Daily Market Report | November 3, 2021
US FINANCIAL MARKET
S&P 500 Pauses Ahead of Fed; Meme Stocks Jump – Wall Street Journal, 11/3/2021
- Broad U.S. stock indexes were quiet early Wednesday ahead of a Federal Reserve meeting, but below the surface a fresh frenzy broke out among meme stocks popular with individual investors.
- The S&P 500 and the Dow Jones Industrial Average edged down 0.1% and 0.4% respectively Wednesday, while the technology-heavy Nasdaq Composite Index rose less than 0.1%.
- On Tuesday, the Dow closed above 36000 for the first time, while the other two indexes also set record highs.
- Companies popular with traders on Reddit’s WallStreetBets page rose in early trading.
- Bed Bath & Beyond surged more than 30%. The company, which on Tuesday announced a partnership with grocery chain Kroger, was among the most discussed companies on the forum, according to sites that track mentions of ticker symbols.
- Other meme-stock favorites GameStop and AMC rose around 11% and 8%, respectively.
- Meanwhile, Activision Blizzard fell almost 15% after the videogame maker said the release of two of its titles would be delayed.
- Ride-hailing firm Lyft jumped 11.4% after saying revenue climbed in the latest quarter as demand for its services returned.
- Avis Budget Group fell over 15% following its more than 100% gain Tuesday, which came after the company reported better-than-expected profit and announced plans to add more electric vehicles to its rental fleet.
- Investors’ eyes are on the Federal Reserve, which is set to conclude its two-day meeting later in the day.
- Officials are expected to announce the beginning of the end of their $120 billion-a-month bond-buying program but keep rates unchanged, despite growing disquiet about inflation.
- The yield on the benchmark 10-year U.S. Treasury note hovered around 1.545%, from 1.546% on Tuesday.
- Bond yields and prices move in opposite directions.
- Overseas, the Stoxx Europe 600 added 0.1%.
- In Asia, stock markets were mostly lower. In Hong Kong, the Hang Seng Index lost 0.3%, while in mainland China, the Shanghai Composite Index edged down 0.2%. Japanese markets were closed Wednesday for a public holiday.
Lyft Reports Higher Revenue as Ridership Returns – Wall Street Journal, 11/2/2021
- Lyft said revenue climbed in the latest quarter, as consumers continue to pay higher prices due to the shortage of drivers and the increase in rider demand.
- The San Francisco company’s revenue increased 73% to $864 million from the year-earlier period, as its ridership inched closer to pre-pandemic levels.
- The company reported 18.9 million active riders in the quarter, up from 12.5 million a year earlier.
- Lyft had 22.9 million active riders at the end of 2019.
- The company’s average revenue per active rider increased to $45.63 in the third quarter, a 14% increase from the year earlier.
- Lyft said the number of drivers increased 20% from the previous quarter and it saw 34% more drivers sign up to the platform in the third quarter over the same period.
- Lyft posted a profit on an adjusted basis before interest, taxes, depreciation and amortization of $67.3 million for the three months ended Sept. 30, compared with an adjusted loss by the same measure of $239.7 million a year ago.
- Lyft’s net loss narrowed to $71.5 million from $459.5 million a year earlier.
T-Mobile Says Customer Growth Recovered After Data Hack – Wall Street Journal, 11/2/2021
- T-Mobile’s third-quarter profit slipped as higher costs and a lull in new customer additions following a headline-grabbing hack sapped its bottom line.
- Overall revenue rose 1.8% to $19.62 billion.
- The company said it added 673,000 phone subscribers in the closely watched market for postpaid wireless service during the September-ended quarter.
- The tally lagged behind AT&T, which reported a net gain of 928,000 such subscribers, over the same span.
- Merger costs jumped to $955 million from $288 million the same time a year earlier.
- T-Mobile’s overall third-quarter profit fell to $691 million, or 55 cents a share, compared with a year-earlier result of $1.25 billion, or $1 a share.
Tinder owner’s revenue forecast disappoints as COVID-19 hits Asia – Reuters, 11/2/2021
- Match Group projected fourth-quarter revenue below market estimates on Tuesday as COVID-19 hit the Tinder owner’s business in Asia and delayed the launch of new features on the recently bought video-chatting app Azar.
- Revenue rose 25% to $801.8 million in the third quarter, but missed estimates.
- The company added 16.3 million payers and revenue per payer rose 8%.
- Net profit came in at 43 cents per share, missing expectations of 55 cents.
- The company expects fourth-quarter revenue between $810 million and $820 million, below analysts’ average estimate of $838.5 million, according to Refinitiv.
- “We continue to feel some lingering COVID effects across Asia, particularly in Japan, our second-largest market by revenue,” Match said in a statement, sending its shares down 6%.
Mondelez Nudges Up Outlook, Expects Inflation and Logistics Pressures to Persist – Wall Street Journal, 11/2/2021
- Mondelez International raised its outlook for a revenue growth metric as it posted higher quarterly profit and revenue and said it expects elevated inflation and logistics volatility to continue.
- Net revenue for the three months ended Sept. 30 rose 7.8% to $7.18 billion, helped by sales from the company’s acquisitions of Hu, Grenade and Gourmet Food. Analysts polled by FactSet were expecting $7.05 billion.
- In the latest quarter, organic net revenue grew 5.5%.
- Mondelez said it booked higher raw material and transportation costs during the third quarter, partially offset by what it described as pricing and manufacturing productivity.
- The Chicago-based company posted net income attributable to the company of $1.26 billion for the quarter, compared with $1.12 billion in the same period last year. Adjusted earnings were 71 cents a share, beating Wall Street estimates.
- The company maintained its full-year target for adjusted earnings per share to grow by a high-single digit. It sees free cash flow of more than $3 billion for the year.
- The snack giant behind Oreo cookies, Toblerone chocolate and Sour Patch Kids candy on Tuesday said it expects organic net revenue, which excludes the effects of acquisitions, divestitures and currency-rate fluctuations, to grow about 4.5% for 2021. It previously projected growth of more than 4%.
Zillow Quits Home-Flipping Business, Cites Inability to Forecast Prices – Wall Street Journal, 11/2/2021
- Real-estate firm Zillow Group is exiting from the home-flipping business, saying Tuesday that its algorithmic+ model to buy and sell homes rapidly doesn’t work as planned.
- In a statement Tuesday, Chief Executive Rich Barton said Zillow had failed to predict the pace of home-price appreciation accurately, marking an end to a venture the company once said could generate $20 billion a year.
- Instead, the company said it now plans to cut 25% of its workforce.
- Zillow, which released earnings Tuesday, said its home-flipping business, Zillow Offers, lost $381 million last quarter, as measured by adjusted earnings before interest, taxes, depreciation and amortization.
- That resulted in a combined adjusted Ebitda loss of $169 million across all of Zillow.
- Zillow has an inventory of about 9,800 homes across the United States that it is currently shopping to investors. Additionally, there are another 8,200 homes in contract it has agreed to buy. The company expects to lose somewhere between 5% and 7% on these homes, the company said.
Caesars CEO Talks Up Sports Betting After Profit Falls Short – Bloomberg, 11/3/2021
- Caesars Entertainment would have been more profitable last quarter if not for the fallout from Hurricane Ida on the U.S. Gulf Coast and a fire in Northern California, Chief Executive Officer Tom Reeg said Tuesday.
- Revenue soared to $2.69 billion from $1.44 billion a year ago, when casinos were in the teeth of the pandemic.
- Adjusted earnings before interest, taxes, depreciation and amortization more than doubled to $882 million, but that missed the $931 million average of analysts’ estimates compiled by Bloomberg.
- The earnings represent a record for the company’s Las Vegas properties, Caesars said in a statement.
- Caesars reported a surprise net loss for the quarter of $233 million, or $1.10 a share.
CVS Health Posts Higher Revenue as Customers Seek Covid-19 Tests, Vaccines – Wall Street Journal, 11/3/2021
- Vaccinations and Covid-19 tests boosted revenue for CVS Health over the summer, fueling a larger quarterly profit and leading the drugstore and healthcare company to boost its full-year outlook.
- Third-quarter sales were $73.79 billion overall, a rise from $67.06 billion in 2020’s third quarter.
- CVS posted an adjusted profit of $1.97 a share, up from $1.66 a share a year earlier.
- The results exceeded the forecasts of Wall Street analysts, who had predicted sales of $70.52 billion and adjusted earnings of $1.79 a share, according to FactSet.
- Retail sales rose by 10% year over year in the three months through September, with Covid-19 vaccines and tests accounting for about 40% of the gain.
- Revenue also climbed in CVS’s health-insurance and pharmacy-services businesses as pharmacy claims grew, the company said Wednesday.
- Looking ahead, CVS lifted its full-year outlook. It said it now expects to report a per-share adjusted profit of $7.90 to $8.00 in 2021, up from a previous forecast of $7.70 to $7.80.
Activision Shares Tumble on Game Delays – Wall Street Journal, 11/3/2021
- Activision Blizzard shares tumbled in after-hours trading Tuesday after the company said it is delaying the launch of two games and reported third-quarter earnings with a holiday-season outlook falling short of Wall Street analysts’ expectations.
- Activision said net bookings in the third quarter rose 6% to $1.88 billion, while net income climbed 6% to $639 million.
- Monthly active users were 390 million, down sequentially from 408 million in June and flat from a year ago.
- On Tuesday, Activision said Jen Oneal will step down from her position as co-chief of Blizzard, a role she gained in August, to focus on a new diversity, equity and inclusion initiative in partnership with a nonprofit.
- For the current quarter, which includes the launch of a new installment of Activision’s biggest property, “Call of Duty,” the company said it projects net bookings to fall 4.5% from a year earlier to $2.78 billion.
- Analysts polled by FactSet were expecting $2.92 billion.
- Similarly, the company’s full-year outlook for net bookings, $8.65 billion, fell short of analysts’ $8.79 billion projection.
Discovery edges past quarterly revenue estimates on ad strength – Reuters, 11/3/2021
- Discovery beat Wall Street expectations for third-quarter revenue on Wednesday, driven by higher advertising and distribution revenue as the company looks ahead to its proposed merger with AT&T’s WarnerMedia unit.
- Revenue rose about 23% to $3.15 billion in the quarter ended Sept. 30, slightly above an estimate of $3.14 billion, according to Refinitiv data.
- Total paid streaming subscribers globally stood at 20 million at the end of the third quarter, up from 17 million in the previous quarter and 18 million that the company had announced in early August.
- Advertising revenue rebounded after a pullback due to the pandemic, and was up 28% internationally from the same period last year. Both domestic and international distribution revenue were also up from a year ago, driven by Discovery+.
- Excluding onetime items, Discovery earned 24 cents per share, below estimates of 41 cents.
- In a call with investors on Wednesday, Chief Executive Officer David Zaslav said Discovery sees free cash flow on track to exceed $2.1 billion for the full year, and expects net leverage at the close of the WarnerMedia deal to be at or below 4.5 times, versus 5 times it estimated in its guidance in May.
Amgen posts higher third-quarter sales, but trims full-year estimate – Reuters, 11/3/2021
- Amgen on Tuesday said its quarterly revenue rose 4% as the impact of the COVID-19 pandemic began to ease, but said new prescriptions will be subdued through 2021 and prices for some drugs remain under pressure from lower-cost competition.
- Revenue for the quarter totaled $6.7 billion, up from $6.4 billion a year earlier, and in line with analyst expectations.
- Amgen said sales volume for the quarter rose 8%, but net selling prices fell 7% as competition, including from cheaper generics and biosimilars, pushed down prices for its arthritis, migraine and infection-fighting drugs.
- Sales of arthritis drug Enbrel fell 3% from a year earlier to $1.29 billion. Sales of newer cancer drug Lumakras totaled $36 million for the quarter, ahead of analyst estimates of $28 million.
- Amgen’s net earnings fell 3% to $3.31 per share with a $400 million licensing-related expense from a collaboration with Japan’s Kyowa Kirin.
- For the full year, the biotechnology company lowered the top end of its revenue forecast to $26.2 billion from a previous $26.6 billion. Wall Street analysts had forecast $26 billion, according to Refinitiv.
- Amgen also slightly raised its outlook for 2021 adjusted earnings per share to between $16.50 and $17.10 from a previous range of $16.00 to $17.00.
- Full-year stock buy backs will come in near the high end of the company’s estimated range of $3 billion to $5 billion, Chief Financial Officer Peter Griffith said on a conference call.
New York Times earnings beat on ad rebound, subscriber growth – Reuters, 11/3/2021
- The New York Times reported better-than-expected quarterly earnings on Wednesday, as a surge in marketing spend by companies emerging from the pandemic bolstered its digital ad business.
- The company posted an adjusted profit of 23 cents per share in the third quarter on revenue of $509.1 million. Analysts had expected a profit of 20 cents per share on revenue of $499.1 million, according to Refinitiv data.
- The publisher’s digital ad revenue jumped 40.2% in the third quarter, putting it on a path to growth following a hammering at the peak of the pandemic when companies slashed their ad budgets to save up on cash.
- The Times said it added 455,000 digital-only subscribers during the quarter, its highest this year as the news cycle gathered pace.
Bed Bath & Beyond Surges 91% Amid Accelerated Buyback Plan – Bloomberg, 11/2/2021
- Bed Bath & Beyond soared in late trading on Tuesday after announcing accelerated share buybacks and the launch of a new digital marketplace for merchandise from third-party producers.
- The company said it expects to complete its $1 billion share repurchase plan by the end of its fiscal year in February — two years ahead of schedule.
- There is $400 million of buybacks remaining in the program.
- In addition to its online marketplace, the home-goods retailer said it would start selling some of baby and home merchandise at Kroger and pilot a small-scale physical store in some Kroger stores starting next year.
- Bed Bath & Beyond also named Anu Gupta as chief growth officer and Rafeh Masood as chief customer officer, both new roles.
- Elsewhere in the meme world, shares in Avis Budget Group doubled Tuesday as the rental-car company was mentioned alongside other such stocks on Reddit’s WallStreetBets thread and chatroom Stocktwits.
Nike Files to Sell Digital Sneakers, as It Seeks Downloadable Kicks – Wall Street Journal, 11/3/2021
- Nike might soon sell you sneakers that can’t be worn.
- The company filed trademark applications last week that indicate it wants to sell digital versions of its sneakers, clothing and other goods stamped with its swoosh logo in virtual worlds, such as videogames or other online platforms.
- For Nike, the trademark applications could be a way to protect its brand in virtual worlds— as it already does in the real world—and prevent knockoffs from appearing in games, said Josh Gerben, a trademark attorney at Gerben Intellectual Property.
Deere Union Workers Reject Labor Agreement, Extending Strike – Bloomberg, 11/3/2021
- Members of the United Auto Workers union rejected a deal with Deere & Co., extending a nearly three-week-long strike and illustrating the growing willingness of U.S. workers to hold out for better terms.
- The second rejected deal offered substantial improvements over one that workers turned down before going on strike, and included larger wage increases, no new tiers to retirement benefits and a signing bonus of $8,500.
- The rejection of the agreement demonstrates workers’ increased leverage amid a national labor shortage and strong demand for farm equipment. The wage increase offered at 14 Deere facilities was larger than nearly a dozen other collective bargaining agreements the UAW has negotiated since 2018, according to Bloomberg Law’s database of labor contracts.
- “Thirty five years ago, workers at Deere lost a lockout and took a deal that froze and reduced wages,” said University of Chicago historian Gabriel Winant. “Today they rejected an offer that starts with a 10% raise.
- It’s the biggest downward shift in the economic balance of power in my lifetime.”
US ECONOMY & POLITICS
U.S. Companies Add More Jobs Than Forecast, ADP Data Show – Bloomberg, 11/3/2021
- U.S. companies added the most jobs in four months, suggesting employers are making progress in filling a near-record number of open positions.
- Businesses’ payrolls increased by 571,000 last month, after a revised 523,000 gain in September, according to ADP Research Institute data released Wednesday.
- The median forecast in a Bloomberg survey of economists called for a 400,000 rise.
- Service-provider employment increased 458,000 in October, the most since June, led by payrolls at leisure and hospitality companies and professional and business firms.
- Payrolls at goods producers rose by 113,000, reflecting the biggest advances in construction and manufacturing hiring since September 2020.
- Companies with more than 1,000 workers added 305,000 people to payrolls, while small businesses posted a gain of 115,000.
- The data precede Friday’s monthly employment report from the Labor Department, which is forecast to show that private payrolls increased by 408,000 in October.
U.S. Services Gauge Advances to Record as Activity Strengthens – Bloomberg, 11/3/2021
- U.S. service providers expanded at a record pace in October, powered by resilient demand and stronger business activity as the impact of the delta variant faded.
- The Institute for Supply Management’s services index advanced to 66.7 last month, exceeding all projections, from 61.9 in September, data showed Wednesday. Readings above 50 signal growth.
- The gauges of new orders and business activity also increased to the highest in data back to 1997, indicating the economy picked up steam at the start of the fourth quarter.
- The ISM’s measure of prices paid by service providers for materials and services increased to the highest level since September 2005. An index of supplier delivery times climbed to the second highest on record, indicating extended delays and lingering capacity constraints.
- Meantime, a decline in the group’s measure of employment shows labor market challenges persist. The index slipped to a four-month low of 51.6 in October, indicating more moderate job growth even as demand remained buoyant.
U.S. factory orders unexpectedly rise in September – Reuters, 11/3/2021
- New orders for U.S.-made goods unexpectedly rose in September, though manufacturing remains constrained by input shortages.
- The Commerce Department said on Wednesday that factory orders increased 0.2% in September.
- Data for August was revised down to show orders rising 1.0% instead of 1.2% as previously reported.
- Economists polled by Reuters had forecast factory orders unchanged. Orders gained 17.6% on a year-on-year basis.
- Shipments increased 0.6% after gaining 0.1% in August.
- Inventories at factories shot up 0.8% in September.
- Unfilled orders at factories increased 0.7% after rising 0.9% in August.
- The Commerce Department also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, increased 0.8% as reported last month.
- Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the GDP report, rose 1.4% as previously reported.
Fed Prepares to Taper, but Markets Crave More Insight on Rate Rises – Wall Street Journal, 11/3/2021
- The Federal Reserve is likely to announce Wednesday that it will begin steadily reducing its bond-buying program, the biggest step the central bank has taken toward reversing its pandemic-era stimulus.
- Minutes from the Fed’s Sept. 21-22 meeting signaled that the central bank would begin around the middle of November to reduce its asset buying by $15 billion a month. That would end the expansion of the Fed’s $8.6 trillion asset portfolio by June.
- Fed officials don’t want to lift rates until after they have ended the bond purchases.
- Mr. Powell has slightly moved up plans to wind down those purchases, relative to earlier market expectations, as inflation has soared this year.
Treasury Unveils First Cut in Long-Term Debt Sales Since ’16 – Bloomberg, 11/3/2021
- The U.S. Treasury announced the first reduction in its quarterly sale of longer-term debt in more than five years on Wednesday, reflecting diminishing borrowing needs as the wave of pandemic-relief spending ebbs.
- The Treasury Department, in a statement Wednesday, said it will sell $120 billion of long-term securities at auctions next week.
- That’s down some $6 billion from the record levels seen over the past three so-called quarterly refundings.
- Twenty-year bonds rallied in the wake of the larger cuts to that sector, with their yields down about 3 basis points to around 1.94% as of 8:54 a.m. in New York, while those on 30-year bonds were off only about 2 basis points.
- On Monday, the Treasury increased its estimate of federal borrowing needs for the three months through December after it ran down its stockpile of cash more than it previously anticipated.
Virginia Election Results: Glenn Youngkin Wins Governor Race – Wall Street Journal, 11/3/2021
- Republican Glenn Youngkin was elected governor of Virginia on Tuesday, halting a yearslong trend of Democratic electoral gains in the state and giving the GOP a potential playbook in competitive parts of the U.S. ahead of next year’s congressional midterm elections.
- Mr. Youngkin had 50.7% of the vote, compared with Mr. McAuliffe’s 48.6%, with 95% of precincts reporting.
- About two-thirds of voters in the survey said the country was headed in the wrong direction, while about one-third said it was on the right track.
- Although Mr. Biden, a Democrat, easily carried Virginia in 2020, his approval ratings there have fallen to the low-40% range, several polls show, at a time when he hasn’t succeeded so far in getting his infrastructure, climate-change and social-spending legislation through a Congress that his party narrowly controls.
New Jersey Governor Race Is Still Too Close to Call – Wall Street Journal, 11/3/2021
- The New Jersey governor’s race remained too close to call early Wednesday, with Republican Jack Ciattarelli ahead of Democratic Gov. Phil Murphy by about 1,200 votes out of more than 2 million ballots cast, according to the Associated Press.
- Election officials in several counties were still processing vote-by-mail ballots, which under state law must be counted if they are postmarked by Tuesday and received by Nov. 8. State officials said Monday that nearly 500,000 mail ballots had been received.
- Three nonpartisan surveys released in the past week showed Mr. Murphy leading by roughly 10 points over Mr. Ciattarelli.
U.S. Voters Approve at Least $7.8 Billion of Muni Bond Sales – Bloomberg, 11/3/2021
- Voters across the U.S. are slated to approve at least $7.8 billion of local-government debt sales on ballots this election, according to preliminary results after Tuesday’s polling.
- All in all, voters were asked to decide on about $27 billion of municipal bonds, the lowest tally since 2017, according to data compiled by IHS Markit.
- Early results showed more bond measures passing than failing, but many of the races were tight, with some propositions decided by just a handful of votes. At least $3.5 billion of bonds failed or were failing, according to Bloomberg calculations.
EUROPE & WORLD
China’s Latest Delta Outbreak its Most Widespread Since Wuhan – Bloomberg, 11/3/2021
- More provinces in China are fighting Covid-19 than at any time since the deadly pathogen first emerged in Wuhan in 2019.
- More than 600 locally-transmitted infections have been found in 19 of 31 provinces in the latest outbreak in the world’s second-largest economy.
- China reported 93 new local cases on Wednesday, and 11 asymptomatic infections. Three more provinces detected cases: central Chongqing, Henan, and Jiangsu on the eastern coast.
- Officials in China say they are committed to maintaining a so-called Covid Zero approach, even though flare-ups are coming faster, spreading further and evading many of the measures that previously controlled the virus.
- The drastic responses needed to wipe out the delta variant have led several other countries that had been pursuing elimination of the coronavirus, including Singapore and Australia, to shift focus and instead rely on high vaccination rates to be able to live with the virus as endemic.
High prices, steady supply chain protect BMW from industry woes – Reuters, 11/3/2021
- BMW beat analysts’ forecasts on Wednesday with a 42.4% increase in third quarter net profits to 2.58 billion euros ($2.99 billion) as higher prices and strong electric vehicle (EV) sales offset lower deliveries due to scarce chips.
- In an earnings call, finance chief Nicolas Peter said the company was confident of topping its target for a 10% margin on pre-tax earnings this year, though the fourth quarter could be slightly dampened by higher tax payments and investment costs.
- BMW’s deliveries fell 12.2% in the third quarter but revenues were still up by 4.5%. EVs in particular saw a significant boost, with sales in the nine months to September almost double last year’s levels at just under 232,000 vehicles.
- BMW maintained its full-year EBIT margin forecast of 9.5% to 10.5% for its automotive division, adding this goal would be achieved through slightly reducing the number of employees.
Factmonster – TODAY in HISTORY
- The first Opium War between China and Britain broke out. (1839)
- Clarence Birdseye marketed the first frozen peas. (1952)
- The Soviet Union sent the first animal, a dog named Laika, into space aboard the Sputnik II. Laika died in orbit. (1957)
- A Lebanese magazine broke the story of U.S. arms sales to Iran, leading to the Iran-Contra affair. (1986)
- Hamid Karzai was declared the winner in Afghanistan’s first presidential election. (2004)
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. Any economic forecasts set forth may not develop as predicted.
All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.
Material presented is excerpts derived from third party content and you may need a subscription to access the full the content. The views and opinions expressed are those of the authors and do not necessarily reflect the views of Pence Wealth Management or LPL Financial.
Prior to making any investment decision please consult your financial advisor regarding your specific situation.