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Daily Market Report | November 2, 2021

US FINANCIAL MARKET

Stocks Edge Higher After Wall Street Records – Wall Street Journal, 11/2/2021

  • U.S. stocks rose Tuesday, as the Federal Reserve began its two-day policy meeting against a backdrop of sharpening inflation concerns.
  • Tesla shares slipped after Chief Executive Elon Musk said on Twitter that the electric car maker hasn’t yet signed a deal for Hertz to buy its vehicles. Tesla’s shares surged last week after Hertz said it had ordered 100,000 cars.
  • Investors are looking beyond earnings though, analysts said.
  • The Fed’s two-day policy meeting will be a key focus this week. Investors have grown increasingly concerned that a period of rising prices could last longer and weigh more on the economy than central bank officials have suggested.
  • Major central banks elsewhere in the world, concerned about stubbornly high inflation, have been moving forward plans to raise rates.
  • On Tuesday, the Reserve Bank of Australia signaled it would raise interest rates sooner than expected.
  • The Bank of England is expected to increase rates when it meets on Thursday, while Canada’s central bank suggested last week that it could do so as soon as April.
  • Overseas, the Stoxx Europe 600 added 0.1%. In Asia, stock markets mostly weakened.
  • In Japan, the Nikkei 225 fell 0.4%, while in Hong Kong, the Hang Seng Index lost 0.2%.
  • In mainland China, the Shanghai Composite Index dropped 1.1%.

Pfizer Ups Covid-19 Vaccine Forecast as Sales More Than Double – Wall Street Journal, 11/2/2021

  • Pfizer raised its forecast for sales of its Covid-19 vaccine this year to about $36 billion, a roughly 7% boost from previous guidance.
  • Revenue from the vaccine of $13 billion was the single biggest contributor to Pfizer’s third-quarter revenue of $24.09 billion, which more than doubled year over year. Excluding the vaccine, sales of Pfizer’s other drugs rose by 7%.
  • Stripping out one-time items, the company’s adjusted third-quarter profits were $1.34 a share.
  • Wall Street analysts had been forecasting $22.58 billion in revenue and adjusted earnings of $1.08 a share.
  • Last week, Pfizer’s vaccine became the first in the U.S. authorized for children as young as 5 years old.
  • Like adults, children will be given the vaccine in two shots, although each will contain one-third of the adult dose.
  • Pfizer also raised its overall financial guidance for the year, forecasting sales of $81 billion to $82 billion, and adjusted earnings of $4.13 a share to $4.18 a share. It attributed the increase to both vaccine and non-vaccine momentum.

Under Armour shares soar as earnings beat prompts retailer to hike annual outlook – CNBC, 11/2/2021

  • Under Armour shares soared Tuesday, as strong fiscal third-quarter earnings revealed the athletic apparel maker is seeing progress in improving its brand image under Chief Executive Officer Patrik Frisk.
  • Revenue rose 8% to $1.55 billion from $1.43 billion a year earlier. Analysts had anticipated sales of $1.48 billion.
  • Wholesale revenue rose 10% while direct-to-consumer sales were up 12%. Under Armour still derives more sales from wholesale partners, like department stores, but the company has been investing in its own stores and website to in a bid to bypass middlemen and sell more directly to customers.
  • Online sales were down 4% from the prior year, as pandemic-fueled e-commerce activity slowed.
  • The company said digital sales made up 33% of total sales, down from 39% in the prior period.
  • Net income for the three-month period ended Sept. 30 rose to $113.4 million, or 24 cents per share, compared with $38.9 million, or 9 cents a share, a year earlier.
  • For fiscal 2021, Under Armour said earnings per share will reach about 74 cents, on an adjusted basis, compared with its prior estimate of 50 cents to 52 cents.
  • Revenue is estimated to rise about 25%, compared with its previous forecast for an increase in the low twenties.

DuPont Revamp to Harness Electric Vehicles, 5G Growth – Wall Street Journal, 11/2/2021

  • DuPont de Nemours announced planned deals that executives said aim to position the 200-year-old industrial company to capture growth from electric vehicles and high-speed telecommunications networks.
  • Net sales climbed 18% to $4.3 billion. The results outpaced expectations of analysts surveyed by FactSet.
  • DuPont on Tuesday reported net income of $391 million, compared with a net loss of $79 million a year ago, while operating earnings before interest, taxes, depreciation and amortization came in at $1.09 billion, up 20% from the year before.
  • The semiconductor shortage is continuing to drag on DuPont’s sales, executives said, and the company reduced its full-year sales and adjusted profit outlook.

Rental-Home Owner Pretium Buys Home-Flipping Lender for $1.5 Billion – Wall Street Journal, 11/2/2021

  • Investment firm Pretium Partners is acquiring home-flipping lender Anchor Loans for $1.5 billion, the latest sign that big investors believe the record-setting housing boom has more room to run.
  • The sellers were a group of investors that included Wafra Capital Partners, an affiliate of a Kuwait government pension fund, which had acquired a controlling stake in the company in 2019.
  • Thousand Oaks, Calif.-based Anchor has originated more than $10 billion in debt, specializing in small loans to professional home-flippers as well as rental landlords.
  • According to the company, 95% of its loans go to borrowers that have completed at least 40 projects. Flip loans are generally short-term—about one-year and high-interest.

KKR Earnings Rise, as Private-Equity Portfolio Climbs – Wall Street Journal, 11/2/2021

  • KKR reported an increase in third-quarter earnings, and the portion of profits that it could return to shareholders more than doubled.
  • The private-equity firm reported net income of $1.13 billion, or $1.80 per share, in the quarter ended Sept. 30 versus $1.06 billion, or $1.79 a share, a year earlier.
  • Helping to drive the gain was a 9% appreciation in KKR’s private-equity portfolio, including an 11% gain in its flagship funds. Both figures easily exceeded the 0.2% gain for the S&P 500 during the period.
  • KKR’s distributable earnings, a closely watched measure of cash that could be returned to shareholders, came in at $925.1 million, or $1.05 a share. That is compared with $452.8 million, or 53 cents a share, in the same period a year ago.

Thomson Reuters raises 2021 revenue forecast again – Reuters, 11/2/2021

  • Thomson Reuters on Tuesday raised its 2021 revenue forecast for the third time this year as the news and information company benefits from a recovering global economy.
  • Quarterly revenues climbed 6% to $1.53 billion, compared to expectations of $1.5 billion, while an 18% rise in adjusted EPS to 46 cents beat analysts’ mean estimate of 38 cents, according to Refinitiv.
  • Reuters News revenue benefited from gains in its business with media customers and a 60% rise in sales at its events business that was hurt by the pandemic.
  • The company now expects full-year revenues to increase 4.5-5.0%, compared with its previous forecast of 4.0-4.5%.

Shipper Maersk says port delays will stretch into new year – Reuters, 11/2/2021

  • The chaos that has bedevilled global supply chains in recent months will extend into next year, with a lack of truck drivers preventing hundreds of container vessels from offloading goods around the world, shipping group Maersk said.
  • “The whole system has become one gigantic bottleneck,” Chief Executive Soren Skou told reporters on Tuesday.
  • There are 300 container vessels laying idle outside ports, Skou said after Maersk reported robust third-quarter earnings on the back of record freight prices driven by the supply chain problems as the global economy recovers from the coronavirus crisis.
  • It said that final third-quarter earnings before interest, tax, depreciation and amortization (EBITDA) tripled to $6.9 billion compared with a preliminary figure of close to $7 billion issued on Sept. 16 when the company also raised its 2021 forecasts.
  • Maersk, which handles one in five containers shipped worldwide, said its main ocean business is now expected to grow more slowly than global container demand.
  • The company now expects demand to grow by 7-9% this year, up from previous guidance of 6-8%.
  • Container demand growth is then expected to slow to 2-4% next year, it said, reflecting normalization of the burgeoning consumer demand for material goods during the pandemic.
  • Maersk also said it would extend its share buyback program by an additional $5 billion over 2024 and 2025.

Yahoo Pulls Out of China, Ending Tumultuous Two-Decade Relationship – Wall Street Journal, 11/2/2021

  • Yahoo said it was pulling out of China, citing an increasingly challenging business and legal environment, the latest foreign company to be caught up in Beijing’s toughening rules for businesses.
  • Yahoo said it had ceased to offer its services from Nov. 1, becoming the second well-known U.S. technology firm to downsize China operations in less than a month following the closure of Microsoft’s LinkedIn social-networking site.
  • “In recognition of the increasingly challenging business and legal environment in China, Yahoo’s suite of services will no longer be accessible from mainland China as of November 1,” a Yahoo spokesman said.
  • Yahoo’s pullout coincided with the implementation of China’s Personal Information Protection Law, a privacy law that will curb data collection by technology companies that went into effect on Nov. 1, though Yahoo didn’t refer directly to it.

US ECONOMY & POLITICS

Manchin Criticizes Democrats’ Revised Social Spending and Climate Bill – Wall Street Journal, 11/2/2021

  • Sen. Joe Manchin (D., W.Va.) criticized Democrats’ $1.85 trillion healthcare, education and climate-change bill and withheld his support for a legislative framework that the White House had cast as a consensus acceptable to all members of the Senate Democratic caucus.
  • “I’m open to supporting a final bill that helps move our country forward,” he said at an afternoon press conference. “But I’m equally open to voting against a bill that hurts our country.”
  • He raised concerns about its possible impact on the national debt and inflation and attacked the decision to fund many programs on a temporary basis, saying that the legislation could be “a recipe for economic crisis” if its programs are funded for longer.
  • Mr. Manchin attacked that central design of the bill. “What I see are shell games, budget gimmicks” that could sharply increase the size of the bill if the programs were extended permanently, Mr. Manchin said.

Terry McAuliffe, Glenn Youngkin in Dead Heat in Virginia Governor’s Race – Wall Street Journal, 11/2/2021

  • Virginians headed to the polls Tuesday to elect a new governor in a tight race that is being closely watched as a gauge of the national political mood.
  • Polls show former Democratic Gov. Terry McAuliffe and Republican Glenn Youngkin, a former private-equity executive, are running neck-and-neck to succeed Democratic Gov. Ralph Northam. Virginia governors are barred from serving consecutive four-year terms.
  • President Biden, a Democrat, won Virginia by 10 percentage points last year, but his approval ratings have dipped to the low-40% range, making him a potential drag on Mr. McAuliffe.
  • A poll released last week by Christopher Newport University’s Wason Center for Civic Leadership found that independent voters favor Mr. Youngkin over Mr. McAuliffe 51% to 44%.
  • It found 80% of Republican likely voters said they were very enthusiastic, compared with 65% of Democrats. That “enthusiasm advantage” has grown since its Oct. 8 survey, the center said.

U.S. Suspends Duty-Free Trade Access to Ethiopia Over Conflict – Bloomberg, 11/2/2021

  • The U.S. suspended duty-free access to Ethiopian exports because of a yearlong civil war that’s spawned a humanitarian crisis in the Horn of Africa nation.
  • Ethiopia is not in compliance with the eligibility requirements of the African Growth and Opportunity Act because of gross violations of internationally recognized human rights, a senior U.S. official told reporters on a conference call.
  • The determination can be reversed if the government addresses human rights, humanitarian and political crises by Jan. 1, the official said.
  • The Horn of Africa nation exported goods worth $245 million to the U.S. last year under AGOA, accounting for almost half its shipments to America.

Biden Administration Proceeds With Covid-19 Vaccine Mandates – Wall Street Journal, 11/2/2021

  • The Biden administration is moving ahead with mandates that workers at private-sector businesses be vaccinated against Covid-19, giving companies more details on implementation and setting the issue up for further legal challenges.
  • President Biden’s vaccine mandate for private-sector businesses with 100 or more workers—and details on how the requirement will work—will likely be released later this week, according to people familiar with the matter.
  • The government separately on Monday released guidance on the mandate for federal contractors, which has been a factor for many large companies imposing vaccination requirements.
  • The requirement could mandate that employees who aren’t vaccinated pay for their own Covid-19 tests, which could be a point of contention for labor groups. Some businesses have already been covering the costs of testing for workers.
  • Slightly under 40% of workers who are unvaccinated say they would leave their job if getting the Covid-19 vaccine was mandated by their employer or if they were required to get tested for the virus weekly, according to survey results from the Kaiser Family Foundation Covid-19 Vaccine Monitor.
  • Employers in the construction industry have been concerned about the mandate potentially driving workers who don’t want to comply toward smaller companies that won’t be affected by the rule, said Greg Sizemore, vice president of health, safety, environment and workforce development at the Associated Builders and Contractors.

EUROPE & WORLD

China Shares Fall as Shut Schools Spark Concern on Virus Curbs – Bloomberg, 11/2/2021

  • Chinese shares fell on Tuesday after Beijing suspended classes at some schools due to rising virus cases, deepening concern that the government’s Covid Zero approach will weigh on the nation’s economic recovery and corporate earnings.
  • The benchmark CSI 300 Index closed 1% lower, with financial and energy stocks leading the drop while consumer discretionary shares also slid. China Tourism Group Duty Free slumped 7.8%, the worst performer and one of the biggest drags on the main gauge.
  • China’s capital halted classes at 18 primary and middle schools, at a time when the government’s stringent virus curbs have already been cited by companies and analysts for weak earnings in the third quarter.
  • The latest measure will add to concerns that troubles for businesses may linger into the winter months.

U.K. Parliament Tightens Its Covid Rules on Surge in Infections – Bloomberg, 11/2/2021

  • The U.K. Parliament tightened coronavirus rules amid a surge in cases, with tours and banquets canceled for two weeks and MPs urged to wear masks.
  • Face coverings were made compulsory for staff, contractors and journalists last week, but members of Parliament cannot be ordered to do so because they’re not employed by House of Commons authorities.
  • They were told Tuesday, however, that they are now expected to wear them across the estate.
  • The move comes as the U.K. continues to record a high number of daily cases, with 40,077 reported on Monday, along with 40 deaths.

Ryanair posts first quarterly profit since late 2019 – CNBC, 11/2/2021

  • Ryanair reported its first quarterly profit since before the onset of COVID-19, but said it expects to post an annual loss of up to 200 million euros ($231 million) as it would be forced to discount tickets to fill its planes over the winter.
  • The budget airline, Europe’s largest, carried 39.1 million passengers in the six months ended September, 54% fewer than in the same period of 2019.
  • The Irish airline, which operated more flights this summer than its European rivals, reported on Monday an after-tax loss of 48 million euros for the six months to September. A company poll of analysts had forecast a loss of 43 million euros.
  • Ryanair nudged up its passenger target for its financial year to March 2022to “just over” 100 million. It flew 149 million passengers a year before the pandemic.
  • Ryanair is expected to turn in a loss of between 100 million and 200 million euros for the financial year, which ends on March 31, Group Chief Executive Michael O’Leary said, adding that there was extremely little visibility.
  • The airline reiterated it expects to return to pre-COVID profitability in the year ending March 2023.

BP, Buoyed by Resurgent Oil Price, to Boost Investor Returns – Wall Street Journal, 11/2/2021

  • BP benefited from resurgent oil prices in the third quarter and said it would buy back more shares, though the energy giant’s profit was wiped out by an accounting issue.
  • The London-listed company said Tuesday that beyond higher commodity prices, its results were boosted by gains in its refining business and in natural-gas trading, and that it would use some of its surplus cash to buy back $1.25 billion of stock in the coming months.
  • BP reported a replacement cost loss—a metric similar to the net income figure that U.S. oil companies report—of $2.9 billion for the three months ended Sept. 30, compared with a loss of $644 million in the same period last year.
  • Excluding the accounting issue related to hedges, BP said it had an underlying replacement cost profit of $3.3 billion.

Factmonster – TODAY in HISTORY

  • Howard Hughes flew the Spruce Goose on its first and only flight. (1947)
  • Harry S. Truman defeated Thomas E. Dewey to the surprise of pollsters and newspapers, in the greatest presidential upset in history. (1948)
  • Jimmy Carter defeated Gerald Ford, becoming the first U.S. president from the deep South since the Civil War. (1976)

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