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Daily Market Report | November 17, 2021

US FINANCIAL MARKET

Stocks Open Modestly Lower After Target, Lowe’s Earnings – Wall Street Journal, 11/17/2021

  • U.S. stocks were muted after earnings from Target, TJX Cos. and Lowe’s before the opening bell.
  • The S&P 500 was nearly 0.1% lower in early trading Wednesday. The broad market index rose Tuesday, leaving it just short of last week’s closing high.
  • The tech-focused Nasdaq Composite Index was also down 0.1%, while the Dow Jones Industrial Average fell 0.2%.
  • Target shares fell 4% despite the retailer’s posting fiscal third-quarter revenue and earnings that topped Wall Street’s expectations.
  • Lowe’s shares added 1.4% after it boosted its full-year sales guidance, citing strong results through the first three quarters of the year.
  • TJX gained 9% after the retailer posted earnings that exceeded what analysts anticipated.
  • A strong earnings season has propelled stocks to fresh highs in recent weeks, offsetting investors’ concerns that supply-chain issues and higher-than-anticipated inflation would weigh on profits.
  • Cisco Systems, Bath & Body Works and Nvidia are slated to release earnings after the market closes.
  • In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 1.640% Wednesday from 1.632% Tuesday. Yields and prices move inversely.
  • Shares of Tesla rose 0.9%. Chief Executive Elon Musk sold another 934,000 shares Tuesday for roughly $973 million, continuing a recent selling spree, forms filed with the Securities and Exchange Commission showed.
  • Futures for gas to be delivered in the Netherlands—the European benchmark—gained 6.9%, building on Tuesday’s gains after German regulators suspended certification proceedings for a controversial natural-gas pipeline from Russia.
  • The pan-continental Stoxx Europe 600 stock index rose 0.1%. In Asia, major stock indexes closed with mixed performance. South Korea’s Kospi declined 1.2% and Japan’s Nikkei 225 shed 0.4%. China’s Shanghai Composite added 0.4%.

U.S. Overdose Deaths Top 100,000 a Year as Opioid Crisis Worsens – Bloomberg, 11/17/2021

  • The U.S. reached the grim milestone of 100,000 drug overdose deaths annually, a sign that the opioid crisis deepened at the height of the Covid-19 pandemic.
  • An estimated 100,306 Americans died from an overdose in the 12 months ended in April, a period that included months of lockdowns and business restrictions across the country, according to provisional data from the Centers for Disease Control and Prevention’s National Center for Health Statistics.
  • The toll is up 29% from the previous year.
  • About three-quarters of the total were overdoses from opioids, which rose 35%, killing 207 Americans a day on average during the period. That’s 54 more on a daily basis than a year earlier, CDC data show.
  • Most major drug categories saw an increase, including: fentanyl, a chemical powerful enough to kill in tiny concentrations; natural and semi-synthetic opioids, such as prescription pain medication; psychostimulants like methamphetamine; and cocaine.

Target lifts holiday sales forecast; supply costs loom – Reuters, 11/17/2021

  • Target on Wednesday raised its sales forecast for the holiday season, boosted by early Christmas shopping by Americans, even as the retailer grappled with higher costs stemming from the supply chain crisis.
  • Comparable sales rose 12.7% in the quarter ended Oct. 30, beating expectations, with almost all of that growth coming from stores.
  • Store traffic jumped nearly 13% as Target attracted more shoppers through its quick same-day delivery services such as Shipt and Drive-Up.
  • Adjusted profit came in at $3.03 per share.
  • Target said its inventory levels were up more than $2 billion from a year earlier ahead of the holiday rush, while adding that it had maintained lower prices despite an increase at the vendor side due to higher raw material costs.
  • The added costs in getting goods to its stores have weighed on its gross margins, which fell 260 basis points in the quarter.
  • The company now expects current quarter same-store sales to rise in the high single- to low double-digit range, up from its prior forecast of a high single-digit increase. It, however, did not raise its operating-margin expectations for the full year.

Lowe’s tops estimates as customers invest more in bigger home projects, retailer lifts sales forecast – CNBC, 11/17/2021

  • Lowe’s beat analysts’ expectations for fiscal third-quarter earnings on Wednesday, as the company got a bump in business from home professionals and online sales.
  • Net sales climbed to $22.92 billion from $22.31 billion last year and were higher than analysts’ expectations of $22.06 billion.
  • Lowe’s same-store sales grew by 2.2% in the three-month period. That was a sharp difference from analysts’ prediction of a 1.5% decline, according to StreetAccount.
  • Consumer transactions declined 7.5% in the three-month period, as there were lower sales of smaller ticket, do-it-yourself customers and was a drop in lumber sales, Chief Financial Officer Dave Denton said on the earnings call.
  • Average ticket increased nearly 10% over the year-ago period as more consumers bought appliances and flooring and the price of some items like copper rose due to inflation, Denton said.
  • Digital sales jumped by 25% in the third quarter.
  • Lowe’s profits rose to $1.90 billion, or $2.73 per share, from $692 million, or 91 cents a share, a year earlier. The results outmatched the $2.36 per share expected by analysts surveyed by Refinitiv.
  • The home improvement retailer raised its forecast, saying it anticipates $95 billion in sales. It had previously predicted revenue of $92 billion.
  • Lowe’s also said it plans to buy back $3 billion in shares in the fourth quarter, bringing total repurchases for the year to $12 billion. It bought back 13.7 million of its own stock for $2.9 billion during the latest quarter.

T.J. Maxx owner expects holiday sales to be undisturbed by supply crunch – Reuters, 11/17/2021

  • TJX Cos said it was well-positioned for the holiday season, easing concerns of product availability due to supply-chain bottlenecks and sending shares of the discount store operator up to a record high on Wednesday.
  • Net sales rose 24% to $12.53 billion in the third quarter, beating estimates of $12.27 billion, according to Refinitiv IBES data.
  • TJX said overall open-only comparable store sales growth for the start of the fourth quarter were up in the mid-teens percentage range over the fourth quarter two years ago.
  • Net income gained 18% at $1.02 billion, or 84 cents per share. Analysts had expected 81 cents.
  • The HomeGoods parent said inventories as of Oct. 30 were at $6.6 billion, compared with $6.3 billion at the end of the third quarter two years ago.

Amazon to Stop Accepting U.K.-Issued Visa Credit Cards – Wall Street Journal, 11/17/2021

  • Amazon.com said it would stop accepting Visa U.K. credit cards because of their high fees, a move that marks a major escalation in the retail giant’s yearslong battle with the card network.
  • Amazon told customers it would stop accepting Visa credit cards issued in the U.K. starting Jan. 19. High interchange fees on credit-card transactions mean higher prices for shoppers, an Amazon spokesman said.
  • Online retailers like Amazon are more reliant on credit cards and other digital payments and are especially sensitive to interchange fees. Card networks typically impose higher fees on online purchases because they are deemed more vulnerable to fraud.

Activision Blizzard Employees Demand CEO Bobby Kotick’s Resignation – Wall Street Journal, 11/17/2021

  • More than 100 current and former Activision Blizzard employees participated in a protest Tuesday to demand the resignation of Chief Executive Bobby Kotick after publication of a Wall Street Journal article about his handling of sexual misconduct issues at the videogame company, participants said.
  • The demonstration was held outside Activision’s Blizzard campus in Irvine, Calif., and organized by a recently formed Activision employee group called the ABK Workers Alliance.
  • “We will not be silenced until Bobby Kotick has been replaced as CEO,” the alliance said in a post on Twitter promoting the gathering.

Peloton, in Reversal, Plans to Raise $1 Billion in Stock Offering – Wall Street Journal, 11/17/2021

  • Peloton Interactive on Tuesday announced a $1 billion stock offering, just weeks after the maker of connected fitness equipment said it didn’t need additional capital to weather wider-than-expected losses and slowing growth.
  • Asked on Nov. 4 by analysts whether Peloton needed additional cash to deal with the shift, finance chief Jill Woodworth said, “Cutting to the chase, we don’t see the need for any additional capital raise based on our current outlook.” Ms. Woodworth said Peloton instead would consider putting off capital investments and cut costs.
  • The New York-based company said it would use proceeds from the stock sale for general corporate purposes, which could include building or expanding facilities or buying other companies, products or technologies.

SEC Investigating Cassava Sciences, Developer of Experimental Alzheimer’s Drug – Wall Street Journal, 11/17/2021

  • The Securities and Exchange Commission is investigating claims that Cassava Sciences, the sixth-best performing U.S. stock this year, manipulated research results of its experimental Alzheimer’s drug, according to people familiar with the matter.
  • The accusations appeared in a public petition filed in August to the Food and Drug Administration asking it to suspend Cassava’s clinical trials. The petition’s authors are two physicians who said they came to doubt Cassava’s research and have shorted its stock, betting the share price would fall once investors recognized the problems they found, they said.
  • David Bredt, a biotech entrepreneur and former neuroscience research chief at Johnson & Johnson and Eli Lilly, and Geoffrey Pitt, a cardiologist and professor at Weill Cornell Medicine, wrote that Cassava’s research, published in several different scientific journals, include images of experiments that appear to have been manipulated using software such as Photoshop.

U.S. airlines carried 58.4 million passengers in September – Reuters, 11/17/2021

  • U.S. airlines carried 58.4 million passengers in September, which remains down 20% over pre-pandemic levels, the U.S. Transportation Department said Wednesday.
  • The figures were more than twice the 25. 1 million passengers carried in September 2020 but still down from the 72.6 million in September 2019. The figures cover the 20 largest U.S. airlines.

McKesson Opioid Trial Begins With $95 Billion Potentially at Stake – Bloomberg, 11/17/2021

  • McKesson and two other drug distributors say they could end up having to pay more than $95 billion if they lose a trial in Seattle over the opioid crisis that began Monday.
  • Washington State Attorney General Robert Ferguson claims McKesson, Cardinal Health and AmerisourceBergen violated the state’s consumer-protection laws by turning a blind eye to red flags about opioid shipments. The companies failed to have tracking systems in place to prevent illegitimate sales and distribution of opioids as required by Washington’s state law, Ferguson said.
  • The state seeks at least $38 billion to replenish treatment and social-services budgets depleted by the public-health crisis. But the companies — which deny any wrongdoing — say the attorney general’s demand for penalties and forfeited profits could add up to more than $95 billion.

Oil Slips as Traders Mull Potential Reserves Release Post-EIA – Bloomberg, 11/17/2021

  • Oil clung to losses even after a U.S government report showed declines in crude and refined product inventories as investors focused on the chances of the U.S. and China tapping their strategic reserves.
  • During a virtual summit this week, the U.S. asked China to release oil reserves, the South China Morning Post reported. Beijing is open to the request but hasn’t committed to specific actions, it said.
  • In the U.S., an Energy Information Administration report showed crude stockpiles declined for the first time in a month, and gasoline inventories slid for a sixth straight week.
  • Japan, another major consumer that has voiced concern about high prices, is unlikely to release oil from its reserves due to a law that only allows it to release stocks in the event of supply disruptions, a government official said.

US ECONOMY & POLITICS

U.S. Housing Starts Ease as Single-Family Projects Decline – Bloomberg, 11/17/2021

  • New U.S. home construction unexpectedly slowed down in October, driven by a drop in single-family projects, as supply constraints disrupt building activity.
  • Residential starts fell 0.7% last month to a 1.52 million annualized rate after a downwardly revised 1.53 million pace in September, according to government data released Wednesday. The median estimate in a Bloomberg survey called for a 1.58 million pace.
  • Applications to build, a proxy for future construction, rose to an annualized 1.65 million units in October. The pace of permits for single-family units rose to the highest since May.
  • Single-family starts fell 3.9% in October to an annualized pace of 1.04 million units, the weakest since August 2020. All four regions saw a decline.
  • Multifamily starts — which tend to be volatile and include apartment buildings and condominiums — increased 7.1% to 481,000.
  • The number of single-family homes authorized for construction but not yet started — a measure of backlogs — climbed to 152,000 in October.
  • The report also showed the number of homes under construction but not yet completed rose to 1.45 million, the highest since 1974.

Federal Government Could Be Unable to Pay Bills as Soon as Dec. 15, Yellen Says – Wall Street Journal, 11/17/2021

  • The U.S. government could run out of resources to meet the nation’s obligations as soon as Dec. 15, Treasury Secretary Janet Yellen said Tuesday, reviving questions about how Congress will resolve a standoff about raising or suspending the federal borrowing limit.
  • Ms. Yellen provided the new estimate of when the federal government might no longer be able to pay all of its bills in a letter to Congressional leaders. She had previously said that a debt-limit increase passed by Congress in October provided confidence that the federal government would be able to pay its bills at least through Dec. 3.
  • The letter doesn’t indicate that Dec. 15 is the definite date when the U.S. may need to forgo certain obligations. Private analysts have said that date could fall between mid-December and mid-February.

SALT Proposal Gives Windfall to Top Earners in High-Cost Areas – Bloomberg, 11/17/2021

  • Well-off professionals in costly areas of the U.S., such as New York and California, are set to get a windfall from competing plans by Congressional Democrats to change the deduction limit for state and local taxes.
  • Americans with six-figure salaries and high property and state income tax bills will see the most noticeable effects from lifting the $10,000 SALT cap, according to an analysis by accounting firm Marcum conducted for Bloomberg News.
  • The reconciliation bill under consideration by the House of Representatives would allow all taxpayers – including the superrich – to deduct up to $80,000 of SALT.
  • In the Senate, Vermont’s Bernie Sanders and New Jersey Senator Bob Menendez have proposed limiting the benefits of raising the SALT cap to non-wealthy households. A threshold of $400,000 was floated earlier this month, but Menendez said the income limit could be as much as $500,000.

Tesla, Toyota Accuse Biden’s EV Tax Credit of Putting Unions Over the Environment – Wall Street Journal, 11/17/2021

  • President Biden says he wants to save the planet and save union jobs. The electric-vehicle tax credit in his social spending package shows how those aims can sometimes conflict.
  • The proposal being negotiated by House and Senate Democrats gives consumers the full $12,500 tax write-off only if they buy electric vehicles assembled by union workers using American-built batteries. Automobiles produced in nonunion factories would qualify for $4,500 less.
  • “Biden is a UAW…puppet,” Tesla Chief Executive Elon Musk wrote on Twitter, replying to a tweet about EV tax credit. Tesla, the world’s biggest electric-vehicle maker, didn’t respond to a request for comment.
  • According to Autos Drive America, only two of more than 50 electric vehicles on the market would be eligible for the whole tax credit. Both are Chevy Bolts, made by the UAW-organized General Motors.

EUROPE & WORLD

Inflation at 5% a Reality for Almost a Third of U.K. Spending – Bloomberg, 11/17/2021

  • Inflation for almost a third of the things U.K. consumers usually buy is running at 5% or more a year, delivering another alarm about rising prices to the Bank of England.
  • From olive oil to cigars and cinema tickets, almost 30% of the shopping basket of goods and services used to calculate the cost of living was growing by more than 5% in October, according to analysis by Bloomberg. In September, just a fifth items were rising at that pace.
  • The findings indicate that the drivers of inflation go well beyond the cost of energy and that increasing prices are becoming more widespread. That will add to concerns about inflation at the central bank, which has warned it’s preparing to tighten rates to maintain its 2% inflation target.

Off the grid: Chinese data law adds to global shipping disruption – Reuters, 11/17/2021

  • Ships in Chinese waters are disappearing from tracking systems following the introduction of a new data law in China, frustrating efforts to ease bottlenecks that are snarling the global economy, according to three shipping sources directly impacted.
  • China’s Personal Information Protection Law, which came into effect on Nov. 1, has added to a raft of new rules designed to increase government control over how domestic and foreign organisations collect and export China’s data.
  • Although there are no specific guidelines on shipping data in the regulations some domestic providers in China have stopped giving information to foreign companies as a direct consequence of the new rules, the sources told Reuters on Wednesday.
  • The data is relied upon to provide information on cargo volumes and helps optimise logistics by predicting congestion so companies can make key decisions on shipping routes.

Two Powerful Dynasties Accused of Rights Abuses Join Forces in the Philippines – Wall Street Journal, 11/17/2021

  • Two political dynasties have joined forces in the Philippines presidential race, creating a formidable ticket in the contest and uniting two powerful families that have faced allegations of human rights abuses.
  • Sara Duterte-Carpio, the daughter of the incumbent president, avoided a showdown with Ferdinand Marcos Jr., the son of a former dictator, when she opted to run for the vice presidency instead of challenging him for the top job.
  • Political analysts say they would likely uphold some of the policies and tactics of Mr. Duterte, who has been accused of eroding democracy and human rights in the country.
  • He has waged a deadly war on drugs, expanded presidential influence over the judiciary and attacked the press. Critics say he has manipulated the court system to imprison political opponents.

Factmonster – TODAY in HISTORY

  • Queen Elizabeth I of England ascended to the throne upon the death of her half-sister Queen Mary. (1558)
  • The Suez Canal opened in Egypt. (1869)
  • Night of the “Heidi bowl:” NBC switched from football to movie of Heidi. In the missing 42 seconds, the lagging Raiders scored two touchdowns, defeating the Jets. (1968)
  • President Nixon said “I am not a crook.” (1973)
  • The beginning of the “Velvet Revolution,” which led to the downfall of communism in Czechoslovakia. (1989)
  • Arnold Schwarzenegger was sworn in as governor of California. (2003)

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Prior to making any investment decision please consult your financial advisor regarding your specific situation.

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