US FINANCIAL MARKET
Stocks Waver, Bond Yields Rise After Powell Nomination – Wall Street Journal, 11/23/2021
- U.S. stocks toed the flat line while bond yields rose Tuesday in the wake of Jerome Powell’s nomination to continue as Federal Reserve chairman.
- The S&P 500 ticked down 0.2%, while the Dow Jones Industrial Average was essentially flat. The tech-heavy Nasdaq Composite slipped 0.6% after losing more than 1% Monday.
- Bond yields continued to rise Tuesday, with investors pricing in more certainty for the Fed’s plans to taper asset purchases and hike rates in the near future. The yield on the two-year note climbed to 0.622%, from 0.580% on Monday. The yield on the benchmark 10-year bond rose to 1.653%, from 1.625% Monday.
- The dollar strengthened, with the WSJ Dollar Index rising to the highest level since July 2020. The index measures the greenback against a basket of currencies.
- The late stages of earnings season continued. Zoom Video Communications shares tumbled 15% after the videoconferencing company reported a slowdown in sales growth.
- Best Buy shares fell 15% after the electronics retailer also posted lackluster sales growth.
- Oil prices oscillated after the White House said the U.S., China, Japan and other countries would tap strategic oil reserves in a bid to temper gasoline prices and inflation. Global benchmark Brent crude rose more than 2% in recent trading.
- Overseas, the Turkish lira weakened further, reaching a record low of 12.80 lira to $1. President Recep Tayyip Erdogan reiterated his views on interest rates and inflation on Monday, exerting further pressure on the Turkish central bank.
- The pan-continental Stoxx Europe 600 declined 0.5%. An uptick in Covid-19 cases and renewed restrictions in Austria and Germany is weighing on market sentiment in Europe.
- In Asia, major benchmarks were mixed. The Shanghai Composite Index added 0.2%. Hong Kong’s Hang Seng Index declined 1.2%, weighed down by declines in technology stocks.
Covid Rebound in U.S. Is as Bad as Last November’s in Some Spots – Bloomberg, 11/23/2021
- The latest U.S. Covid-19 wave is taking its toll on some states’ intensive-care units, with several parts of the country seeing outbreaks that are as bad as ever.
- In 15 states, patients with confirmed or suspected Covid are taking up more ICU beds than a year earlier, according to Department of Health and Human Services data.
- Colorado, Minnesota and Michigan have 41%, 37% and 34% of ICU beds occupied by Covid-19 patients, respectively, the data show.
- Michigan’s 54% full vaccination rate trails the national average of 59%, but Colorado and Minnesota are both doing slightly better than the country as a whole.
- Maine, which has one of the highest vaccination rates in the U.S., is setting pandemic hospitalization records with the count of patients nearing 300 in recent days. The surge is strongest among counties with the lowest vaccination rates, according to CDC data.
Zoom Shares Skid as Sales Growth Slows – Wall Street Journal, 11/23/2021
- Zoom Video Communications sales growth slowed last quarter as the extra demand for remote work and the company’s videoconferencing application eased, along with a pullback in the Covid-19 pandemic.
- The San Jose, Calif.-based company said its sales rose 35% from a year earlier to $1.05 billion for the three months ended Oct. 31. In the previous quarter, the company’s sales rose 54%. A year earlier, its sales jumped more than 360%.
- Zoom’s net income for its fiscal third quarter rose more than 70% from a year earlier to $340 million.
- Wall Street analysts were projecting sales of $1.02 billion and net income of $337 million for the quarter.
- Zoom said the number of customers who spent more than $100,000 on its services over the prior 12 months increased 94%, a sign that the company is having success picking up larger customers.
- For its current quarter ending in January, Zoom expects total sales of between $1.051 billion and $1.053 billion, better than the $1.018 billion expected by Wall Street, according to FactSet.
Best Buy earnings top estimates but retailer’s stock tumbles amid weakening demand, shipping bottlenecks – CNBC, 11/23/2021
- Best Buy’s fiscal third-quarter earnings beat estimates on Tuesday, yet shares tumbled as investors worried about rising shipping costs and weaker demand for consumer electronics.
- Net sales rose to $11.91 billion from $11.85 billion a year earlier, outpacing estimates of $11.58 billion.
- Same-store sales in the quarter rose 2% in the U.S., on top of 22.6% growth in the year-ago period. That exceeded the company’s own forecast of same-store sales being flat to down 3% in the quarter.
- Net income rose to $499 million, or $2.00 per share, from $391 million, or $1.48 per share, a year earlier.
- The company raised its forecast slightly for the year to reflect the third quarter’s gains, saying it now expects revenue of between $51.8 billion to $52.3 billion compared with the prior outlook of $51 billion to $52 billion. It expects same-store sales growth of 10.5% to 11.5% for the year.
- For the fourth quarter, it says it anticipates revenue of $16.4 billion to 16.9 billion, and same-store sales in the range of 1% growth to 2% decline.
- Shares fell more than 15% early Tuesday.
Dick’s Sporting Goods shares fall despite earnings beat and hiked outlook – CNBC, 11/23/2021
- Dick’s Sporting Goods shares fell Tuesday despite the company reporting fiscal third-quarter earnings that outpaced analysts’ expectations, which led it to hike its annual forecast.
- Revenue rose roughly 14% to $2.75 billion from $2.41 billion a year earlier. That topped expectations for $2.50 billion.
- Same-store sales, which track revenue at stores open for at least 12 months, rose 12.2%.
- Analysts surveyed by StreetAccount had been calling for a gain of 1.9%.
- Dick’s said its online sales rose just 1% from a year earlier, when many consumers resorted to shopping online, and were up 97% on a two-year basis. E-commerce sales made up about 19% of its total business, up from 13% in 2019.
- In the three-month period ended Oct. 30, net income rose to $316.5 million, or $2.78 per share, from $177.2 million, or $1.84 a share, a year earlier.
- Dick’s now expects to earn between $12.88 and $13.06 per share on sales of between $12.12 billion and $12.19 billion. After adjustments for Covid-19-related expenses, Dick’s said it would earn between $14.60 and $14.80 per share.
- Analysts had been looking for fiscal 2021 adjusted earnings per share of $13.13 on sales of $11.84 billion.
J.M. Smucker Reports Higher Sales Amid Price Increases – Wall Street Journal, 11/23/2021
- Food manufacturer J.M. Smucker said sales in the second quarter rose, as higher prices and demand helped it navigate higher costs and supply chain challenges.
- On Tuesday, the company behind Jif peanut butter, its namesake jellies and Folgers coffee said net sales were $2.05 billion in its fiscal second quarter, up from $2.03 billion a year earlier. Analysts polled by FactSet expected $1.95 billion.
- When adjusted for divestitures and for currency exchange, sales rose 8%.
- Higher prices in manufacturing, transportation, ingredient and packaging costs continued to weigh on gross margin in the period, falling to 34.7% from 40.2% a year earlier.
- For the quarter, earnings per share fell 6% to $1.90, while on an adjusted basis, earnings rose to $2.43 a share, beating analyst expectations of $2.05 a share.
- The company said it now expects adjusted earnings to be between $8.35 and $8.75 a share for the year. It had previously guided for $8.25 and $8.65 a share.
- The company also raised its sales expectations for the year. It now expects sales to be between a fall of 0.5% and a rise of 0.5%. It had previously guided for a decline between 1.5% and 2.5%.
U.S., Other Countries to Tap Strategic Oil Reserves in Bid to Tame Inflation – Wall Street Journal, 11/23/2021
- The U.S. and several other countries will tap their national strategic petroleum reserves, senior Biden administration officials said Tuesday, in an attempt to bring down gasoline prices that have become a big contributor to inflation.
- Other countries participating in the release include China, India, Japan, South Korea and the U.K., the White House said. The U.S. will release 50 million barrels, officials said.
- The coordinated release would be the first one in a decade, and senior administration officials say it is intended to help supply an economy rebounding from the coronavirus pandemic.
- Global consumption is likely to average 100 million barrels a day in the final three months of the year, up 4.9% from the same period a year ago, according to Energy Department figures.
Oil Rises With Global SPR Release Smaller Than Expected – Bloomberg, 11/23/2021
- Oil clung to gains as a landmark plan from consumer countries to tap their strategic oil reserves was less severe than markets expected.
- Futures in New York rose as much as 2.6%, erasing earlier losses, after Tuesday’s statement from the White House.
- While the headline size of the U.S. release is large, a significant chunk of the crude will be borrowed — to be returned later — leaving traders expecting tighter balances down the line.
UAE Says ‘No Logic’ to OPEC+ Increasing Oil Production Faster – Bloomberg, 11/23/2021
- The United Arab Emirates said there was no need for OPEC+ to increase oil production any faster, despite pressure from major consumers such as the U.S. and Japan for the group to help ease gasoline prices.
- “There is no logic to increasing our contribution,” UAE Energy Minister Suhail Al-Mazrouei said to reporters on Tuesday in Dubai. “I don’t think we are changing the plan.”
- The minister did not specify if he would agree to OPEC+ slowing its output increases should the U.S. and others announced a sale of their strategic petroleum reserves in a bid to lower gasoline prices.
- The group is raising daily output by 400,000 barrels each month, but has said it will be flexible and can move slower or faster depending on demand.
American Eagle Outfitters sales, inventory jump ahead of holidays – Reuters, 11/23/2021
- American Eagle Outfitters said on Tuesday its inventory levels jumped ahead of the crucial holiday season as it spent more on air freight to overcome supply chain disruptions, after posting better-than-expected quarterly results.
- For American Eagle, net revenue increased 24% from a year earlier to $1.27 billion in the third quarter ended Oct. 30, beating market estimates of $1.23 billion, according to Refinitiv IBES.
- Abercrombie’s net sales, meanwhile, rose 10% to $905.2 million, beating estimates of $896.9 million. It also announced a new $500 million share repurchase plan.
- Abercrombie’s digital revenue increased 8%, while American Eagle’s rose 10%, although both indicated a slowdown from a pandemic-fueled boom in 2020.
- Abercrombie said on Tuesday its inventory levels as of Oct. 30 were $544 million, largely flat compared to a year earlier, while American Eagle said its inventory at the end of the third quarter increased 32% to $740 million.
- Helped by strong demand across its eponymous and Aerie brands, American Eagle earned 76 cents per share, beating analysts’ average estimate of 61 cents.
US ECONOMY & POLITICS
U.S. Business Activity Softens as Capacity Constraints Linger – Bloomberg, 11/23/2021
- Growth in U.S. business activity softened this month as service providers and manufacturers remained constrained by higher inflation, supply shortages and hiring difficulties.
- The IHS Markit flash composite purchasing managers index slipped to 56.5 in November from 57.6 a month earlier, the group reported Tuesday. Readings greater than 50 indicate expanding activity.
- The IHS Markit composite index for input costs jumped to a fresh record, while the measure of prices received remained at a series high.
- The group’s composite measure of order backlogs was little changed from a month earlier and the second-highest in data back to October 2009.
- The IHS Markit flash factory index rose to 59.1 in November from 58.4 a month earlier, aided by stronger output and orders. Meantime, finished-goods inventories at manufacturers shrank at the fastest pace since May of last year.
- The group’s preliminary reading of services for the month slipped to a still-robust 57, from 58.7 in October.
EUROPE & WORLD
Germany considers new COVID-19 curbs, compulsory vaccines – Reuters, 11/23/2021
- Germany should impose further restrictions to try to stop a fourth wave of coronavirus infections, outgoing Health Minister Jens Spahn said on Tuesday as more politicians backed the idea of compulsory vaccinations.
- Spahn said more public spaces should be restricted to those who were vaccinated or recently recovered from COVID-19 and also had a negative test.
- Many German regions have already started to impose tighter rules, including demanding that vaccinated people show a negative test to attend indoor events.
- On Monday, Spahn said that by the end of the winter almost everyone in Germany would be “vaccinated, recovered or dead”.
Europe’s Surging Prices Beat Lockdown Risk for ECB Officials – Bloomberg, 11/23/2021
- The European Central Bank’s markets chief and the Dutch National Bank governor urged an end to emergency stimulus, highlighting inflation risks while insisting the recovery can weather new pandemic restrictions.
- Executive Board member Isabel Schnabel and Governing Council member Klaas Knot both suggested increasing vigilance to the threat of soaring prices, just weeks before a crucial decision on the future of asset purchases.
- The euro-area economy is facing a double whammy of headwinds, as a fresh wave of Covid-19 infections threatens to slow activity while inflation pressures notch up to record levels amid ongoing supply disruptions.
- The Bundesbank warned on Monday that inflation data next week might show a surge close to 6% this month, while Chancellor Angela Merkel urged new tight restrictions to bring record infections under control.
Europe’s Recovery at Risk From Covid Wave, Inflation Pressure – Bloomberg, 11/23/2021
- Euro-area business activity unexpectedly quickened, though the region’s recovery faces headwinds from a fresh wave of Covid-19 infections and “record inflationary pressures.”
- IHS Markit’s composite Purchasing Managers’ Index rose to 55.8 in November from 54.2 in October, according to a survey of purchasing managers by IHS Markit published Tuesday.
- While that defies the median estimate in a survey of analysts that forecast the measure would retreat, it still points to weaker economic growth in the closing quarter of 2021, the report said.
- The first jukebox was installed at the Palais Royal Saloon in San Francisco. (1889)
- S. wartime food rationing, of meat, butter, and other foods, ended. (1945)
- People’s Republic of China was seated at the UN Security Council. (1971)