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Daily Market Report | October 20, 2021

US FINANCIAL MARKET

Stocks Edge Higher Amid Big Tech Earnings – Wall Street Journal, 10/20/2021

  • U.S. stocks rose amid corporate results that are providing insight into the effects on the technology industry of inflation and supply-chain disruptions, including from the global chip shortage.
  • Shares of Verizon climbed 2% after the telecommunications giant raised its full-year outlook.
  • Biogen rose 0.6% after the pharmaceutical company increased its full-year sales and earnings guidance.
  • Tesla and IBM are set to report earnings after markets close.
  • Netflix shares slipped 0.6%. The company said it added more new users than expected in the last quarter, but its co-chief executive also apologized for defending a controversial comedy special by Dave Chappelle.
  • Novavax fell 13% after a report that the pharmaceutical company was running into difficulties manufacturing a Covid-19 vaccine that met regulators’ quality standards.
  • The Federal Reserve will release its twice-quarterly report about economic conditions, known as the Beige Book, at 2:30 p.m. ET.
  • Early Wednesday, the yield on the benchmark 10-year Treasury note reached 1.673%, its highest level since May, and fell back down to 1.634%, even with its Tuesday level.
  • Overseas, the pan-continental Stoxx Europe 600 advanced 0.3%. Nestlé shares climbed 2.8% after the Swiss food giant upgraded its full-year sales outlook.
  • In Asia, major benchmarks were mixed.
  • The Shanghai Composite Index edged down 0.2%, while Hong Kong’s Hang Seng Index rose 1.4%.

Novavax Shares Plunge on Report of Covid-19 Vaccine Manufacturing Problems – Wall Street Journal, 10/20/2021

  • Shares of Novavax fell sharply Wednesday after a report said that the pharmaceutical company was running into difficulties manufacturing a Covid-19 vaccine that met regulators’ quality standards.
  • The stock fell as much 24% before trimming some losses in morning trading.
  • Politico said the methods the company uses to test the purity of its vaccine have fallen short of regulators’ standards, with the publication citing multiple people familiar with Novavax’s difficulties.
  • Novavax issued a statement Wednesday saying it expects to complete ongoing regulatory submissions over the next few weeks in the U.K., Europe and Canada.
  • It said it has already filed for authorization in India and for emergency use with the World Health Organization.
  • The company said it plans to file its vaccine for emergency-use authorization in the U.S. by the end of 2021.

Netflix Adds More Users Than It Predicted, Boosted by ‘Squid Game’ – Wall Street Journal, 10/19/2021

  • Netflix added 4.4 million memberships in the third quarter, more than the company had forecast, as viewers flocked to the streaming platform with the return of popular series and new hits such as “Squid Game.”
  • The Los Gatos, Calif.-based streaming company said revenue rose 16% to $7.48 billion, in line with Wall Street’s expectations.
  • In the U.S. and Canada, Netflix ended the third quarter with 74.02 million subscribers, an improvement of 73,000 from the end of the second quarter.
  • The Asia Pacific region was among the company’s strongest in terms of new members, responsible for half of the additions in the quarter, adding 2.2 million subscribers to the total tally.
  • The new additions bring Netflix’s total paid global subscriber base to 213.6 million.
  • The company had forecast that it would add 3.5 million memberships in the three-month period.
  • In its letter to investors, Netflix said “Squid Game” has become its most popular show ever, with 142 million households sampling the title. It is the No. 1 program in 94 countries, it said.
  • Netflix’s profit increased to $1.45 billion, or $3.19 a share, from $790 million, or $1.74 a share, in the same period last year.
  • Its bottom-line topped analysts’ earnings estimates of $2.57 a share, according to FactSet.
  • For the current holiday quarter, Netflix projects 8.5 million new subscribers, $7.71 billion in revenue and earnings of 80 cents a share.

United Airlines’ Profit Dented by Delta Variant – Wall Street Journal, 10/19/2021

  • United Airlines Holdings said the spread of the more-contagious variant of Covid-19 slowed flying during the third quarter but hasn’t derailed its recovery.
  • The airline’s total quarterly revenue of $7.8 billion was down 32% from the 2019 third quarter but outpaced what analysts had anticipated.
  • United on Tuesday reported a third-quarter profit of $473 million, including the final $1.1 billion in government grants the airline received to pay workers during the quarter.
  • Excluding the government aid, United reported a loss of $329 million, compared with a profit of over $1 billion in the third quarter of 2019.
  • United said it plans to increase its international flying capacity by 10% in 2022 while keeping domestic capacity flat.
  • The airline said last week that it would add a number of new trans-Atlantic routes next year.

5G speeds up Verizon’s postpaid user additions, helps raise profit view – Reuters, 10/20/2021

  • Verizon Communications said on Wednesday it added more postpaid phone subscribers than expected in the third quarter and raised its annual earnings forecast, as more Americans switched to 5G-supported devices.
  • In the reported quarter, Verizon’s total operating revenue rose 4.3% to $32.9 billion, but missed analysts’ average estimate of $33.2 billion, according to Refinitiv data.
  • Verizon added 429,000 postpaid phone subscribers in the quarter, above FactSet estimates of 302,300.
  • Excluding items, it earned $1.41 per share, beating expectations of $1.36.
  • The company raised its 2021 adjusted earnings per share expectations to between $5.35 to $5.40 from its prior guidance of $5.25 to $5.35.

Anthem lifts 2021 earnings view after third quarter beat – Reuters, 10/20/2021

  • Anthem on Wednesday became the second major U.S. health insurer to raise its full year profit forecast, after beating third-quarter profit estimates on the back of lower-than-expected medical costs.
  • The company also beat Wall Street quarterly revenue estimates, helped by growth in its government health plans and IngenioRx pharmacy benefit management businesses.
  • Indianapolis-based Anthem said its benefit expense ratio – the percentage of premiums paid for medical services – was 87.7% in the third quarter, better than the 88.38% forecast by analysts according to Refinitiv IBES data.
  • Net income for the quarter soared nearly seven-fold to $1.51 billion, or $6.13 per share, compared with a year earlier, when the group booked over $1 billion in charges related to business optimization and a settlement in an antitrust case.
  • Excluding one-time items, Anthem earned $6.79 per share in the quarter ended Sept. 30, ahead of the average analyst estimate of $6.37.
  • The number two U.S. health insurer raised its outlook for the third time this year, saying it now expected 2021 adjusted profit to exceed $25.85 per share, up from an earlier forecast of more than $25.50.

Abbott raises annual earnings outlook as COVID-19 test sales rebound – Reuters, 10/20/2021

  • Abbott Laboratories increased its full-year adjusted earnings forecast on Wednesday as a rebound in COVID-19 test sales and strength in its mainstay businesses helped the medical device maker beat quarterly profit estimates.
  • Revenue for the third quarter was $10.93 billion, compared with estimates of $9.56 billion.
  • Third-quarter sales at Abbott’s diagnostics business grew 48.2% to $3.91 billion, with coronavirus test-related sales at $1.9 billion, up from $1.3 billion in the second quarter.
  • On an adjusted basis, the company earned $1.40 per share, beating estimates of 95 cents per share, according to Refinitiv IBES data.
  • Abbott raised its outlook for 2021 adjusted earnings from continuing operations to between $5.00 and $5.10 per share, compared with its previous forecast of $4.30 to $4.50 per share.

Biogen’s New Alzheimer’s Drug Meets Slow Rollout – Wall Street Journal, 10/20/2021

  • Uptake for Aduhelm, the newest approved drug for Alzheimer’s disease, remained slow over the summer, and sales could be minimal through the end of the year, drugmaker Biogen said Wednesday.
  • Overall, Biogen’s sales declined to $2.78 billion in the third quarter, from $3.38 billion in the same three months of 2020.
  • After stripping out one-time items, Biogen’s profit was $4.77 a share, compared with $5.64 a share a year ago.
  • Wall Street analysts were expecting sales of $2.67 billion and adjusted earnings of $4.09 a share, according to FactSet.
  • Most of the company’s revenue comes from drugs for multiple sclerosis and spinal muscular atrophy.
  • Sales of those drugs mostly declined or were flat year over year.
  • The Cambridge, Mass.-based pharmaceutical company said its revenue from Aduhelm was $300,000 from July through September, the first full quarter since its approval. That brought total sales for the drug this year to $2 million.
  • Analysts had been expecting sales of Aduhelm to reach $12 million in the quarter, according to FactSet.
  • The company said it expects full-year sales to reach $10.8 billion to $10.9 billion, with a per-share profit of $18.85 to $19.35.
  • That was a rise from the forecast the company had offered in July.

Baker Hughes profit misses estimates amid supply chain woes – Reuters, 10/20/2021

  • Oilfield firm Baker Hughes reported quarterly profit that fell short of analyst expectations on Wednesday, in part due to global supply chain issues, sending its shares down sharply in early trading.
  • Revenues of $5.093 billion also fell short of expectations of $5.321 billion.
  • Its digital solutions unit was also negatively impacted by supply chain problems related to semiconductors, boards and displays, executives said on the call.
  • Higher costs for chemicals, which have not yet been fully passed onto customers, also weighed on earnings.
  • Baker Hughes reported adjusted net income of $141 million, or 16 cents per share, in the third quarter, missing forecasts for 21 cents per share, according to Refinitiv IBES data.

Nasdaq profit beats on robust demand for investment products – Reuters, 10/20/2021

  • Nasdaq on Wednesday reported a third-quarter profit that topped Wall Street estimates, helped by strong demand for its investment-related products and a jump in the number of initial public offerings.
  • The company’s net revenues rose 17% to $838 million in the quarter. Market services revenue rose 15% to $295 million.
  • Revenue from the company’s solutions segments jumped 19% jump to $541 million, boosted by strong demand for its products tied to Nasdaq’s indexes.
  • Nasdaq reported an adjusted profit of $1.78 per share for the quarter ended Sept. 30.
  • Analysts were expecting $1.72 per share, according to IBES data from Refinitiv.
  • The exchange operator bought back $475 million worth of common shares in the quarter, it said.

Bank of New York Mellon’s Profit Rises on New Business, Asset Growth – Wall Street Journal, 10/20/2021

  • Bank of New York Mellon reported a higher third-quarter profit, as a robust stock market, busy clients and new business all helped lift revenue.
  • Total revenue rose 4.9% to $4.04 billion, beating analysts’ average estimate of $3.95 billion.
  • Fee revenue climbed 8% to $3.39 billion.
  • The bank’s asset-servicing arm boosted revenue by 3% and is on pace to increase its new business wins by almost 40% this year, Mr. Gibbons said. “And we are winning larger, more complex deals that span our product offering,” he said.
  • BNY Mellon finished the quarter with $45.3 trillion in assets under custody, up 17% from a year earlier.
  • BNY Mellon’s investment-management business posted its sixth-straight quarter of net inflows, where new client money outpaced losses. Revenue rose by 12%, and assets under management jumped 13% to $2.3 trillion.
  • Net interest revenue, or what the custody bank pocketed on loans, fell 9% to $641 million.
  • BNY Mellon said Tuesday that net income, attributable to common shareholders, rose to $943 million, or $1.04 a share, in the third quarter from $876 million, or 89 cents, in the year-earlier period.

Micron to Expand Chip Production With $150 Billion in Capital Spending Over Coming Decade – Wall Street Journal, 10/20/2021

  • The memory-chip maker Micron Technology plans to boost investment to more than $150 billion over the coming decade to cater to booming demand and is urging Congress to pass legislation that would aid domestic plant expansion.
  • Micron Chief Executive Officer Sanjay Mehrotra said some of the planned spending would go toward expansion of existing chip-production facilities and potential construction of new ones.
  • Mr. Mehrotra said he was supportive of U.S. government proposals from the Biden administration and lawmakers to boost domestic chip production, including bills in Congress that would provide grants for plant investments and long-term tax incentives.
  • “The economics needs to work,” he said, adding that U.S. factories can be 35% to 45% more expensive than in low-cost countries.
  • Intel in September pledged up to around $95 billion for more chip-making capacity in Europe, after detailing U.S. expansion plans earlier this year.
  • Taiwan Semiconductor Manufacturing, the world’s leading contract chip maker, said this month it would build a chip manufacturing plant in Japan. Samsung Electronics and GlobalFoundries have also announced capital investment plans this year.

Facebook Plans to Rebrand Company With New Name, Verge Says – Bloomberg, 10/20/21

  • Facebook, facing intense scrutiny over its business practices, is planning to rebrand the company with a new name that focuses on the metaverse, according to The Verge.
  • Chief Executive Officer Mark Zuckerberg is expected to discuss the name change at the company’s Connect conference on Oct. 28, the website reported on Tuesday.
  • The original Facebook app and service may remain unchanged in their branding, positioned under a parent company that counts other billion-user brands like Instagram and WhatsApp in its portfolio.

U.S. Online Holiday Sales Seen Growing at Slower Pace This Year – Bloomberg, 10/20/21

  • This holiday season, e-commerce growth is expected to be the lowest in at least six years as comparisons get tougher amid widespread adoption of online shopping and consumers’ eagerness to return to stores.
  • Online sales are expected to grow 10% in the November-December period from a year ago and reach $207 billion in the U.S., according to a study from Adobe Analytics. That’s down from the 33% increase in holiday e-commerce shopping that took place last year, compared to 2019, and represents the slowest pace of growth since at least 2015.
  • Globally, sales are seen rising 11% to $910 billion.
  • Online prices for goods have increased for 16 consecutive months, Adobe Analytics found.
  • This Christmas season, discounts are expected to fall into the 5% to 25% range, compared to the historical average of 10% to 30%.

US ECONOMY & POLITICS

Biden Identifies Cuts to Social Policy and Climate Bill – Wall Street Journal, 10/20/2021

  • Democrats accelerated efforts to strike a deal on their social-policy and climate legislation, as President Biden identified programs that party lawmakers could eliminate or slim down during a flurry of meetings at the White House Tuesday.
  • Mr. Biden said that two years of tuition-free community college likely won’t be in the bill, according to several attendees and people familiar with the meetings.
  • He also acknowledged that opposition from Sen. Joe Manchin (D., W.Va.) to a clean electricity program would require Democrats to abandon it, according to lawmakers at the meetings.
  • Democrats have differed over how to trim the size of the package, with progressives pushing for the party to reduce the duration of many of the bill’s different programs and preserve them all, even if just for a short duration. Democrats said that Mr. Biden endorsed the progressive approach during the meetings on Tuesday.
  • As part of that strategy, Mr. Biden discussed extending the expanded child tax credit for just one year, rather than the three or four years that Democrats have previously called for, according to several people familiar with the meetings.
  • Mr. Biden indicated to Democrats that the compromise would include universal prekindergarten, according to several people familiar with the discussion, though the funding for other programs could be cut.
  • Democrats have discussed reducing the number of weeks covered under a proposed federal paid-leave program, which would offer 12 weeks of leave as currently drafted.
  • More broadly, some lawmakers said Mr. Biden implied that the bill’s total spending wasn’t likely to top $1.9 trillion, on the low end of the range that he had previously floated to them.

Democrats Try to Salvage IRS Bank-Account Reporting With Scaled-Back Plan – Wall Street Journal, 10/20/2021

  • Democrats scaled back a proposal to require banks to send to the IRS more information about customers’ accounts in hopes of salvaging the idea, raising to $10,000 from $600 the key reporting threshold and adding an exemption that would spare many workers and retirees.
  • The core idea remains—banks would be required to provide information that could help the IRS more easily find tax cheating. But amid opposition from the financial-services industry and many Republicans, Sens. Ron Wyden (D., Ore.) and Elizabeth Warren (D., Mass.) proposed changes on Tuesday that would reduce the number of accounts affected.
  • An annual report would be generated when a bank account’s inflows include more than $10,000 not tied to wages or other exempted benefits.
  • Banks, credit unions, Republican lawmakers, business owners and conservative groups such as Americans for Tax Reform have been building opposition to the plan for months.
  • They warn that the requirement would put taxpayer information at risk if IRS computer systems were breached and they have described the proposal as snooping and surveillance.

SALT Cap Changes Are in Play as Democrats Debate, Key Chair Says – Bloomberg, 10/20/2021

  • House Ways and Means Committee Chair Richard Neal said that addressing the cap on the federal deduction for state and local taxes is still on the table in discussions over a sweeping tax and spending bill.
  • “Yes, it has to be,” Neal said when asked if SALT was still up for discussion on what could be included in the multitrillion-dollar bill.
  • Democrats have been narrowing differences over elements of the package.
  • Lawmakers from high-tax states including New Jersey and New York have pushed for an expansion or removal of the $10,000 cap on SALT deductions that was imposed in the Republican tax bill of 2017.

U.S. takes aim at China’s ‘unfair trade practices’ at WTO review – Reuters, 10/20/2021

  • The United States said on Wednesday that China’s industrial policies “skew the playing field” against imported goods and services, as well as their foreign providers, and that Washington would pursue all means to secure reforms.
  • Other “unfair trade practices” include preferential treatment for state enterprises, data restrictions, inadequate enforcement of intellectual property rights and cyber theft, U.S. charge d’affaires David Bisbee told the World Trade Organization’s first review of China’s trade policy since 2018.
  • “We also cannot ignore reports of China’s use of forced labor in several sectors,” he said without elaborating.
  • The United States would pursue all available tools to try to persuade China to make needed changes, he added.

EUROPE & WORLD

Covid-19: Irish press pause on some Covid-19 reopening plans – BBC, 10/20/2021

  • The Republic of Ireland is to pause some of the measures that had been planned for the reopening of society on Friday 22 October.
  • It follows a rising number of Covid-19 cases in hospitals. It is being made even though 89% of those aged over 12 are vaccinated.
  • Originally, the 22 October plan was to end the use of Covid certificates for dining and drinking indoors; to reopen nightclubs and to allow outdoor events without restriction.
  • Cabinet ministers have decided to continue the use of Covid certificates for the hospitality sector and for entrance to night clubs which will now open for the first time since March 2020.

UK doctors call for urgent return of Covid restrictions as experts monitor new mutation – CNBC, 10/20/2021

  • U.K. medical professionals have issued an urgent plea to the British government to reimpose some Covid restrictions due to the increased level of infections and hospitalizations in the country.
  • Last Friday, the U.K.’s Health Security Agency issued a report in which it said “a delta sublineage newly designated as AY.4.2 is noted to be expanding in England” and that it was monitoring the subtype.
  • Officials at the NHS Confederation, which represents organizations across the U.K. healthcare sector, issued a statement calling on the government “to introduce measures, such as mandatory face coverings in crowded and enclosed spaces, without delay to keep people well and avoid the NHS from becoming overwhelmed this winter.”
  • They warned that the National Health Service “is seeing worrying increases in coronavirus cases in its hospitals and the community at a time when it is preparing for a busy winter period, its staff are close to burnout, and it is being expected to recover many of its services that were disrupted by the pandemic.”
  • The U.K. is currently recording between 40,000 and 50,000 new Covid cases a day and the number of hospitalizations and deaths is steadily rising, although at a much lower pace than earlier in the pandemic thanks to Covid vaccines, which greatly reduce the risk of severe infection, hospitalization and death.

Nestlé Sales Buoyed by Coffee, Pet Food – Wall Street Journal, 10/20/2021

  • Nestlé raised its full-year sales guidance for the second straight quarter, buoyed by strong demand for coffee and pet food, despite the continuing challenges of rising input costs and supply-chain snags.
  • The world’s largest packaged-food company on Wednesday reported a 6.5% rise in third-quarter organic sales growth, with revenue for the first nine months of the year coming in at 63.29 billion Swiss francs, equivalent to $68.60 billion.
  • It said e-commerce sales, another beneficiary since Covid-19 struck, were up 17% in the first nine-months of the year, even as out-of-home sales increased by 23%.
  • Nestlé said it increased prices by an average of 2.1% in the third quarter.
  • Nestlé said it now expected full-year growth between 6% and 7%, up from its previous guidance of between 5% and 6%.
  • Still, the company said its underlying trading operating-profit margin is expected to be around 17.5% for the full year, reflecting an initial delay between the rise in input costs and Nestlé’s ability to raise prices.

China’s New Home Prices Fall for First Time in Six Years as Rules Bite – Wall Street Journal, 10/20/2021

  • New home prices in China fell on a monthly basis for the first time in more than six years in September, new official data showed, as Beijing’s measures to curb housing speculation and cool the property sector begin to bite.
  • Average new home prices in 70 major cities edged down 0.08% in September from the previous month, China’s National Bureau of Statistics said Wednesday.
  • Though small, it is the first such month-on-month decline since March 2015, and follows August’s 0.16% increase.
  • Prices of new homes in China’s so-called third-tier cities fell 0.2% from the previous month, after remaining unchanged in August, the statistics bureau said.

China Takes the Brakes Off Coal Production to Tackle Power Shortage – Wall Street Journal, 10/20/2021

  • China is pulling out the stops to ease its worst power crunch in two decades, reversing course on earlier ambitions to curb coal use as it sets new policies to revive production and loosen imports of the electricity-generating fuel.
  • As winter looms, the nation’s top economic planner this week said it would use “all necessary means” to roll back record-high coal prices, including by using domestic laws that allow the government to limit profit and prices for key goods.
  • It has ordered all coal mines to operate at full capacity even during holidays, issued approvals for new mines and ordered major coal production bases in north and northwestern China to lower prices by 100 yuan a metric ton from Tuesday.
  • China’s rollback of restrictions on mining and imports of coal might help stem soaring global fuel prices that were driven up by factors including a post-pandemic economic recovery, transport bottlenecks and low stocks.

China Evergrande says $2.6 billion stake sale of property services unit falls through – Reuters, 10/20/2021

  • China Evergrande Group said on Wednesday a deal to sell a 50.1% stake in its property services unit has fallen through, delivering a blow to embattled developer’s hopes of avoiding a potentially disruptive default.
  • If it had gone through, the deal with a unit of Hopson Development to sell half of Evergrande Property Services would have been worth HK$20.04 billion ($2.58 billion), Evergrande said.
  • The parties said in separate filings to the exchange they were unable to agree on terms of the deal.
  • 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 for around HK$20 billion ($2.6 billion), sources have previously told Reuters.

Factmonster – TODAY in HISTORY

  • The Senate ratified the Louisiana Purchase. (1803)
  • Gen. Douglas MacArthur returned to the Philippines, 30 months after he said “I shall return.” (1944)
  • Jacqueline Kennedy married Aristotle Onassis. (1968)
  • During the Watergate scandal, Attorney General Elliot L. Richardson and Deputy Attorney General William B. Ruckelshaus resigned and special prosecutor Archibald Cox was dismissed by President Nixon in what came to be known as the “Saturday Night Massacre.” (1973)
  • Col. Muammar el-Qaddafi is killed by rebel troops in Surt, Libya, his hometown. (2011)

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