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Daily Market Report | November 24, 2021

US FINANCIAL MARKET

Stocks Fall Ahead of Fed Minutes – Wall Street Journal, 11/24/2021

  • U.S. stocks weakened Wednesday as investors awaited minutes from the Federal Reserve’s latest meeting.
  • The S&P 500 edged down 0.2%, while the blue-chip Dow Jones Industrial Average weakened 0.3%, or about 110 points.
  • The Nasdaq Composite Index fell 0.2%. That puts the technology-heavy index on pace to decline for a third consecutive day amid a rise in bond yields.
  • Stock-market gains have been tempered in recent weeks by concerns over fresh coronavirus lockdowns in parts of the world, and inflation that is proving longer lasting than many had anticipated.
  • The earnings season—in which 82% of S&P 500 companies have topped analysts’ profit forecasts, according to FactSet—is drawing to a close, and investors are looking for fresh market drivers.
  • Nordstrom skidded 29%, while Gap fell 22%.
  • Both retailers reported disappointing earnings due to supply-chain issues late Tuesday.
  • Deere rose 6.1% after reporting sales and profit growth, despite a five-week long strike that ended last week.
  • The yield on the benchmark 10-year Treasury note ticked up to 1.667% Wednesday, from 1.665% Tuesday.
  • Yields, which move inversely to prices, have risen this week as investors increasingly expect the Federal Reserve to tighten monetary policy in the near future.
  • Technology and other growth stocks, which tend to be more sensitive to inflation and rising bond yields, suffered another pullback Wednesday. Qualcomm slid 0.8% and Microsoft lost 0.5%.
  • In commodity markets, Brent crude, the international oil benchmark, fell 0.2% to $81.13 a barrel.
  • Crude prices have shown limited response to the U.S.’s plan to release 50 million barrels of oil from its strategic stockpiles.
  • The move had been well telegraphed by the White House and some market participants had been girding for a larger release.
  • Overseas, the Turkish lira bounced off Tuesday’s record low. It rose over 4% against the dollar, but its losses for the month remain at more than 20%.
  • On Wednesday, President Recep Tayyip Erdogan is set to host Abu Dhabi Crown Prince Mohammed bin Zayed al Nahyan, in search of foreign investment that could help ease Turkey’s economic crisis.
  • Meanwhile, the Stoxx Europe 600 hovered near the flat line Wednesday, after the pan-continental index suffered its biggest one-day drop Tuesday in almost two months, amid fresh Covid-19 lockdowns in parts of Europe.
  • In Asia, stock markets were mixed. In Japan, the Nikkei 225 fell 1.6%, while in Hong Kong, the Hang Seng Index edged up 0.1%. In mainland China, the Shanghai Composite Index rose 0.1%.

Deere’s Sales Grew Last Quarter Despite Strike – Wall Street Journal, 11/24/2021

  • Deere & Co. posted sales and earnings growth in its latest fiscal quarter and forecast more growth to come next year as the company worked to move past the impact of a five-week worker strike that ended last week.
  • Deere’s sales in the latest quarter were $11.33 billion, up 16% from $9.73 billion in the same stretch of 2020.
  • Net income was $1.28 billion, or $4.12 a share, compared with $757 million, or $2.39 a share, in last year’s fourth quarter.
  • Wall Street analysts had been expecting sales of $10.46 billion and earnings of $3.91 a share, according to FactSet.
  • Production agriculture sales were up 23% year over year, while sales of small agricultural machines and turf equipment rose 17%. Construction and forestry sales improved by 14%.
  • Looking ahead, Deere estimated that its profit in 2022 will be between $6.5 billion and $7 billion, which would be growth over the $5.96 billion profit it recorded in 2021.

HP Sees Office Reopenings Lifting PC Demand Ahead of Promising Holiday Season – Wall Street Journal, 11/24/2021

  • HP reported strong earnings and gave an upbeat outlook, aided by office reopenings and an expectation for healthy consumer demand through the holiday shopping season despite supply shortages.
  • The PC and printer maker on Tuesday said it generated quarterly sales of $16.7 billion, up 9.3% from the year-ago period, and $3.1 billion in net income, including a one-time $1.78 billion legal settlement. The results beat Wall Street expectations for both sales and earnings.
  • Commercial PC revenue grew 25%, the company said, while consumer PC sales retreated 3%, from their lofty levels a year ago.
  • HP said it expects to generate per-share earnings of $0.92 to $0.98 in the current quarter and $3.86 to $4.06 for the full fiscal year ending Oct. 31, 2022, both ahead of Wall Street expectations.
  • Dell Technologies also posted strong results Tuesday after the bell, sending its shares up more than 0.6% in after-hours trading. The company said it reported its strongest-ever third quarter, with sales of $26.4 billion and net income of $3.9 billion. Commercial PC and high-end consumer devices saw strong growth, the company said.
  • Dell says it expects revenue in the current quarter to increase at least 12% from the year-ago period and reach $27 billion to $28 billion, beating expectations. Growth should continue next year, Chief Financial Officer Tom Sweet said on an analysts call.

Gap shares crater 15% after retailer sees millions in lost sales from delayed product shipments, cuts its forecast – CNBC, 11/24/2021

  • Gap shares tumbled Tuesday after the company slashed its full-year outlook, with fiscal third-quarter results falling short as Covid-related factory closures led to significant product delays in the quarter.
  • Revenue fell slightly to $3.94 billion from $3.99 billion a year earlier. That missed expectations for $4.44 billion.
  • Old Navy was disproportionately impacted by supply chain delays, particularly its women’s assortment, Gap said.
  • As a result, same-stores sales fell 9% year over year, but remained up 6% compared with 2019.
  • At its namesake Gap brand, same-store sales rose 7% from a year earlier and were up 3% versus 2019
  • Gap said it swung to a net loss of $152 million, or 40 cents per share, from net income of $95 million, or 25 cents a share, a year earlier.
  • Gap now expects full-year revenue to be up about 20%, which is less that its prior outlook of about a 30% increase.
  • Analysts polled by Refinitiv had been looking for a 28.4% year-over-year gain.
  • Gap’s expectations for adjusted full-year earnings have been lowered to a range of $1.25 to $1.40 per share, from a prior range of $2.10 to $2.25 a share. Analysts had expected Gap to earn $2.20 per share, Refinitiv said.
  • The company said its revised outlook takes into account roughly $550 million to $650 million of lost sales from supply chain constraints and about $450 million in air freight costs for the year.

Nordstrom shares tumble more than 20% as earnings fall short, hurt by higher labor costs, weak Nordstrom Rack sales – CNBC, 11/24/2021

  • Nordstrom on Tuesday reported earnings that fell short of analysts’ expectations as labor costs ate into profits and sales and its Nordstrom Rack business struggled to return to pre-pandemic levels.
  • Revenue, including credit card sales, climbed to $3.64 billion from $3.09 billion a year earlier, topping expectations for $3.55 billion. But that’s still down slightly from the $3.67 billion Nordstrom reported in the third quarter of 2019.
  • At Nordstrom Rack, an off-price division that competes with TJ Maxx and Macy’s Backstage, sales were up 35% from 2020 but fell 8% from 2019.
  • Digital sales fell 12% year over year and rose 20% on a two-year basis, representing 40% of the business.
  • Net income rose to $64 million, or 39 cents per share, from $53 million, or 34 cents a share, a year earlier. Analysts had been looking for per-share earnings of 56 cents, according to a Refinitiv survey.
  • It still expects annual revenue, including credit card sales, to grow more than 35% from last year. Analysts had been looking for a 36% increase, according to Refinitiv.

Oil Steadies as Global Release of Strategic Reserves Underwhelms – Bloomberg, 11/24/2021

  • Oil held on to Tuesday’s surge following the announcement of a coordinated release of strategic petroleum reserves, but the additional supply is unlikely to solve ongoing strength in some pockets of the oil market.
  • Brent futures traded around $82 a barrel after climbing 3.3% on Tuesday.
  • The total SPR release by the U.S., China, Japan, India and South Korea was smaller than many analysts and traders expected.
  • The U.S. also confirmed Tuesday that its barrels — which make up the bulk of the release — will be mostly sour, or high in sulfur.
  • That does little to solve an underlying problem of a shortage of sweet crudes, which are low in sulfur content.
  • As a result, a key time spread that measures the health of those markets has surged markedly.

Apple Sues Israeli Firm NSO Over Spyware, Claiming iPhone Hacks – Wall Street Journal, 11/24/2021

  • Apple has sued NSO Group, an Israeli maker of surveillance software, alleging the company misused its products and services, escalating a battle over surveillance and user privacy.
  • The lawsuit alleges that NSO Group engaged in “concerted efforts in 2021 to target and attack Apple customers, Apple products and servers and Apple through dangerous malware and spyware,” and seeks to bar NSO Group from using Apple’s products.
  • Critics and privacy advocates for years have alleged that NSO Group and similar firms sell hacking tools to governments with poor track records on human rights, allegations the company has denied.
  • The Israeli company has developed hacking techniques to install its surveillance software, called Pegasus, on Apple’s mobile phones without a user’s knowledge or consent, according to security researchers.

OPEC Weighs Shift in Oil Policy After Crude Release – Wall Street Journal, 11/24/2021

  • Top oil producers Saudi Arabia and Russia are considering a move to pause their recent efforts to provide the world with more crude, according to people familiar with those discussions, after Washington and other countries said they would release a slug of stored oil in an effort to lower prices.
  • Riyadh and Moscow have led OPEC and a group of other oil-producing countries in coordinating output closely amid a demand shock last year caused by the pandemic. Other members of that cartel, including the United Arab Emirates, aren’t convinced a pause is necessary, according to these people.
  • The U.S.-led crude release of up to 70 million barrels threatens to further scramble the supply-demand balance.
  • To compensate for the new supply, Riyadh and Moscow are now considering a pause of the group’s monthly collective increase, OPEC delegates said.
  • The U.A.E., a powerful OPEC member that has clashed with Saudi Arabia over OPEC policy in the past, and Kuwait are resisting a pause, according to the delegates.

US ECONOMY & POLITICS

U.S. Households Increased Spending in October – Wall Street Journal, 11/24/2021

  • U.S. consumers ramped up spending in October, helping to power the broader economic recovery as businesses stepped up investment and jobless claims fell to historic lows in a tightening labor market.
  • Household spending rose 1.3% in October from a month earlier, while personal income increased 0.5% last month, the Commerce Department said Wednesday. Consumers are benefiting from a strong labor market.
  • Spending on goods was up 2.2% in October, with increases for big-ticket and smaller purchases, while outlays on services grew 0.9% last month.
  • New orders for nondefense capital goods excluding aircraft—a closely watched proxy for business investment—were up 0.6% in October compared with the previous month, the Commerce Department said in a separate report released Wednesday.
  • Across the U.S., savings have dwindled from higher levels earlier in the pandemic and are near 2019 levels.
  • Americans were saving at an annualized rate of $1.336 trillion in September, compared with $5.764 trillion in March, when a fresh round of stimulus started reaching bank accounts.

U.S. Jobless Claims Reach 52-Year Low – Wall Street Journal, 11/24/2021

  • Weekly jobless claims fell sharply to the lowest level in 52 years, reflecting the labor market’s tightening as the economy recovers from the effects of the pandemic.
  • Worker filings for initial unemployment benefits, a proxy for layoffs, dropped 71,000 to 199,000 last week, the lowest level since November 1969, the Labor Department reported Wednesday.
  • Continuing claims—a proxy for those receiving payments—made to pandemic programs and all others dropped to 2.4 million in the week ended Nov. 6, down from 3.2 million the week prior and a sharp decrease from about 12 million in late August, before the pandemic aid expired nationwide.
  • That data isn’t seasonally adjusted and is reported on a several-week delay.

U.S. New-Home Sales Increase as Prices Climb to Record High – Bloomberg, 11/24/2021

  • Sales of new U.S. homes edged up in October, reflecting stabilizing demand even as builders face supply-chain disruptions and buyers grapple with rising prices.
  • Purchases of new single-family homes increased 0.4% to a 745,000 annualized pace following a downwardly revised 742,000 in September, government data showed Wednesday.
  • The median estimate in a Bloomberg survey of economists called for a 800,000 rate.
  • The report, produced by the U.S. Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home jumped 18% from a year earlier to a record $407,700.
  • There were 389,000 new homes for sale as of the end of October, the most in 13 years — though 28% of those houses were not yet started.
  • At the current sales pace, it would take 6.3 months to exhaust the supply of new homes, compared with 3.6 months at the start of the year.

U.S. Consumer Sentiment Falls to Decade Low on Inflation Woes – Bloomberg, 11/24/2021

  • U.S. consumer sentiment dropped in November from a month earlier to a decade low as higher prices continued to erode Americans’ spending power.
  • The University of Michigan’s final sentiment index fell to 67.4 during the month from 71.7 in October, data released Wednesday showed. That was a bit better than the preliminary reading of 66.8 and the median estimate in a Bloomberg survey of economists.
  • Respondents said they expect inflation to rise 3% over the next 5 to 10 years, up slightly from the preliminary reading. They expect prices to advance 4.9% over the next year, the highest since 2008.
  • The gauge of current conditions fell to 73.6, while the measure of future expectations decreased to 63.5.
  • A measure of buying conditions for household durable goods decreased to the second lowest in University of Michigan data back to 1978.

EUROPE & WORLD

U.N. Nuclear Chief Leaves Iran Without a Deal on Factory Inspection, Diplomats Say – Wall Street Journal, 11/24/2021

  • The head of the United Nations atomic watchdog agency left Iran late Tuesday after failing to reach a deal to allow inspectors access to a factory making equipment for Tehran’s nuclear program, diplomats said Wednesday, casting a fresh shadow over international nuclear talks set for next week.
  • The Wall Street Journal reported last week that the factory, in Karaj, Iran, had resumed producing key parts for centrifuges, which are used to enrich uranium, without any monitoring by the International Atomic Energy Agency. The diplomats said talks between the IAEA and Iran were continuing.
  • With Iran, the U.S. and other major powers set to resume negotiations in Vienna next Monday aimed at curbing Iran’s nuclear capabilities, that raised new concerns among Western officials that Iran could divert nuclear equipment to a possible future covert nuclear weapons program.

Factmonster – TODAY in HISTORY

  • Abel Tasman discovered Van Diemen’s land, later renamed Tasmania. (1642)
  • Darwin’s Origin of Species was published. (1859)
  • Jack Ruby shot Lee Harvey Oswald, JFK’s accused assassin, in the garage of Dallas police headquarters. (1963)
  • D. B. Cooper parachuted from a Northwest Airlines flight with $200,000. (1971)

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