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Daily Market Report | November 10, 2021

US FINANCIAL MARKET

Stocks Decline, Bond Yields Rise After Inflation Hits 30-Year High – Wall Street Journal, 11/10/2021

  • Stocks fell after data showing that U.S. inflation hit a three-decade high added to investors’ concerns about price pressures in the global economy.
  • The S&P 500 dropped 0.2% a day after the broad U.S. stock index ended an eight-day streak of record closes, its longest streak of records since 1997.
  • The blue-chip Dow Jones Industrial Average slipped less than 0.1%, while the tech-heavy Nasdaq Composite Index shed 0.5%.
  • Data out Wednesday showed inflation rose in October to its highest level since 1990, driven by supply shortages and strong consumer demand. The annual rate of inflation stood at 6.2%.
  • The yield on the benchmark 10-year U.S. Treasury note rose to 1.500%, from 1.431% Tuesday. Yields rise as bond prices fall.
  • Chinese economic data released Wednesday added to inflation concerns.
  • Factory-gate prices in China rose at a record pace in October, due in part to surging energy costs. The nation’s producer-price index rose by a record 13.5% from a year earlier.
  • In mainland China, the Shanghai Composite Index fell 0.4%, while in Hong Kong, the Hang Seng Index rose 0.7%.
  • In Japan, the Nikkei 225 fell 0.6%. Europe’s pan-continental Stoxx Europe 600 hovered around the flatline.
  • Among individual stocks, shares of Coinbase Global fell 9.5% after the cryptocurrency exchange reported earnings late Tuesday that missed analysts’ expectations.
  • DoorDash shares rose 13% after the company said it had agreed to buy Finnish food-delivery firm Wolt Enterprises in a deal valued at over $8 billion.
  • Earnings are due Wednesday from Walt Disney and Beyond Meat after markets close.

Coinbase falls short on revenue as trading volumes slump 30% – Reuters, 11/10/2021

  • U.S. cryptocurrency exchange Coinbase Global on Tuesday reported a nearly 30% fall in third-quarter trading volumes on a sequential basis, hit by lower volatility and declining prices for bitcoin and other cryptocurrencies.
  • Total revenue fell to $1.31 billion from $2.23 billion in the prior quarter, also missing estimates of $1.57 billion.
  • Trading volumes fell to $327 billion in the quarter from $462 billion in the second.
  • Of this, bitcoin comprised 19%, down from 24% last quarter.
  • Net income attributable to common shareholders of $405.34 million, or $1.62 per share.
  • Analysts had expected a profit of $1.57 per share, according to IBES data from Refinitiv.

DoorDash to Buy Finland Food-Delivery Startup in Deal Valued Above $8 Billion – Wall Street Journal, 11/10/2021

  • DoorDash said it has agreed to acquire European food-delivery company Wolt Enterprises Oy in an all-stock deal valued at over $8 billion.
  • Revenue in the three months ended Sept. 30 rose 45% year over year to $1.28 billion, the company said, above the $1.18 billion average estimate of analysts polled by FactSet.
  • The company posted a $101 million net loss for the most recent quarter compared with a $43 million loss in the year-ago period.
  • DoorDash said Wolt’s co-founder and chief executive, Miki Kuusi, would lead DoorDash’s overseas presence after the deal closes, which the companies expect in the first half of next year.
  • Founded in 2014, Helsinki-based Wolt employs 4,000 people across 23 countries.

Upstart stock sinks 20% despite earnings beat – MarketWatch, 11/10/2021

  • Upstart notched better-than-expected earnings for its latest quarter, but shares of the lending company plunged 20% in after-hours trading Tuesday.
  • The company, which uses artificial intelligence to inform lending decisions, generated third-quarter net income of $29.1 million, or 30 cents a share, up from $9.7 million, or 10 cents a share, in the year-earlier period.
  • On an adjusted basis, Upstart earned 60 cents a share, up from 16 cents a share a year prior and ahead of the FactSet consensus, which called for 30 cents a share.
  • Upstart’s revenue increased to $228.5 million, from $65.4 million a year ago, and included $210.4 million in fee revenue.
  • Analysts were modeling $214.9 million in total revenue for the period.
  • For the fourth quarter, Upstart anticipates $255 million to $265 million in revenue, whereas the FactSet consensus was for $227.6 million.
  • The company also expects $48 million to $50 million in adjusted net income, while analysts tracked by FactSet were expecting $24.5 million.

Wynn Resorts Chief Executive Matt Maddox Stepping Down – Wall Street Journal, 11/10/2021

  • Wynn Resorts Chief Executive Matt Maddox will leave the casino operator in January, the company said Tuesday.
  • Mr. Maddox, on a conference call with Wall Street analysts, said he is leaving now because he has accomplished his goals as CEO over the last four years.
  • The company reported a loss of $166 million, or $1.45 per diluted share, narrower than its year-ago loss of $758 million, or $7.10 a share, when its business was affected more by lockdowns and the pandemic.
  • The company reported operating revenue in the latest quarter of nearly $995 million, up from nearly $371 million last year.

Poshmark flags bigger-than-expected hit from Apple privacy change, shares dive – Reuters, 11/10/2021

  • Poshmark forecast holiday-quarter revenue below estimates on Tuesday due to a bigger-than-expected hit from the recent changes in Apple’s privacy policy that has limited advertisers’ ability to attract new customers.
  • Poshmark said third-quarter revenue rose 16% to $79.7 million, missing analysts’ average estimate of $82.7 million.
  • Poshmark said it was spending more on marketing, directing funds toward TV advertisements and partnering with social media influencers to counter the impact of Apple’s privacy changes.
  • The increased expenditure, however, has led Poshmark to report a third-quarter loss of 9 cents per share, bigger than analysts’ estimates of a loss of 7 cents per share, according to IBES data from Refinitiv.
  • Poshmark forecast fourth-quarter revenue of $80 million to $82 million, compared with analysts’ estimates of $85.2 million.
  • Shares in Poshmark, which went public in January, fell 27% in extended trading, as it also missed third-quarter revenue estimates a day after rivals ThredUp and RealReal beat expectations.

Zillow Sells 2,000 Homes in Dismantling Its House-Flipping Business – Wall Street Journal, 11/10/2021

  • Zillow Group reached a deal to sell about 2,000 homes from its ill-fated house-flipping program, the company’s biggest bulk sale as it starts unloading thousands of homes and terminates the business.
  • The digital real-estate company said it intends to sell roughly 9,800 homes it owns, plus another 8,200 it had been in the process of buying. The company expects to lose between 5% and 7% on these sales.
  • Pretium Partners, a New York City-based investment firm, has agreed to buy Zillow homes across 20 U.S. markets and plans to rent them out, according to people familiar with the matter.
  • In the transaction with Pretium, Zillow received market price for the properties, these people said.
  • Zillow said last week that it was shutting down the business because it couldn’t accurately predict future home prices and was losing too much money. The company expects to record losses of more than $500 million from home-flipping by the end of this year and is laying off a quarter of its staff.

Google Loses Appeal of $2.8 Billion EU Shopping-Ads Fine – Wall Street Journal, 11/10/2021

  • A European Union court largely upheld a $2.8 billion antitrust decision against Google, adding new momentum to the bloc’s assault on big tech companies.
  • The EU’s General Court in Luxembourg on Wednesday gave its endorsement to a 2017 antitrust finding by EU competition regulators that the Alphabet search engine had broken antitrust laws by directing users toward its own comparison-shopping ads at the expense of rival services.
  • At stake in the case, which was argued a year and a half ago, is a legal precedent that is the focus of intense scrutiny globally: Whether the internet’s biggest platforms have a special responsibility to avoid favoring their own in-house products and services over those offered by competitors.
  • “Google departed from competition on the merits,” the court said, finding that changes Google made to its search engine that favored its own ads didn’t create efficiencies “that would counteract its negative effects on competition.”

US ECONOMY & POLITICS

US ECONOMY & POLITICS

Inflation in U.S. Builds With Biggest Gain in Prices Since 1990 – Bloomberg, 11/10/2021

  • U.S. consumer prices rose last month at the fastest annual pace since 1990, cementing high inflation as a hallmark of the pandemic recovery and eroding spending power even as wages surge.
  • The consumer price index increased 6.2% from October 2020, according to Labor Department data released Wednesday.
  • The CPI rose 0.9% from September, the largest gain in four months.
  • Excluding the volatile food and energy components, so-called core inflation rose 0.6% from the prior month and 4.2% from a year earlier. The annual increase was the largest since 1991.
  • Shelter costs — which are considered to be a more structural component of the CPI and make up about a third of the overall index — rose 0.5% in October, the most in four months as higher rents and home prices feed into the data.
  • The cost of hotel stays increased.
  • Prices for new cars rose 1.4% last month as a global shortage of semiconductors continues to limit inventories and drive up costs.
  • Used-vehicle prices jumped 2.5%.
  • Food costs were up 5.3% from year ago, the most since January 2009.
  • Gasoline rose 6.1% from September, the biggest gain since March.
  • Inflation-adjusted average hourly earnings fell 1.2% in October from a year earlier, separate data showed Wednesday.

Jobless Claims Fall to Pandemic Low, Continuing Downward Trend – Wall Street Journal, 11/10/2021

  • Worker filings for unemployment insurance edged lower last week, continuing their long glide path toward pre-pandemic levels as the labor market improves.
  • Initial claims for jobless benefits, a proxy for layoffs, declined to 267,000 last week from a revised 271,000 the prior week, the Labor Department reported Wednesday.
  • The 4-week moving average of weekly claims was 278,000 for the week ending Nov. 6. Claims have declined since the average reached a recent peak of 424,000 in mid-July.
  • The number of Americans continuing to claim unemployment benefits rose slightly for the week ended Oct. 30, rising 59,000 to 2,160,000.

Inflation Pickup Makes Fed More Likely to Raise Rates Next Year – Wall Street Journal, 11/10/2021

  • The latest rise in inflation helps to explain why investors are increasingly asking not whether the Federal Reserve will raise interest rates next year but rather how much and how quickly it may do so.
  • The figures highlight why Fed officials have been backing away from characterizing recent price pressures as “transitory.” Even though senior central bank leaders still believe inflation could slow as supply-chain kinks abate, they now see that process taking longer than they expected earlier this year, extending into 2022.
  • Together with evidence that the labor market is rapidly recovering, this means they are more likely to raise interest rates next year, possibly as soon as next summer.
  • Chicago Fed President Charles Evans said on Monday, “I had expected to see more progress by now, and there are some indications that inflationary pressures may be building more broadly.”

Tax Brackets Will Be Higher in 2022 Due to Faster Inflation, IRS Says – Wall Street Journal, 11/10/2021

  • The threshold for the top federal income-tax bracket in 2022 will climb by nearly $20,000 next year for married couples, and that 37% rate will apply to income above $647,850, the Internal Revenue Service said Wednesday as it implemented automatic tax-code updates to reflect faster inflation in 2021.
  • For individuals, that top tax bracket will start at $539,900.
  • Those levels and the other tax bracket break points all rose about 3% from tax year 2021 due to automatic inflation adjustments built into the tax code.
  • The changes announced Wednesday typically will affect paycheck withholding and quarterly estimated taxes during 2022 and will be reflected on tax returns filed in early 2023.
  • The standard deduction for married couples will be $25,900, up from $25,100.
  • The maximum amount that can be set aside in a healthcare flexible spending account will be $2,850, up from $2,750.
  • The exclusion from estate and gift taxes will be $12.06 million per person, up from $11.7 million.
  • Democrats had discussed cutting that exclusion to about $6 million but have since dropped that provision from their legislation.
  • The annual exclusion for gifts will be $16,000, up from $15,000. That is the amount that each person can give another person without using up any of the lifetime exclusion from estate and gift taxes.

Home Prices Rose Across U.S. in Third Quarter – Wall Street Journal, 11/10/2021

  • Home prices climbed across the U.S. in the third quarter, but price growth slowed from earlier in the year as record prices and stiff competition pushed some buyers out of the market.
  • The median sales price for single-family existing homes was higher in the quarter compared with a year before in 182 of the 183 metro areas tracked by the National Association of Realtors, the association said Wednesday.
  • Median prices rose by more than 10% from a year earlier in 78% of those areas, a slowdown from the second quarter, when 94% of metro areas reported double-digit-percentage growth.
  • Nationwide, the median single-family, existing-home sales price rose 16% in the third quarter to $363,700 from a year before, a record in data going back to 1968, NAR said.
  • In the third quarter, the typical monthly mortgage payment for a single-family home rose to $1,214, from $1,058 a year earlier, the NAR said, even as mortgage rates declined.

EUROPE & WORLD

China’s Factory Inflation Grows at a Record Pace on Soaring Energy Prices – Wall Street Journal, 11/10/2021

  • China’s factory-gate prices surged at a record pace in October due to higher energy costs, adding to anxieties that global inflation will persist while constraining Beijing’s ability to stimulate the nation’s economy.
  • China’s producer-price index rose by a record 13.5% in October from a year earlier, accelerating from a 10.7% increase in September, according to the National Bureau of Statistics.
  • The reading exceeded the 12.5% median forecast from economists polled by The Wall Street Journal and is the highest level since 1996, when Chinese officials began releasing the data.
  • Consumer inflation in the world’s second-largest economy rose by 1.5% last month from a year earlier, up from 0.7% in September, though it remained below the official target of around 3% for this year.
  • Fresh vegetable prices surged by 16.6% in October compared with the previous month, offsetting subdued pork prices.

Tencent’s Profit Growth Slows After China Tightens Games Rules – Wall Street Journal, 11/10/2021

  • Tencent’s third-quarter profit edged up 2.5% compared with the same period in 2020, a significant slowdown from earlier this year amid soft advertising income and continued weakness in its games business.
  • Tencent, the world’s largest videogame developer, on Wednesday posted net profit of 39.51 billion yuan, equivalent to $6.18 billion, for the July-to-September quarter.
  • Revenue grew 13% year over year to 142.37 billion yuan.
  • Domestic games revenue rose 5%, while international games revenue grew 20%, compared with a 45% jump in the overall games segment during the same period last year.
  • Pressure also came from a soft advertising business, whose revenue rose by 5%.
  • The company, in its quarterly earnings release, played up its commitment to China’s policy of common prosperity, and highlighted its efforts to ensure compliance with new games regulations as the broader technology sector faces heightened regulatory scrutiny.

Evergrande teeters on edge of default as $148 million payment falls due – Reuters, 11/10/2021

  • Some bondholders of cash-strapped China Evergrande have not received coupon payments by the end of 30-day grace periods at close of Asia business on Wednesday, sources said, pushing the developer again to the edge of default.
  • Evergrande, the world’s most indebted developer which once epitomized a freewheeling era of borrowing and building, has been stumbling from deadline to deadline in recent weeks as it grapples with more than $300 billion in liabilities, $19 billion of which are international market bonds.
  • The company has not defaulted on any of its offshore debt obligations. But a 30-day grace period on coupon payments of more than $148 million on its April 2022, 2023 and 2024 bonds ends on Wednesday.
  • A failure to pay would result in a formal default by the company and trigger cross-default provisions for other Evergrande dollar bonds, exacerbating a debt crisis looming over the world’s second-largest economy.

Another Covid Winter Threatens Europe’s More Vulnerable Nations – Wall Street Journal, 11/10/2021

  • Europe is divided as it enters another Covid-19 winter. In some countries, people are dying from the virus at record rates. Elsewhere, infections are rising—but from low levels that policy makers say are the result of a suite of restrictive policies.
  • In Italy, Spain and much of the rest of Southern Europe and France, deaths, hospitalizations and confirmed infections from the virus are rising, but still relatively subdued.
  • In Bulgaria and Romania, the pandemic is raging with Covid-19 deaths and confirmed infections at, or near, record highs.
  • Meanwhile, Germany on Tuesday notched a record of confirmed infections, which are now averaging about 30,000 a day, compared with less than 1,000 in July and a peak of about 25,000 last winter.
  • Deaths, though rising and much higher per capita than in Italy and Spain, are well below previous peaks.
  • In the U.K. where there are almost no Covid-19 containment restrictions, daily confirmed infections are trending down, but are still about four times higher than in France, which has a similar population and vaccination rate.
  • The U.K. is averaging almost 170 Covid-19 deaths a day, compared with fewer than 40 in France.
  • On Tuesday, French President Emmanuel Macron noted case rates had risen 40% in a week and—in a move to encourage the take-up of booster shots—said people 65 years and over would be required from Dec. 15 to show proof of a booster shot to gain access to restaurants and some public spaces.

Factmonster – TODAY in HISTORY

  • Hirohito was crowned Emperor of Japan. (1928)
  • The first long distance telephone call without operator assistance took place. (1951)
  • The Great Wall of China opened to the world for tourism. (1970)
  • The Vietnam Veterans Memorial opened in Washington, DC. (1982)

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