 1.08 million units as multifamily starts — which tend to be volatile and include apartment buildings and condominiums — decreased 5% to 475,000.
  • The number of single-family homes authorized for construction but not yet started — a measure of backlogs — edged lower to 144,000 in September but remains near a 15-year high.
  • The report also showed the number of homes under construction but not yet completed rose to the highest since 1974. Regionally, residential starts fell in two of four regions, led by a 27.3% drop in the Northeast. Starts rose in the Midwest and West.

Manchin Casts Doubt on Oct. 31 Deadline to Act on Biden Plan – Bloomberg, 10/19/2021

  • Democratic Senator Joe Manchin said there’s little chance that Congress can complete work on President Joe Biden’s economic agenda by the end of the month deadline set by his party’s leaders.
  • “There is an awful lot to go, I don’t know how that would happen,” Manchin, whose vote is pivotal in the 50-50 Senate, told reporters Monday at the Capitol. “Once you come to a meeting of the minds, you might be able to work something out.”
  • Manchin’s vote will be needed to pass Biden’s plan, which includes provisions to fund child care, programs for the elderly and climate measures mostly funded by higher taxes on the wealthy and corporations.
  • Oct. 31 also is the date that a United Nation’s climate conference opens in Glasgow, which Biden is scheduled to attend.
  • But Manchin also said he opposes a clean power plan that has been a major priority for the White House and Biden’s goal of de-carbonizing the nation’s electric grid by 2035.
  • A few Democrats have said they won’t support legislation without substantial provisions to deal with climate change.

Yellen Says Debt-Limit Deal Will Keep Government Funded Through Dec. 3 – Wall Street Journal, 10/19/2021

  • Treasury Secretary Janet Yellen on Monday said the debt-limit deal enacted by Congress last week will allow the government to keep paying its bills through Dec. 3.
  • In a letter to Capitol Hill leaders, Ms. Yellen said the deal “provides only a temporary reprieve” and urged lawmakers to take further action to ensure that the government can continue to borrow money.
  • If Congress doesn’t raise the debt ceiling, the government would have to suspend payments to beneficiaries or delay interest payments, which would constitute a government default.

U.S. Lawmakers Step Up Efforts to Adopt Tougher Tech Laws – Wall Street Journal, 10/19/2021

  • Legislation to curb the influence of big technology companies, including putting new restrictions on online content, is starting to gain traction in Congress as lawmakers narrow their targets and seek to build on public attention.
  • A bipartisan group of senators including Amy Klobuchar (D., Minn.) and Chuck Grassley (R., Iowa) came out last week in favor of legislation that would prohibit dominant platforms from favoring their own products or services, boosting similar efforts already under way in the House.
  • Leaders of the House Energy and Commerce Committee, meanwhile, offered their own far-reaching proposal to discourage social-media companies from promoting harmful content.
  • One of the measures with the best chance of passage is an update to the 1998 Children’s Online Privacy Protection Act, which has bipartisan support among lawmakers and is also backed by children’s advocacy groups.

EUROPE & WORLD

In Tackling China’s Real-Estate Bubble, Xi Jinping Faces Resistance to Property-Tax Plan – Wall Street Journal, 10/19/2021

  • Chinese President Xi Jinping has made no secret of his desire to deflate China’s property bubble. But according to people with knowledge of government deliberations, he is facing resistance over a measure aimed at curbing housing speculation: a nationwide property tax.
  • China has experimented with a tax on some properties in just a couple of cities during the past decade. Earlier this year, Mr. Xi assigned to Han Zheng, the most senior of China’s four vice premiers, the task of rolling out the levy much more widely, these people say.
  • But Beijing is now settling for a limited tax plan because of strong pushback, while a proposal involving state-provided affordable housing is emerging as an alternative.
  • The pushback on the tax is one sign that taking on a sector that perhaps more than any other defines modern China carries risks for Mr. Xi—of both alienating Chinese households and sowing dissent within the party.

Key Evergrande deal to sell stake in unit put on hold – sources – Reuters, 10/19/2021

  • China Evergrande Group’s deal to sell a 51% stake in its property services unit has been put on hold, two people with knowledge of the matter said, in a blow to the embattled developer’s hopes of avoiding a potentially disruptive default.
  • Evergrande, teetering on the brink of collapse with more than $300 billion in debt, was in talks to sell the stake in Evergrande Property Services to smaller rival Hopson Development Holdings for around HK$20 billion ($2.6 billion), sources previously told Reuters.
  • However, the deal, which was set to be the biggest asset sale for the company, has been put on hold as it has yet to win the blessing of the Guangdong provincial government, which is overseeing Evergrande’s restructuring, one of the people said on Tuesday.

Russia Signals Europe Won’t Get Extra Gas Without Nord Stream 2 – Bloomberg, 10/19/2021

  • Russia is signaling that it won’t go out of its way to offer European consumers extra gas to ease the current energy crisis unless it gets something in return: regulatory approval to start shipments through the controversial Nord Stream 2 pipeline.
  • In exchange for upping supplies, Russia wants to get German and European Union approval to begin using the pipeline to Europe, according to people close to state-run gas giant Gazprom and the Kremlin.
  • As surging fuel costs have caused increasing economic havoc, pressure has grown on Russia, Europe’s largest supplier, to pump more. Extra Russian gas is seen as the main way to avoid an even deeper supply crunch in the middle of the winter.
  • But with relations with Europe in the deep freeze after years of sanctions and other tensions, there’s no appetite in the Kremlin to do any favors.
  • Although exports to Europe are up this year from last year’s depressed levels, they lag those seen in 2019, according to the Oxford Institute for Energy Studies.

Port of Rotterdam freight volumes rise 15% as economy recovers – Reuters, 10/19/2021

  • Freight volumes in the port of Rotterdam increased 15% on a yearly basis in the third quarter as international trade continued to recover from its COVID-19 slump, Europe’s largest sea port said on Tuesday.
  • Trade flows to and from Rotterdam have been almost 9% higher in the first nine months of the year, with strong growth in almost all segments, the port said.
  • “These figures show that the economy is continuing its upward path. Factories, businesses and logistics are operating flat out again to meet increased demand,” the port’s Chief Executive Allard Castelein said.
  • Strong consumer spending has pushed container freight back to pre-pandemic levels, the port said, while transport prices rose sharply.
  • As a consequence, the number of containers arriving in Rotterdam increased faster than the total amount of goods shipped, as transport of relatively heavy, low-value goods declined.

Factmonster – TODAY in HISTORY

  • British General Cornwallis surrendered to General George Washington at Yorktown, Va., bringing an end to the last major battle of the American Revolution. (1781)
  • French troops under Napoleon Bonaparte began their retreat from Moscow. (1812)
  • The United States imposes a partial embargo on goods exported to Cuba. (1960)
  • The Senate passed a bill (78?22) making Martin Luther King, Jr.’s, birthday a public holiday. (1983)
  • The stock market crashed on what came to be known as “Black Monday.” Stocks dropped a record 508 points, or 22.6%, topping the drops on October 28 and 29 in 1929 that ushered in the Great Depression. (1987)

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All investing involves risk including loss of principal. No strategy assures success or protects against loss. Any economic forecasts set forth may not develop as predicted.

All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

Material presented is excerpts derived from third party content and you may need a subscription to access the full the content. The views and opinions expressed are those of the authors and do not necessarily reflect the views of Pence Wealth Management or LPL Financial.

Prior to making any investment decision please consult your financial advisor regarding your specific situation.

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