US FINANCIAL MARKET
U.S. Stocks Open Higher on Earnings Optimism – Wall Street Journal, 10/25/2021
- U.S. stocks opened higher Tuesday amid a bumper day of earnings from some of America’s largest corporations, including major technology names.
- The Dow Jones Industrial Average added 98 points, or 0.2%, shortly after the opening bell while the S&P 500 rose 0.4%, a day after the broad index hit its latest in a string of record highs. The technology-heavy Nasdaq Composite climbed 0.5%.
- Tech behemoths Microsoft, Twitter and Google parent Alphabet, as well as Robinhood Markets and Visa, are set to report earnings after markets close, part of a major week for an earnings season that has so far beaten investors’ expectations and helped lift indexes out of a September slump.
- Investors have been buoyed by strong figures from major banks, consumer companies and manufacturers.
- Meanwhile, jitters about the labor market and inflation have somewhat given way to optimism about a recovering economy.
- Shares of Lockheed Martin fell over 7% after the aerospace company posted a drop in profit early Tuesday.
- UPS jumped almost 5% after the delivery company reported third-quarter profit and revenue that beat expectations.
- General Electric rose 0.4% after saying cost-cutting efforts had offset lower-than-expected sales.
- The yield on the benchmark 10-Year U.S. Treasury note inched down to 1.630% Tuesday from 1.634% Monday. Bond prices and yields move in opposite directions.
- Overseas, the pan-continental Stoxx Europe 600 rose 0.5%. In Japan, the Nikkei 225 rose 1.8%, while in Hong Kong, the Hang Seng Index dropped 0.4%. In mainland China, the Shanghai Composite Index edged down 0.3%.
- Facebook blamed Apple’s privacy rules for posting slower sales growth and warned of further uncertainty for the social-media giant’s crucial advertising business.
- Third-quarter revenue reached $29.01 billion, up 35% from the year-earlier period but below the $29.56 billion that analysts polled by FactSet were expecting.
- That increase was the smallest since last year’s fourth quarter and well below the 52% rate over the first half of this year.
- Facebook’s third-quarter profit rose 17% to $9.19 billion.
- The company said it had 3.58 billion monthly users across Facebook, Instagram, and its other services—up 12% from a year earlier.
- Facebook said it expected sales this quarter of $31.5 billion to $34 billion, reflecting what it called “continued headwinds from Apple’s iOS 14 changes” and other factors.
- The company added that next year’s expenses would be as much as $97 billion, including spending on items such as technical and product staff and infrastructure-related costs.
Lockheed tumbles 10% as supply chain woes hammer forecast – Reuters, 10/26/2021
- Lockheed Martin lowered its 2021 revenue expectations by 2.5% to $67 billion on Tuesday and said next year’s revenue could fall to $66 billion, sending shares down 10% as the COVID-19 pandemic hobbles the company’s supply chain.
- Lockheed’s third-quarter revenue was $16 billion, 6.6% below analyst revenue estimate of $17.1 billion, Refinitiv data showed.
- The third quarter which ended on Sept. 26 showed sales at Lockheed’s largest unit, aeronautics – which makes the F-35 fighter jet – down 2% from a year earlier when the pandemic locked down many parts of the defense industry’s supply chain.
- Through Sept. 26, the unit made 90 F-35 deliveries with 36 occurring in the third quarter.
- Lockheed aims to deliver 133 to 139 of the stealthy jets this year.
- Lockheed, however, raised its earnings-per-share guidance for 2021 to $22.45, more than analyst estimates of $22.19, as operating profits rose 6.6% versus the same period last year.
Raytheon raises profit forecast on commercial aero demand – Reuters, 10/26/2021
- Raytheon Technologies raised its forecast for full-year adjusted profit on Tuesday, as rising commercial air travel boosted demand for the aerospace and defense firm’s engines, spare parts and aftermarket services.
- Raytheon’s quarterly revenue rose 9.9% to $16.21 billion.
- But in an interview with CNBC Raytheon’s Chief Executive Greg Hayes warned the U.S. aerospace and defense firm will lose “several thousand” employees after they refused COVID-19 vaccinations.
- Separately, Hayes, in a post-earnings conference call with analysts, said he expects U.S. President Joe Biden’s vaccine mandate to cause “some disruption” in the supply chain.
- While the company faces supply chain challenges among its 13,000 suppliers, Mitchill said “it comes down to some very acute issues” with labor shortages having some impact.
- The maker of Tomahawk missiles reported that net income rose to $1.39 billion, or 93 cents per share, in the third quarter ended Sept. 30 from $264 million, or 17 cents per share, a year earlier.
- Raytheon, whose Pratt and Whitney unit supplies aircraft engines to companies like Boeing and Airbus, said it expects 2021 adjusted profit per share to be between $4.10 to $4.20, up from its prior forecast of $3.85 to $4.00 per share.
GE’s Profits Rise but Sales Miss Forecasts – Wall Street Journal, 10/26/2021
- General Electric reported stronger profits as cost cutting offset lower-than-expected sales of its industrial equipment in the September quarter.
- Overall revenue fell 1% from a year ago to $18.43 billion, while GE’s expenses declined 7%.
- Wall Street analysts were expecting revenue to increase 4% to $19.3 billion, according to FactSet.
- GE’s quarterly profits came in ahead of Wall Street’s expectations and the manufacturer raised its earnings goals for the full year. It also narrowed the forecast for free cash flow from its industrial business, a closely watched metric.
- GE said 2021 revenue would be flat, down from a previous view of growth by a low-single digit percentage.
- The company projected increased revenue, cash flow and profit margins for 2022 but said it would provide more details at a later date.
UPS Revenue Rises as It Ships Fewer Packages – Wall Street Journal, 10/26/2021
- United Parcel Service continues to make more money as it ships fewer packages.
- The delivery company’s third-quarter revenue rose 9.2% from the prior year to $23.2 billion, as the average revenue per piece UPS shipped increased 13%.
- The number of items it shipped daily fell 2%, marking the second consecutive quarter that shipping volume fell after roughly a decade of increases.
- For the period ended Sept. 30, UPS posted earnings of $2.3 billion, or $2.65 a share, compared with $1.96 billion, or $2.24 a share, a year earlier. Excluding some restructuring costs, UPS’s adjusted earnings were $2.71 a share.
- UPS also increased its plans for capital spending for the year by $200 million to $4.2 billion.
Industrial giant 3M lowers profit outlook on supply chain woes – Reuters, 10/26/2021
- 3M cut its full-year earnings forecast on Tuesday, as the diversified manufacturer battles rising inflation, supply chain bottlenecks and higher commodity prices.
- Net sales rose 7.1% to $8.94 billion, beating estimates of $8.67 billion.
- Third-quarter sales in the company’s safety and industrial unit grew 7.2% to $3.24 billion, while that of its consumer unit grew 8.1% to $1.53 billion.
- Net income attributable to 3M rose marginally to $1.434 billion, or $2.45 per share, in the quarter ended Sept. 30.
- 3M, which makes everything from Post-It notes and adhesives to industrial sandpaper, also said annual sales are now expected to grow between 9% and 10%, compared to a prior forecast of 7% to 10%.
- 3M now expects 2021 earnings per share between $9.70 and $9.90, versus its earlier forecast range of $9.70 to $10.10.
TV production business boosts Hasbro as toy shipments take a hit – Reuters, 10/26/2021
- Hasbro beat quarterly profit estimates on Tuesday, helped by a rebound in its TV and film production business that cushioned some of the impact from toy shipment delays due to global supply chain bottlenecks.
- Productions such as “My Little Pony” for Netflix and the musical “Come From Away” for Apple TV+ from Hasbro’s entertainment business boosted the unit’s third-quarter revenue by 76% from a year ago, when filming was largely shutdown by the pandemic.
- That helped offset some of the $100-million hit in delayed toy orders Hasbro had to endure in the quarter as factory shutdowns, a lack of container ships and long port delays pinched supply chains across the world.
- Hasbro said quarterly adjusted net earnings rose 5% to $271.2 million, or $1.96 per share, beating analysts’ estimates of $1.69 per share, but warned that higher freight costs would pressure margins in the fourth quarter.
- Hasbro said it expects 2021 revenue to rise between 13% and 16%, but warned supply issues could impact its ability to achieve the high-end of its forecast.
Lilly kicks off application for Alzheimer’s drug U.S. approval, ups outlook – Reuters, 10/26/2021
- Eli Lilly on Tuesday raised its 2021 profit forecast, citing the strength in its core business and higher sales of its COVID-19 antibody therapies, and said it started the application process for the approval of its closely-watched Alzheimer’s drug candidate.
- Demand for Lilly’s COVID-19 antibody therapies, bamlanivimab and etesevimab, rose during the last three months as the spread of the Delta variant fueled a sharp rise in infections and hospitalizations in areas with low vaccination rates.
- The therapies brought in $217 million in the third quarter, up from $149 million in the second.
- The company said it now expected COVID-19 therapies to bring in about $1.3 billion in sales in 2021, up from an earlier forecast of between $1.0 billion and $1.1 billion.
- Lilly raised its forecast for this year’s adjusted earnings per share to between $$7.95 and $8.05 from an earlier $7.80 to $8.00 range, despite missing third quarter profit estimates.
DraftKings Abandons $22 Billion Bid for Entain – Wall Street Journal, 10/26/2021
- DraftKings is dropping its roughly $22 billion bid for Entain, turning away from an attempt to buy a major international player in the gambling industry.
- The Entain deal would have given DraftKings a stake in bricks-and-mortar betting sites in the U.K. through Entain’s Ladbrokes and Coral brands. It also would have given DraftKings a foothold in international gambling via Entain’s licenses to operate in dozens of countries and through its online technology.
- In the U.S., Entain is also a key partner to one of DraftKings’ biggest rivals, MGM Resorts International, which had said that completing the deal would require its support.
Seagate Broke Export Curbs by Supplying Huawei, Senate Republicans Say – Wall Street Journal, 10/26/2021
- A major U.S. data-storage equipment provider violated U.S. export rules by continuing to sell hard-disk drives to Huawei Technologies after the Commerce Department tightened export restrictions last year, a report by a group of Senate Republicans alleged.
- Seagate Technology Holdings supplied a substantial share of the Chinese company’s estimated $800 million worth of annual purchases of hard-disk drives after the tougher restrictions took effect in September 2020, according to the report by Republicans on the U.S. Senate Committee on Commerce, Science and Transportation.
- The company didn’t seek a license from the Commerce Department to do so, and continued shipments after its rivals had halted sales to Huawei, the report alleged. The report cited market research by banks, disclosures by the company and committee staffer interviews with Seagate officials.
GM to boost EV profile with 40,000 charging stations in U.S., Canada – Reuters, 10/26/2021
- General Motors said on Tuesday it would install up to 40,000 electric-vehicle charging stations in the United States and Canada, as part of the automaker’s $750 million commitments to bolster its presence in the rapidly growing sector.
- The announcement comes just months after the No. 1 U.S. automaker said it had signed agreements with some companies to offer its customers access to nearly 60,000 charging points across the same regions.
- The company said on Tuesday it would expand home, workplace and public charging infrastructure through its Ultium Charge 360 ecosystem, adding that it would focus on installing them in rural and urban areas with limited access to support widespread adoption of EVs.
- The charging stations will be available to all EV customers, and not just those who purchase vehicles from GM, the carmaker said.
Dealmakers Race Past $4.1 Trillion Record With Months to Spare – Bloomberg, 10/26/2021
- The global boom in mergers and acquisitions has just delivered dealmakers their best-ever year — on $4.11 trillion and counting.
- Volumes have been rising across sectors and regions, fueled by cheap financing and super-acquisitive private equity buyers.
- Deals in the $1 billion to $10 billion range — a sweet spot for buyout firms — have underpinned the boom, in the notable absence of $50 billion-plus blockbusters.
3-D Printed Houses Are Sprouting Near Austin as Demand for Homes Grows – Wall Street Journal, 10/26/2021
- A major home builder is teaming with a Texas startup to create a community of 100 3-D printed homes near Austin, gearing up for what would be by far the biggest development of this type of housing in the U.S.
- Lennar and construction-technology firm Icon are poised to start building next year at a site in the Austin metro area, the companies said. While Icon and others have built 3-D printed housing before, this effort will test the technology’s ability to churn out homes and generate buyer demand on a much larger scale.
- If 3-D printing succeeds at this more ambitious level, it could offer a response to America’s chronic shortage of homes for sale, especially in the affordable price range.
- Mortgage-finance company Freddie Mac estimated that the national deficit of single-family homes stood at 3.8 million units at the end of 2020.
US ECONOMY & POLITICS
U.S. New-Home Sales Top Forecast With Best Pace Since March – Bloomberg, 10/26/2021
- Sales of new U.S. homes increased in September to the highest level in six months, underscoring solid underlying demand.
- Purchases of new single-family homes increased 14% to an 800,000 annualized pace after a downwardly revised 702,000 rate in August, government data showed Tuesday. The median estimate in a Bloomberg survey of economists called for a 756,000 rate.
- The report, produced by the U.S. Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home jumped 18.7% from a year ago to a record $408,800.
- The increase reflected a pickup in sales of homes priced at least $300,000.
- There were 379,000 new homes for sale as of the end of September, unchanged from a month earlier.
- At the current sales pace, it would take 5.7 months to exhaust the supply of new homes, compared with 3.5 months a year ago.
Home-Price Growth Holds at Record in August – Wall Street Journal, 10/26/2021
- Home-price growth held at a record high in August, as demand from home buyers remained robust despite skyrocketing prices.
- The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 19.8% in the year that ended in August, unchanged from the prior month.
- The Case-Shiller 10-city index gained 18.6% over the year ended in August, compared with a 19.2% increase in July.
- The 20-city index rose 19.7%, after an annual gain of 20% in July. Price growth accelerated in eight of the 20 cities.
U.S. consumer confidence unexpectedly rebounds in October – Reuters, 10/26/2021
- U.S. consumer confidence unexpectedly rose in October as concerns about high inflation were offset by improving labor market prospects, suggesting economic growth picked up early in the fourth quarter.
- The Conference Board said on Tuesday its consumer confidence index increased to a reading of 113.8 this month from 109.8
- in September, ending three straight monthly declines.
- Economists polled by Reuters had forecast the index dipping to 108.3.
Democrats Negotiate Tax, Healthcare Provisions as Biden Seeks Deal This Week – Wall Street Journal, 10/26/2021
- Democrats are sprinting to wrap up negotiations over their social-spending and climate bill, hoping by this weekend to resolve disagreements on issues including tax policy and healthcare.
- Senate Majority Leader Chuck Schumer (D., N.Y.) said Monday there were three to four open issues.
- Lawmakers and aides said major policy areas, including the tax increases to pay for the package, Medicare and Medicaid provisions and a paid leave program, remain unresolved.
- The bill, initially drafted at $3.5 trillion, is now expected to cost between $1.5 trillion and $2 trillion.
- Several policy areas in the social-spending legislation remain unresolved.
- Democratic aides said it was possible that lawmakers would drop a proposal to offer paid leave from the package entirely; Democrats already have cut a proposed 12 weeks of leave to four weeks.
- Sen. Joe Manchin (D., W.Va.), a critical centrist in the talks, said on Monday that he still had concerns about two of the legislation’s biggest healthcare provisions: expanding Medicare to cover dental, hearing, and vision care; and filling a gap in healthcare coverage in states that haven’t expanded Medicaid.
The U.S. May Need Another 1 Million Truck Drivers Over the Next Decade – Bloomberg, 10/26/2021
- At this rate, the U.S. needs to recruit nearly 1 million truck drivers to replace retiring ones and keep up with high freight demand over the next decade, according to the American Trucking Associations.
- The nation’s trucking shortage already stands at a record 80,000 drivers and that’s set to surpass 160,000 in 2030, the association said in a report dated Monday.
- The group based its estimates on retirements and a pandemic-fueled exodus from the industry, among other things.
EUROPE & WORLD
UBS fee bonanza lifts quarterly profit to six-year high – Reuters, 10/26/2021
- UBS posted its highest quarterly profit since 2015 on Tuesday, as robust trading activity by the world’s ultra wealthy led to a 23% surge in fee income.
- Revenue in its equities trading unit was up 3% to $1.36 billion, but its foreign exchange, rates and credit arm posted a 32% drop in turnover to $363 million.
- Revenue from advising on deals and listings jumped 22% to $792 million, helped by bumper M&A volumes.
- The bank’s flagship wealth management business posted its best pre-tax profit ever, soaring 43% on a 4% climb in income from transactions amongst its wealthy and ultra-wealthy clients as well as a 15% rise in net interest income due to higher lending levels and margins.
- The division saw $18.8 billion in fresh client fee-generating inflows, while invested assets fell slightly from June to $3.198 trillion.
- Third-quarter net profit came in at $2.279 billion, easily surpassing a median estimate of a 24% slump to $1.596 billion from a poll of 23 analysts compiled by the bank.
Record China Defaults in Focus as Modern Land Joins the List – Bloomberg, 10/26/2021
- A Chinese developer of real estate projects that use green technologies has become the latest builder to default, adding to the record for offshore bonds from the nation’s borrowers.
- Modern Land China Co., which is based in Beijing and builds energy-saving homes throughout the nation, didn’t repay either the principal or interest on a $250 million bond due Monday, according to a filing Tuesday morning. The company is working with its legal counsel Sidley Austin and expects to engage independent financial advisers soon, the filing said.
- Credit-rating downgrades of Chinese developers have accelerated further in October, hitting a record high for a second straight month. There were 44 cuts in the sector by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings as of Oct. 21, after 34 downgrades for all of September, according to Bloomberg-compiled data.
- Anwar Sadat became the first Egyptian president to pay an official visit to the United States. (1975)
- South Korean president Park Chung Hee was killed by the head of the Korean Central Intelligence Agency. (1979)
- Russian government forces stormed the Moscow theater held by Chechen rebels. More than 100 hostages were killed. (2002)
- The Chicago White Sox sweep the Houston Astros to win their first World Series in 88 years. (2005)