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Daily Market Report | November 12, 2021

US FINANCIAL MARKET

Stocks Rise but Remain on Track to Snap Weekly Win Streak – Wall Street Journal, 11/12/2021

  • Major U.S. indexes edged higher in early trading Friday but remained on track to snap a five-week winning streak, knocked by concerns about high levels of inflation.
  • Stocks retreated this week after data showed inflation rose to a three-decade high in October and broadened to an array of goods and services. Signs that the flare-up in inflation will last longer than central bankers had forecast prompted traders to bet the Federal Reserve would raise borrowing costs by summer.
  • Now, traders in federal-funds futures are assigning a more-than 70% probability to a rate rise by June, according to CME Group, up from just over 50% a week ago.
  • The bond market reopened after a break for Veterans Day.
  • The yield on benchmark 10-year Treasury notes rose to 1.564%, from 1.558% Wednesday.
  • Yields on some shorter-term Treasury notes, which are more sensitive to interest-rate expectations, rose in early trading.
  • In corporate news, Johnson & Johnson shares rose 1.4% after The Wall Street Journal reported that the healthcare company intended to split in two.
  • Lordstown Motors dropped 10% Friday after the company reported a loss for the third quarter.
  • Overseas markets were mixed. Gains for personal-goods and auto companies pushed the Stoxx Europe 600 up 0.1%.
  • Japan’s Nikkei 225 rose 1.1%, Hong Kong’s Hang Seng 0.3% and the Shanghai Composite added 0.2%.

Lordstown Motors delays Endurance EV pickup production due to supplier issues, shares fall – CNBC, 11/12/2021

  • Commercial production and deliveries of Lordstown Motors’ first product, an all-electric pickup called the Endurance, are once again being pushed back, the company said Thursday.
  • The embattled EV start-up said commercial production is now expected to start in the third quarter of next year compared to the second quarter, due to an ongoing global issue with auto supplier and supply chains.
  • The pre-revenue company’s reported loss of 54 cents a share for the third quarter was slightly narrower than the loss of 59 cents per share anticipated by analysts, according to estimates compiled by Refinitiv.

Warby Parker sales rise 32% as eyeglass retailer’s losses widen in third quarter – CNBC, 11/12/2021

  • Warby Parker reported Friday that its third-quarter revenue rose 32% from year-ago levels, but its losses widened as costs associated with its recent direct listing and stock-based compensation ate into sales.
  • Revenue grew 32% to $137.4 million from $104.1 million. Sales were up 45% on a two-year basis.
  • The company said active customers totaled 2.15 million, up 23% from 2020 levels.
  • Warby’s net loss for the three-month period ended Sept. 30 grew to $91.1 million, or $1.45 per share, compared with a loss of $41.6 million, or 78 cents a share, a year earlier.
  • For the full year, Warby expects revenue to be between $539.5 million and $542 million, representing as much as a 38% jump from a year earlier, or 46% growth on a two-year basis.

iPhone Maker Foxconn Expects Supply-Chain Issues Until Second Half of 2022 – Wall Street Journal, 11/12/2021

  • Foxconn Technology, the biggest manufacturer of Apple’s iPhones, said the global supply-chain crunch is expected to last until the second half of next year, a sign of headwinds that electronics shipments could continue to face.
  • July-September profit for Taiwan-based Foxconn, formally known as Hon Hai Precision Industry, rose 20% compared with a year earlier to 36.98 billion New Taiwan dollars, equivalent to $1.33 billion.
  • Quarterly revenue increased by 8.8%.
  • Foxconn, the world’s biggest electronics contract manufacturer, also said it expects its October-December consumer electronics revenue to decline on year, citing the component shortages that the industry has been grappling with.
  • The relatively high revenue that Foxconn booked a year earlier is also a factor, it said—Foxconn’s revenue was boosted in the fourth quarter last year as some smartphone launches were delayed from the usual September amid the pandemic.

Johnson & Johnson Plans to Split Into Two Public Companies – Wall Street Journal, 11/12/2021

  • Johnson & Johnson plans to break up into two companies, splitting off the $15-billion-a-year division that sells Band-Aid bandages, Tylenol medicines and Johnson’s Baby Powder in a shift indicating just how much healthcare has changed since the company helped pioneer the industry.
  • J&J will shed its consumer division in 18 to 24 months, Chief Executive Alex Gorsky said. J&J decided to make the change, he said, because the businesses, their customers and markets have diverged so much in recent years, including during the pandemic.
  • The trimmer J&J, which will keep the name, will still stand as the world’s largest health-products company, with yearly sales approaching $80 billion, Chief Financial Officer Joseph Wolk said.
  • The consumer company will be among the industry’s largest, after competitors such as Procter & Gamble, Nestlé and L’Oréal.

Facebook Is Stifling Independent Report on Its Impact in India, Human Rights Groups Say – Wall Street Journal, 11/12/2021

  • Human rights groups say Facebook is stifling an independent report it commissioned to investigate hate speech on its services in India, the company’s largest market by customers and where scrutiny of its operations is increasing.
  • Representatives for the organizations say they have provided extensive input to a U.S. law firm that Facebook commissioned in mid-2020 to undertake the report.
  • The groups say they supplied hundreds of examples of inflammatory content and suggested ways Facebook could better police its services in India.
  • Facebook executives from the company’s human rights team, which is overseeing the law firm’s effort, have since narrowed the draft report’s scope and are delaying a process that has already taken more than a year, the groups say.

US ECONOMY & POLITICS

US ECONOMY & POLITICS

A Record 4.4 Million Americans Quit Their Jobs in September – Bloomberg, 11/12/2021

  • An unprecedented number of Americans quit their jobs in September, highlighting how persistent churn is undercutting employers’ efforts to fill a near-record level of vacancies.
  • A record 4.4 million Americans quit their jobs in September, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Friday. Meanwhile, the number of available positions eased to 10.4 million.
  • The quits rate, or the number of quits in the month as a percent of total employment, increased to 3% in September, also a record in data back to 2000.
  • Total hires were little changed in September at 6.5 million, driven by strength in health care and social assistance. The hires rate was unchanged at 4.4%. Layoffs and discharges were little changed at 1.4 million.

U.S. Consumer Sentiment Drops to 10-Year Low on Inflation Fears – Bloomberg, 11/12/2021

  • U.S. consumer sentiment unexpectedly collapsed in early November as Americans grew increasingly concerned about rising prices and the inflationary impact on their finances.
  • The University of Michigan’s preliminary sentiment index decreased to 66.8 from 71.7 in October, data released Friday showed.
  • The November figure trailed all projections in a Bloomberg survey of economists which called for an increase to 72.5.
  • Consumers expect inflation to rise 4.9% over the next year, the highest since 2008, the report showed.
  • They expect prices will rise 2.9% over the next five to 10 years, unchanged from the previous month.
  • The Michigan figures showed a deep divide along partisan lines.
  • Sentiment among Republicans plunged 17 points to the lowest on record while for Democrats respondents it slipped 5.3 points.
  • The gauge of current conditions dropped to 73.2, the lowest since 2011.
  • A measure of future expectations decreased to 62.8, which was the weakest since 2013, according to the survey.
  • Twenty-four percent of households expect to be worse off in the coming year, the highest since June 2008, Richard Curtin, director of the survey, said in a statement.

Economists Boost U.S. Inflation Forecasts Through End of 2022 – Bloomberg, 11/12/2021

  • Economists are ratcheting up their U.S. inflation forecasts through 2022 as supply chain constraints persist and price pressures broaden out to categories like shelter and energy.
  • The consumer price index will rise 5.8% at the end of the fourth quarter from a year earlier, above the 5.5% estimated a month ago, according to the median forecast of 47 economists in Bloomberg’s latest monthly survey.
  • Economists project that the personal consumption expenditures price index, the inflation gauge favored by the Federal Reserve, will also be higher than previously expected.
  • The figure will likely rise 4.9% on an annual basis in the fourth quarter, revised from 4.6% in the previous survey.
  • Estimates for economic growth were revised higher for every quarter of 2022, driven in part by expectations for more private investment and government spending. Those revisions come after Congress passed an infrastructure package that will allocate $550 billion of fresh spending for roads, bridges, public transit and other projects in coming years.
  • Average hourly earnings are expected to be stronger than prior surveys showed, with the measure increasing by 4% annually in the final three months of 2022 after a 3.5% October estimate.
  • That could be due to an expectation that labor shortages will persist next year, leading employers to continue to offer higher pay to attract workers.

Surging Inflation Poses New Challenge to Biden’s $2 Trillion Spending Plan – Wall Street Journal, 11/12/2021

  • The highest inflation in three decades is posing a new challenge for President Biden as he seeks to enact another pillar of his economic agenda while also easing Americans’ concerns about rising consumer prices.
  • The inflation has driven new Republican criticism of Democrats’ $2 trillion social-spending and climate plan, which the White House calls Build Back Better. House Democrats are aiming to wrap up the bill next week and send it to the Senate.
  • Centrist Democrat Sen. Joe Manchin of West Virginia, a pivotal vote, has raised concerns about the size of the proposal, citing in part its possible impact on inflation after a $1.9 trillion Covid-19 relief bill earlier this year boosted household incomes.
  • Democrats also have to limit defections in the House, where they have a narrow 221-213 majority. There, recent debate over the bill has focused on its immigration, tax and paid-leave provisions, as well as whether the spending is fully paid for with new revenue—rather than the possible inflation impact.

Renters Who Abandoned Their City Apartments During Covid Are Coming Home to a Crazy Leasing Market – Wall Street Journal, 11/12/2021

  • Many large urban areas where rents cratered during the early months of the pandemic have now seen rents rebound to levels higher than they were before Covid, according to the Apartment List National Rent Report.
  • In Seattle, for example, the median rent fell by 20.2% between March 2020 and January 2021, Apartment List found. The median rent in the city in October was 15.4% higher than October 2020 and 1% above its March 2020 level.
  • In L.A., rents have increased 10.4% over the past year. Only a handful of large cities, such as San Francisco and Minneapolis, still have rents discounted from pre-pandemic levels, Apartment List found.

EUROPE & WORLD

Netherlands Set to Revive Covid-19 Restrictions Despite High Vaccination Rate – Wall Street Journal, 11/12/2021

  • The Netherlands is set to reimpose curbs on public life, despite a high vaccination rate, after a steep rise in coronavirus cases raised concerns that hospitals could become overwhelmed.
  • A spokesman said the government was planning three-week of further restrictions, to start this Saturday.
  • Measures under consideration include the closure of all nonessential shops at 7 p.m., a ban on the public attending sports events and a return to social distancing in public.
  • The Netherlands’ decision comes after the country recorded over 16,000 new cases Thursday, a record number and a steep increase from recent months, when daily cases plateaued at around 2,000. Over 73% of the Netherlands’ 17 million inhabitants have been fully vaccinated, according to the Our World In Data website.
  • Germany’s federal government will meet with local leaders next week to discuss measures to slow down the record numbers of cases.
  • Some regional governments have already reintroduced restrictions: Bavaria has declared a state of emergency, while Saxony is limiting access to restaurants and other indoor spaces to people who have been vaccinated or had the virus.
  • In neighboring Austria, rules adopted in September will further restrict unvaccinated people’s access to public venues if Covid-19-related hospitalizations reach a given level. On current trends, this appears likely to happen within weeks.
  • Employees in Austria are encouraged to work from home and can only go to work if they have been vaccinated, infected, or if they provide a negative test result.

Alibaba’s ‘Singles Day’ in China Hit by Global Supply Strains – Wall Street Journal, 11/12/2021

  • China’s biggest shopping season is getting squeezed by the global supply-chain crunch.
  • Alibaba said this year’s total sales hit a record high of 540.3 billion yuan, equivalent to about $84.5 billion, an 8.5% year-over-year growth.
  • That was the slowest pace of growth since the e-commerce giant started the festival in 2009.
  • JD.com reported record sales of 349.1 billion yuan, or about $54.6 billion.
  • Two of China’s largest e-commerce platforms, Taobao and JD.com, show that delivery of the latest smartphone models from Apple and Huawei Technologies could take up to some four weeks.

Toshiba, Like GE, Plans to Split Into Three Units – Wall Street Journal, 11/12/2021

  • Toshiba said it planned to split into three by March 2024 in response to shareholder pressure for a more-focused structure, following a similar path taken by fellow industrial conglomerate General Electric.
  • Under the plan, one of the three units will focus on infrastructure and a second on electronic devices such as power semiconductors.
  • The third, which will retain the Toshiba name, will manage the company’s stake in flash-memory company Kioxia Holdings and other assets.
  • The Toshiba board’s strategy committee said it envisioned further asset disposals by the units and described extensive contacts with private-equity firms interested in buying parts of the company.

Factmonster – TODAY in HISTORY

  • Leon Trotsky was expelled from the Communist Party and Joseph Stalin became the ruler of the Soviet Union. (1927)
  • The World War II battle of Guadalcanal begins. (1942)
  • Ellis Island stopped serving as the chief immigration station for the United States. Twenty million immigrants went through Ellis Island in its 62 years of operation. (1954)
  • Akihito becomes emperor of Japan. (1990)

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