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Daily Market Report | November 22, 2021

US FINANCIAL MARKET

Stocks Open Higher as Investors Greet Powell Nomination Announcement – Wall Street Journal, 11/22/2021

  • U.S. stocks opened higher following the news that President Biden would nominate Jerome Powell for a second term as chairman of the Federal Reserve.
  • The decision, revealed Monday before the stock market opened, ended a guessing game over who would lead the Fed during a period in which the central bank is expected to unwind coronavirus-era stimulus measures.
  • The Fed this month approved plans to scale back its bond-buying program, and elevated inflation has prompted market participants to expect higher interest rates next year.
  • Stocks have benefited from the stimulus the Fed, under Mr. Powell, has lavished on the economy since the early days of the pandemic. Investors broadly expect further market gains as the economy continues its recovery.
  • Some, however, are preparing for an increase in volatility as central banks globally gear up to respond to higher inflation by raising borrowing costs.
  • Yields on benchmark 10-year Treasury notes rose to 1.598%, from 1.535% Friday, after the White House made public Mr. Powell’s nomination. Yields move inversely to bond prices and skidded last week when lockdowns in Europe knocked the outlook for the world economy.
  • The WSJ Dollar Index, which tracks the greenback against a basket of currencies, rose 0.1%.
  • Mr. Powell is expected to win bipartisan Senate confirmation.
  • Earnings season is in its final round, with Zoom Video Communications and Urban Outfitters due to post results after the closing bell.
  • Of the roughly 480 companies on the S&P 500 to have reported, 82% have topped analysts’ earnings forecasts, according to FactSet.
  • In overseas markets, the Stoxx Europe 600 slipped 0.1%, led lower by travel and leisure stocks. Shares of Telecom Italia leapt 28% after private-equity firm KKR bid equivalent to around $12.2 billion to take Italy’s largest telephone company private.
  • The stock is still at a discount to KKR’s offer, signaling uncertainty about whether the deal will go through.
  • In Asia, South Korea’s Kospi rose 1.4%, the Shanghai Composite Index gained 0.6% and Japan’s Nikkei 225 ticked up 0.1%. India’s S&P BSE Sensex, which had benefited from investors ditching Chinese stocks in recent months, dropped 2%.

OPEC+ Weighs Adjusting Production to Counter Reserve Releases – Bloomberg, 11/22/2021

  • The OPEC+ group of oil producers may adjust its plans to raise production next month if consuming countries go through with a coordinated release of strategic petroleum reserves, according to delegates.
  • India became the latest major consumer to contemplate deploying its stockpiles, government officials said Monday, potentially assisting the U.S., Japan and even China in a move to assuage the inflationary threat of higher energy costs.
  • The U.S. has sought to persuade consumers to open their reserves after OPEC+ declined to speed up production increases earlier this month.
  • Some OPEC+ countries are unhappy about the use of state reserves, designed to be deployed in an emergency, to cool this year’s rally in prices, the delegates said, declining to be identified because the discussions are private.
  • OPEC+, led by Saudi Arabia and Russia, meets next week to discuss plans to increase production by an additional 400,000 barrels a day in December.

GoDaddy security breach exposes WordPress users’ data – Reuters, 11/22/2021

  • Web hosting company GoDaddy said on Monday email addresses of up to 1.2 million active and inactive Managed WordPress customers had been exposed in an unauthorized third-party access.
  • The company said the incident was discovered on Sept. 6 and the third-party accessed the system using a compromised password.
  • The company, whose shares fell about 1.6% in early trading, said it had immediately blocked the unauthorized third party, and an investigation was still going on.

JPMorgan’s Jamie Dimon and Tesla’s Elon Musk Feud Behind the Scenes – Wall Street Journal, 11/22/2021

  • Mr. Musk has spurned Mr. Dimon’s JPMorgan Chase for years, turning to other banks while expanding Tesla and his broader empire. Conversations over the years between the two companies have often upset one side or the other, according to people familiar with the matter.
  • Messrs. Musk and Dimon have tried to patch things up but clashed instead, the people said.
  • JPMorgan decided some time ago that it is better off without Tesla, according to people familiar with the matter.
  • A small part of the quiet feud, which pits America’s most valuable car maker against its biggest bank, spilled into the open last week when JPMorgan sued Tesla.
  • In its lawsuit, JPMorgan said Tesla owes it $162 million from a trade the bank helped arrange in 2014.
  • “We have provided Tesla multiple opportunities to fulfill its contractual obligations, so it is unfortunate that they have forced this issue into litigation,” JPMorgan said last week.
  • “If JPM doesn’t withdraw their lawsuit, I will give them a one star review on Yelp,” Mr. Musk said in response to The Wall Street Journal. “This is my final warning!”

Elon Musk Says Tesla’s Model S Plaid to Launch in China Next Year – Wall Street Journal, 11/22/2021

  • Tesla Chief Executive Elon Musk said the electric-vehicle company plans to launch its high-end sedan in China next year.
  • In a tweet early Monday, Mr. Musk said the Model S Plaid should come to China, probably around March.
  • The Model S Plaid was introduced earlier this year. It is priced starting around $130,000 and can accelerate from zero to 60 miles an hour in less than two seconds, according to the company.

KKR makes $12 billion approach to take Telecom Italia private – Reuters, 11/22/2021

  • Telecom Italia has received a 10.8 billion euro ($12 billion) approach from U.S. fund KKR aimed at taking Italy’s biggest phone group private, the company said on Sunday.
  • KKR’s move comes as TIM’s CEO Luigi Gubitosi battles for survival after coming under fire from top investor Vivendi following two profit warnings in three months.
  • TIM said KKR had set an indicative price of 0.505 euros for its possible buyout offer — a 45.7% premium to the ordinary shares’ closing price on Friday. KKR would also offer the same price for TIM’s savings shares .
  • KKR’s plan would see TIM carve out its fixed network to be run as a government-regulated asset along the model used by energy grid company Terna or gas grid firm Snam, two sources close to the matter said earlier on Sunday.

US ECONOMY & POLITICS

U.S. Home Sales on Track for Biggest Year in 15 Years – Wall Street Journal, 11/22/2021

  • U.S. home sales rose in October as buyers continued to compete for a limited number of homes for sale.
  • Existing-home sales increased 0.8% in October from the prior month to a seasonally adjusted annual rate of 6.34 million, the highest pace since January, the National Association of Realtors said Monday. October sales fell 5.8% from a year earlier.
  • Existing-home sales are on track to surpass six million this year, which would be the strongest annual pace since 2006, said Lawrence Yun, NAR’s chief economist.
  • The median existing-home price rose 13.1% in October from a year earlier, NAR said, to $353,900.
  • The market remains fast-paced, and many homes are selling above listing price. The typical home sold in October was on the market for 18 days, up from 17 days the prior month, NAR said.
  • There were 1.25 million homes for sale at the end of October, down 0.8% from September and down 12% from October 2020.
  • At the current sales pace, there was a 2.4-month supply of homes on the market at the end of October.
  • The share of first-time buyers in the market fell to 29%, down from 32% a year earlier.

Biden Will Tap Jerome Powell for New Term as Fed Chairman – Wall Street Journal, 11/22/2021

  • President Biden is set to nominate Federal Reserve Chairman Jerome Powell to a second term leading the central bank, the White House said Monday, opting for continuity in U.S. economic policy despite pushback from some Democrats who wanted someone tougher on bank regulations and climate change.
  • Mr. Biden will also nominate Fed governor Lael Brainard as vice chair of the central bank’s board of governors, the White House said.
  • Mr. Powell is expected to win bipartisan Senate confirmation; of the 84 lawmakers who voted for him four years ago, 68 of them are still in office, equally split between the two-party caucuses.

Biden Administration Aims to Close Gaps Among Lawmakers for Reconciliation Bill – Wall Street Journal, 11/22/2021

  • The Biden administration is moving to close gaps between House and Senate Democrats on its roughly $2 trillion education, healthcare and climate package, so it can finalize the bill that serves as the centerpiece of the president’s agenda.
  • The CBO found that the bill would contribute $367 billion to the deficit over 10 years; Democrats have argued that revenue not captured in the CBO score shows the bill is more than fully paid.
  • On Friday, the House passed what the Biden administration has dubbed the Build Back Better bill by largely holding together the Democrats’ centrist and progressive wings.
  • The package faces a more narrow path through the Senate, where lawmakers are evenly divided between Republicans and Democrats.
  • At the center of the dispute is the House plan to raise the $10,000 cap on the deduction for state and local taxes to $80,000 through 2030.
  • A small but committed group of lawmakers from high-tax states like New York and New Jersey have for years insisted on repealing the $10,000 cap, which Republicans put into place as part of the 2017 tax law.
  • But lifting the cap has tilted the tax benefits in the bill toward high-income Americans, alarming other Democrats who have themselves promised to raise taxes on the wealthy, not cut them.
  • Republicans have also pilloried the provision, branding it as a handout to wealthy Democratic supporters.

Traders Brace For June Interest Rate Hikes After Biden Confirms Powell as Fed Chair – Bloomberg, 11/22/2021

  • Traders are pricing in a ramp-up in tapering bond purchases by the Federal Reserve and the potential for a June liftoff on rate hikes after President Joe Biden selected Jerome Powell to serve another four years as the central bank’s chair.
  • Following the announcement, the front-end of the Treasuries curve dropped sharply as two-year yields rose as much as five basis points on the day.
  • In the eurodollar futures market, prices also reacted aggressively as traders started to price an additional Fed hike premium into the 2022 and 2023 contracts.
  • A second rate hike is now priced into the November 2022 Fed meeting next year, up from the December meeting at Friday’s close.

EUROPE & WORLD

Austria locks down, Merkel says new steps needed, as Europe faces COVID freeze – Reuters, 11/22/2021

  • Austria became on Monday the first country in western Europe to reimpose lockdown since vaccines were rolled out, shutting non-essential shops, bars and cafes as surging caseloads raised the prospect of a third winter in deep freeze for the continent.
  • Germany will also need tighter restrictions to control a record-setting wave of infections, outgoing Chancellor Angela Merkel was quoted as saying, remarks that erased gains on European stock markets and sent bond yields down.
  • With Europe once again the epicentre of the global pandemic, new restrictions and vaccine mandates are expected to spread nearly two years after the first COVID-19 case was identified in China.
  • The Czech Republic and Slovakia banned unvaccinated people from services including pubs from Monday.
  • The return of severe government restrictions in Austria had already brought about 40,000 protesters to Vienna’s streets on Saturday, and protests turned to violence in Brussels and across the Netherlands over the weekend.
  • In cities across the Netherlands, riots broke out as police clashed with mobs of angry youths who set fires and threw rocks to protest at COVID-19 restrictions. More than 100 people were arrested during three nights of violence, which saw police open fire at rioters in Rotterdam on Friday.

EU Weighs Changes to Covid Certificates, Travel Rules During Surge – Bloomberg, 11/22/2021

  • The European Union is discussing this week how to update its digital Covid-19 certificates and its approach to travel within and outside the bloc as member nations take varying steps to counter the latest wave of the pandemic.
  • Booster shots will be a topic of conversation when European affairs ministers meet in Brussels on Tuesday, along with a debate over whether to change the length of time a Covid-19 vaccination certificate is valid for, according to EU diplomats who declined to be named on confidential preparations.
  • The ministers, who have the task of preparing the next EU leaders’ summit on Dec. 16-17, will also discuss vaccine hesitancy, which has fueled sometimes violent street protests in several member states in recent days, one of the diplomats said.

China Is Expanding Its Effort to Launch Weapons from Hypersonic Missiles – Wall Street Journal, 11/22/2021

  • China is expanding its capacity to develop weapons that can be fired from hypersonic missiles, suggesting a test this summer that surprised U.S. military officials with its technological accomplishment is part of a program to create new threats for U.S. missile defenses.
  • The state-controlled AVIC Aerodynamics Research Institute said it is set to open a new wind tunnel capable of replicating the speeds and high temperatures faced by hypersonic missiles.
  • The new wind tunnel’s roles include testing the “separation and release” of weapons from hypersonic vehicles, the institute said in a news release Sunday.
  • A hypersonic glide vehicle is a maneuverable warhead that sits on the tip of a long-range missile and, once released, glides to its target on an unpredictable path that makes it difficult to intercept.
  • In a test in July, U.S. officials said, China fired a missile that traveled around the globe in a low-earth orbit before releasing the glide vehicle.
  • That glide vehicle then separately fired a projectile of its own, they said—a feat that pushes the boundaries of physics.

Ericsson to Buy Vonage for $6.2 Billion, Bulking Up Cloud Presence – Wall Street Journal, 11/22/2021

  • Ericsson agreed to buy cloud-communications provider Vonage Holdings, for $6.2 billion, in deal that the Swedish telecom-equipment maker said will expand its wireless enterprise business and broaden its global offerings.
  • Ericsson, in what would be its biggest deal ever, agreed to pay $21 a share in cash for Vonage, representing a 28% premium to Friday’s closing share price. The purchase, which Holmdel, N.J.-based Vonage’s board has approved, will be financed through Ericsson’s existing cash resources.
  • The deal is the latest in a flurry of acquisitions in the cloud-communications software market. Vonage and a handful of competitors occupy a niche in the industry. These so-called communications platform-as-a-service companies provide the tools that companies use to interact with employees and customers by text, WhatsApp, other chat services, video and voice.

Factmonster – TODAY in HISTORY

  • Portuguese explorer Vasco de Gama became the first navigator to sail around the Cape of Good Hope in his search for a sea route to India. (1497)
  • Edward Teach, better known as Blackbeard the pirate, was killed off the east coast of North America. (1718)
  • Mount St. Helens in Washington state erupted. Ash fallout reached as far as 48 mi away. (1842)
  • President Franklin Roosevelt, British prime minister Winston Churchill, and Chinese leader Chiang Kai-shek met in Cairo to discuss measures for defeating Japan. (1943)
  • President John F. Kennedy was assassinated while riding in a motorcade in Dallas. (1963)
  • Margaret Thatcher announced her resignation as prime minister of the United Kingdom. (1990)

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