Daily Market Report | November 11, 2021
US FINANCIAL MARKET
Stocks Claw Back Some Ground After Inflation Readout – Wall Street Journal, 11/11/2021
- U.S. stocks rose Thursday, rebounding from Wednesday’s selloff that came after an inflation reading hit a three-decade high.
- The S&P 500 rose 0.2% in recent trading, reversing direction after finishing Wednesday with its largest decline in more than a month. The technology-heavy Nasdaq Composite rose 0.6%.
- The Dow Jones Industrial Average pulled back, losing about 90 points, or 0.3%.
- Investors for months have been digesting signs of mounting inflation, but on Wednesday new data presented the most staggering figures yet.
- The Labor Department said the consumer-price index—which measures what consumers pay for goods and services—increased 6.2% in October year-over-year.
- That marked the quickest 12-month pace since 1990 and the fifth consecutive month of inflation above 5%.
- Wednesday’s data showed that price increases were broad-based. Stocks pulled back, with technology companies in particular taking losses. In the bond market, the yield on the 10-year U.S. Treasury note posted its largest rise in a year.
- U.S. stocks have rallied for much of the past month on strong earnings results.
- Of the more than 90% of S&P 500 companies that have reported so far, about 81% have beat earnings expectations, according to FactSet data through Thursday morning.
- Companies reporting Thursday include electric-vehicle maker Lordstown Motors.
- Walt Disney posted earnings Wednesday after markets closed. It reported a slowdown in subscriber growth as lockdowns eased. Its shares pulled back 8.3% Thursday.
- Plant-based meat company Beyond Meat lost 17% after it posted a disappointing revenue forecast, citing pandemic-related uncertainty on demand.
- Overseas, the pan-continental Stoxx Europe 600 ticked up 0.2%.
- In Asia, most major benchmarks rose. The Shanghai Composite Index added 1.2% while the Hang Seng Index climbed 1%.
- Shares of Chinese developers rallied on indications that Beijing might moderate its tough property-sector rules. China Evergrande Group made another set of last-minute bond payments, averting default.
Germany recommends only BioNTech/Pfizer vaccine for under-30s – Reuters, 11/11/2021
- People aged under 30 in Germany should only receive the BioNTech/Pfizer COVID-19 vaccine as it causes fewer heart inflammations in younger people than the Moderna shot, an advisory committee said on Wednesday.
- The committee, known as STIKO, recommended that pregnant women also be inoculated only with the BioNTech/Pfizer vaccine, regardless of their age.
- Several other European Union countries have already recommended limiting use of the Moderna vaccine among younger people.
- The German PEI data showed a “report rate” for heart inflammations of 11.71 per 100,000 shots with the Moderna vaccine for men in the 18-29 age group, compared with 4.68 for the BioNTech/Pfizer shot.
- In the 12-17 age group, the rate was 11.41 for males with the Moderna shot compared with 4.81 for BioNTech/Pfizer.
- There was no data provided for females in the lower age group.
Hospitals in Western U.S. Under Siege as Covid-19 Packs ICUs – Bloomberg, 11/11/2021
- Hospitals in some parts of the U.S. are already starting to see the impact of an autumn wave of Covid-19 infections, the latest sign that the health-care system still faces serious pressure from the virus, even in places that have achieved relatively high vaccination rates.
- Intensive-care unit beds occupied by Covid-19 patients are climbing in 12 states from two weeks earlier, with most of them in a contiguous strip running from Arizona and New Mexico, through the Great Plains and into Minnesota.
- The U.S. faces several uncertain months ahead, with the highly infectious delta variant still circulating as the country heads into its traditional winter virus season.
- The world’s largest entertainment company posted a significant slowdown in subscriber sign-ups at its flagship streaming service in the most recent quarter, ending two years of strong growth that had helped the company survive Covid-19 and expand its media dominance into the home.
- The company recorded $18.5 billion in sales, a 26% increase from the year-ago quarter, when the pandemic shut down much of the world. Results missed analysts’ estimates of $18.8 billion, according to a FactSet poll.
- Disney+ added just over two million subscribers in the fourth quarter ending Oct. 2, the company said, bringing its total to 118.1 million. Analysts had expected this quarter’s total to come to 125.3 million.
- During the previous quarter, Disney+ had added more than 12 million new subscribers.
- At its other streaming services, ESPN+ subscribers reached 17.1 million, up from the 14.9 million the company reported in August and above analyst estimates.
- Total Hulu subscriptions rose roughly two million from 43.8 million in the third quarter, below analyst estimates.
- The company’s theme parks and consumer products division had a profit of $640 million for the quarter, swinging from a loss last year. Revenue at the division—which includes its storied Walt Disney World and Disneyland resorts—doubled from a year ago to $5.45 billion.
- Overall, Disney recorded fourth-quarter earnings of $159 million, or 9 cents a share, compared with a year-ago loss of $710 million, or 39 cents a share. Adjusted earnings were 37 cents a share in the latest quarter, below analysts’ estimates of 52 cents a share.
- Disney Chief Executive Bob Chapek said the company was managing its direct-to-consumer business “for the long term, not quarter to quarter.” The service is still on track to reach previous guidance of between 230 million and 260 million paid Disney+ subscribers globally by the end of fiscal 2024, he said.
- In an attempt to boost growth, Disney recently introduced a discounted offer for Disney+, a promotion that charges $1.99 for the first month, followed by the regular rate of $7.99.
- Shares of Affirm, the digital “buy now, pay later” (BNPL) company, soared as high as 30% in after-hours trading Wednesday, after the company said it would expand its partnership with Amazon.
- The company also beat analyst estimates on revenue in the fiscal first quarter.
- Revenue: $269.4 million vs. $248.2 million estimated by analysts. Loss per share: $1.13 adjusted per share
- As part of the new agreement with Amazon, Affirm will serve as the sole third-party buy now, pay later option for the e-commerce giant in the U.S.
- However, credit card companies will still be able to offer buy now, pay later options on Amazon in the future.
- Amazon will also integrate the platform into its digital wallet in the U.S. Affirm can be used for eligible purchases on Amazon of $50 or more.
- Affirm also gave strong guidance for the current quarter, estimating $320 million to $330 million in revenue, versus analyst expectations of $296 million.
Beyond Meat signals more pain ahead as demand slows, shares tumble 19% – Reuters, 11/11/2021
- Beyond Meat forecast fourth-quarter revenue below estimates on Wednesday, as the once red-hot plant-based meat maker reported slowing demand in both grocery stores and restaurants, driving its shares down 19% in extended trading.
- Net revenue rose 12.7% to $106.4 million in the three months ended Oct. 2, but missed estimates of $109.2 million.
- Sales to U.S. retail stores fell 15.6% to $52.4 million in the third quarter, Beyond said, while those to U.S. restaurants fell 7.3% to $15.1 million.
- Excluding certain items, the company reported a loss of 87 cents per share, compared with analysts’ estimates of a loss of 39 cents per share.
- Widespread supply chain problems and labor shortages at Beyond’s own facilities and a transportation provider also hampered operations, as did water damage related to severe weather that destroyed “sizeable amounts” of packaging at a Pennsylvania storage center.
- The company said it expects fourth-quarter net revenue of $85 million to $110 million, compared with analysts’ estimates of $131.6 million, according to IBES data from Refinitiv.
Bumble marks first user growth decline since IPO on COVID-19 hit – Reuters, 11/11/2021
- Bumble posted its first sequential decline in user growth since the dating app owner went public in February, as fresh pandemic restrictions crimped demand in some markets, sending its shares down over 9% in extended trading.
- Total revenue was $200.5 million in the third quarter, compared with estimates of $198.8 million.
- In the third quarter, total paying users fell 2% from the prior quarter to 2.9 million as the global Delta variant surge prompted renewed lockdowns, curtailing consumer spending on dating app subscriptions and in-app purchases.
- Despite the slowdown, Texas-based Bumble raised its full-year revenue forecast and said it remained well-positioned for the upcoming quarter as it continues to expand internationally.
- Bumble expects current-quarter revenue between $208 million and $211 million, above analysts’ estimates of $206.0 million, according to Refinitiv IBES data.
- A week after Zillow announced its sudden departure from the home-buying market, rival Opendoor reported third-quarter results that topped estimates and issued an optimistic forecast for the rest of the year, sending the stock soaring in extended trading.
- Revenue in the quarter climbed to $2.27 billion from $338.6 million a year earlier, when the Covid-19 pandemic put a temporary freeze on transactions.
- Opendoor sold 5,988 houses in the period, up 72% from the second quarter, and it purchased 15,181 homes, which was up 79% from the prior period.
- In addition to exceeding revenue estimates, Opendoor’s loss of 9 cents a share was below the 17-cent loss analysts were expecting.
- And for the fourth quarter, Opendoor forecast revenue of $3.1 billion to $3.2 billion, topping the $2.92 billion average analyst estimate, according to Refinitv.
- Shares of Avis Budget Group have increased nearly sevenfold this year, helped by a bounceback in travel and popularity with the online day-trading crowd.
- The company’s stock has accounted for about one-third of the 2021 gains of the Dow Jones Transportation Average, according to Dow Jones Market Data. It has made up more than half of the index’s gains since the start of September.
- That is muddling signals from the 137-year-old index. Investors track it as a gauge of the broader economy because it includes railroads, shipping companies and others that carry goods and raw materials to people and businesses.
- The divergence means that the Dow Theory, a century-old tool for analyzing the stock market, might not be too helpful to investors right now.
- In one example of the company’s outsize influence, Avis shares more than doubled on Nov. 2, the day after it reported record profits. That lifted the transports index to a nearly 7% gain and its first record close since May.
- Without Avis, the index would have settled lower.
North American companies rush to add robots as demand surges – Reuters, 11/11/2021
- Companies in North America added a record number of robots in the first nine months of this year as they rushed to speed up assembly lines and struggled to add human workers.
- Factories and other industrial users ordered 29,000 robots, 37% more than during the same period last year, valued at $1.48 billion, according to data compiled by the industry group the Association for Advancing Automation.
- That surpassed the previous peak set in the same time period in 2017, before the global pandemic upended economies.
- In the first nine months of the year, auto-related orders for robots grew 20% to 12,544 units, according to A3, while orders by non-automotive companies expanded 53% to 16,355.
US ECONOMY & POLITICS
US ECONOMY & POLITICS
Homes Now Typically Sell in a Week, Forcing Buyers to Take Risks – Wall Street Journal, 11/11/2021
- American home buyers are having to pounce faster than ever to clinch a deal, forcing many of them to make snap decisions about what house to purchase and where to live.
- Home sales between July 2020 and June 2021 sat on the market for a median period of only one week before going under contract, according to a survey released Thursday by the National Association of Realtors.
- That’s down from three weeks a year earlier and marks a record low in data going back to 1989.
- Homes typically sell slightly below their listing price, but in the year ended in June the median sales price was 100% of the listing price, the highest since NAR started tracking the data in 2002.
- The median sale price for that period was $305,000, up from $272,500 the prior year, NAR said.
- About two-thirds of active buyers have been house-hunting for at least three months, according to a September survey from the National Association of Home Builders. About 45% of those shoppers said they hadn’t been successful because they kept getting outbid by other buyers.
- The NAR survey also showed that buyers weren’t venturing far when purchasing a new home. The typical distance between a buyer’s previous residence and their new one was just 15 miles in the year ended in June, the survey showed.
Fed’s ‘transitory’ inflation plot thickens again with rate at 30-year high – Reuters, 11/11/2021
- Inflation pushed more broadly through the economy in October again challenging the Federal Reserve’s outlook for only “transitory” price increases, offsetting recent wage hikes in a blow to consumers, and prompting investors to boost bets the central bank will raise interest rates sooner than expected.
- Yields on two-year Treasury notes, a proxy for the outlook for the overnight interest rate set by the Fed, jumped 6 basis points, the most in three weeks and among the largest daily increases in the last year and a half, to 0.485% on Wednesday after the release of data showing consumer prices rose by 6.2% in October versus the year before.
- That was the largest one-year jump in prices in 30 years and applied across staples like food, energy and rent, as well as to items like automobiles where the Fed has expected the pace of price increases to ease alongside pandemic-driven “bottlenecks” in global supply chains.
- Both a Cleveland Fed “trimmed mean” index of consumer prices and one that tracks the median level of price increases surged in a sign that price pressures were rising across a more extensive set of goods and services.
- Pricing in futures contracts tied to the target federal funds rate showed investors boosting odds the Fed will by September raise rates twice by a cumulative 0.50 percentage point.
- Expectations for a third quarter-point rate increase in December increased to nearly 50% compared to less than 30% on Tuesday.
U.S. Treasury Market Is Most Treacherous Since Pandemic’s Onset – Bloomberg, 11/11/2021
- The U.S. Treasury market has become a minefield over the past month.
- As bond traders around the world try to force central banks to respond to elevated inflation rates, unusually large price swings have taken their toll. Signs have emerged of a vicious cycle in which reluctance to participate in the market impairs liquidity, making large price swings even more likely.
- As measured by Bloomberg’s U.S. Government Securities Liquidity Index, trading conditions in Treasuries are the worst since March 2020, when the pandemic spurred massive central-bank intervention around the world.
- As for expected volatility, the ICE BofA MOVE Index for U.S. bonds is near the highest since April 2020.
- U.S. Senator Joe Manchin may delay President Joe Biden’s “Build Back Better” legislation until next year over inflation worries, Axios reported on Wednesday, citing people familiar with the matter.
- The $1.75 trillion proposal aims to expand the social safety net in the United States and boost climate change policy.
- The House of Representatives passed a separate $1 trillion package of highway, broadband and other infrastructure improvements last week. It was passed by the Senate in August.
- Manchin’s office did not immediately respond to a request for comment on the report, which coincides with government data that showed prices rose 6.2 percent in October compared with a year ago, the largest annual increase in about 30 years.
EUROPE & WORLD
- Stocks and bonds of Chinese developers jumped on signs that Beijing could moderate its tough stance on the beaten-down property sector, while industry heavyweight China Evergrande again averted default by making another set of last-minute bond payments.
- On Thursday in Hong Kong, the Hang Seng Mainland Properties index gained 5.6%, building on a rally in the previous session. Some real-estate stocks surged more, with China Aoyuan Group gaining 12% and China Vanke jumping 6.7%.
- The Wall Street Journal reported on Wednesday that Chinese regulators are considering easing rules on leverage to help struggling developers sell off assets.
- The rules, dubbed the “three red lines,” have hurt the ability of developers like Evergrande to make disposals to repay debts. The People’s Bank of China is considering allowing buyers to take over assets without affecting their own debt ratios, people with knowledge of the discussions told the Journal.
- Chinese leader Xi Jinping has formally etched his name alongside the greatest figures in the annals of Communist Party history, paving the way for him to strengthen and extend his rule over the world’s most populous country.
- China’s most senior officials approved a resolution on the party’s accomplishments since its founding 100 years ago that portrays Mr. Xi as a core leader who has “promoted historic achievements and historic changes.”
- The decision puts him on equal footing with revolutionary patriarch Mao Zedong and market reformer Deng Xiaoping, the only other leaders who enjoyed enough power to push through resolutions on the party’s history.
- The elevation of Mr. Xi’s official status was a centerpiece of the annual fall gathering, or plenum, of nearly 350 full and alternate members of the Communist Party’s Central Committee in Beijing, according to the communiqué.
- The resolution ensures longevity for Mr. Xi’s agenda and armors him against criticism because that would require challenging the party’s narrative of history.
China Borrows Again at Negative Rates in Euros – Wall Street Journal, 11/11/2021
- China sold about $4.6 billion of bonds denominated in euros, taking advantage of superlow yields in the eurozone to raise shorter-term funds at negative rates for the second year running.
- China’s finance ministry sold €1.5 billion, the equivalent of $1.7 billion, of three-year notes priced to yield minus 0.192%, a term sheet showed. It also sold the same amount of seven-year debt with a positive yield of 0.216% and €1 billion, or about $1.15 billion, of 12-year bonds yielding 0.759%.
- The debt offers a premium over even-more-negative benchmark European government debt, which helps to explain the investor interest. Three-year German government notes yielded about minus 0.733% as of Wednesday, according to Refinitiv.
- A coal shortage that led to an energy crisis in China is rippling beyond its borders, threatening to disrupt supply chains and farming in countries that rely on its exports of a chemical used in fertilizer and diesel exhaust systems.
- India and South Korea are experiencing shortages of urea, which is extracted from coal, since China placed new restrictions on exports.
- It is widely used in India as a fertilizer and in South Korea to produce urea solution, which is used to reduce diesel emissions in vehicles and factories.
- South Korean cargo-truck drivers say they are working to find gas stations that still carry the solution, with some having to idle their vehicles and stop work due to shortages.
- Prices of urea solution have soared as much as 10 times on secondhand markets, though the government has placed a ban on hoarding.
- Logistics-industry experts say the shortage hasn’t had a significant impact on supply chains but that it could if the situation doesn’t improve by next month.
Toyota says large parts of world not ready for zero-emission cars – Reuters, 11/11/2021
- Large parts of the world are not ready for zero-emission vehicles, which is why Toyota Motor did not sign a pledge this week to phase out fossil-fuel cars by 2040, the world’s largest automaker said on Thursday.
- Six major carmakers, including General Motors, Ford, Sweden’s Volvo Cars, and Daimler’s Mercedes-Benz, signed the Glasgow Declaration on Zero Emission Cars and Vans, as did a number of countries including India. read more
- But Toyota and No. 2 global automaker Volkswagen, as well as crucial car markets the United States, China and Germany did not.
- A spokesperson for Toyota told Reuters that where the energy and charging infrastructure, economics and customer readiness exist, “we are ready to accelerate and help support with appropriate zero-emission vehicles.”
- “However, in many areas of the world such as Asia, Africa, Middle East … an environment suitable for promoting full zero emission transport has not yet been established,” the spokesperson said. “We think it will take more time to make progress…; thus, it is difficult for us to commit to the joint statement at this stage.”
Factmonster – TODAY in HISTORY
- The Mayflower Compact was signed by Pilgrims aboard the Mayflower. It would provide the basis for all governments of the American colonies. (1620)
- Former slave Nat Turner was executed. (1831)
- The Allies and Germany signed an armistice ending World War I. (1918)
- The Tomb of the Unknown Soldier was dedicated in Arlington National Cemetery. (1921)
- Yasir Arafat, chairman of the Palestine Liberation Organization, died in Paris. Mahmoud Abbas was elected to take his place. (2004)
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