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Daily Market Report | November 30, 2021

US FINANCIAL MARKET

Stocks, Oil Drop on Omicron Variant Concerns – Wall Street Journal, 11/30/2021

  • U.S. stock indexes fell and investors sheltered in government bonds after drugmakers raised concerns that Covid-19 vaccines might not work as well against the new Omicron strain.
  • The S&P 500 declined 0.4%, and the Dow Jones Industrial Average fell 0.7%, or about 250 points. The tech-heavy Nasdaq Composite, meanwhile, added 0.1%. Major indexes closed higher Monday, rebounding from a sharp selloff last week.
  • Investors are trying to parse the risk posed by the new strain.
  • Drugmakers have said existing vaccines might be less potent against Omicron. The lack of concrete information so far is driving uncertainty, and with it, volatility in stock markets.
  • Moderna’s chief executive told the Financial Times in an interview published Tuesday that he was skeptical existing vaccines would be as effective against the new variant.
  • Trading in individual stocks reflected the focus on pandemic news. Moderna shares fell 7.5%. Travel and airlines also declined, with Expedia shares falling 3%, American Airlines shares dropping 2.9% and Carnival shares sliding 3.6%.
  • The yield on the benchmark 10-year Treasury note, viewed as a safe asset, fell to 1.432% Tuesday from 1.529% Monday.
  • In commodity markets, Brent crude, the international oil benchmark, fell 3.5% to $70.88 a barrel Tuesday, having risen by 1% Monday.
  • Investors awaited testimony from Federal Reserve Chairman Jerome Powell on Tuesday for clues on how the new variant might affect the outlook for inflation and interest-rate rises.
  • Mr. Powell is expected to say that the new strain could intensify the supply-chain issues that have fueled a spike in inflation.
  • Overseas, the Stoxx Europe 600 dropped 0.4%. In Asia, stock markets were mostly lower.
  • Japan’s Nikkei 225 fell 1.6%, while Hong Kong’s Hang Seng Index fell 1.6% to its lowest level in more than a year.
  • In mainland China, the Shanghai Composite Index edged up less than 0.1%.

Omicron Unlikely to Cause Severe Illness in Vaccinated People, BioNTech Founder Says – Wall Street Journal, 11/30/2021

  • The Omicron variant of the coronavirus could lead to more infections among vaccinated people but they will most likely remain protected from a severe course of illness, according to the inventor of one of the first Covid-19 vaccines.
  • While the new variant might evade the antibodies generated in reaction to the vaccine, the virus will likely remain vulnerable to immune cells that destroy it once it enters the body, BioNTech SE co-founder Ugur Sahin said.
  • Based on current knowledge about the mechanisms behind the vaccine and the biology of variants, Dr. Sahin said he assumed that immunized people would have a high level of protection against severe disease even if infected by the Omicron variant.

Moderna chief predicts existing vaccines will struggle with Omicron – Financial Times, 11/30/2021

  • The chief executive of Moderna has predicted that existing vaccines will be much less effective at tackling Omicron than earlier strains of coronavirus and warned it would take months before pharmaceutical companies could manufacture new variant-specific jabs at scale.
  • Stéphane Bancel said the high number of Omicron mutations on the spike protein, which the virus uses to infect human cells, and the rapid spread of the variant in South Africa suggested that the current crop of vaccines may need to be modified next year.
  • Bancel said scientists were worried because 32 of the 50 mutations in the Omicron variant are on the spike protein, which current vaccines focus on to boost the human body’s immune system to combat Covid.

UnitedHealth forecasts 2022 profit below estimates – Reuters, 11/29/2021

  • UnitedHealth Group on Monday forecast profit for 2022 below Wall Street estimates, as it grapples with a surge in insurance claims due to the COVID-19 pandemic.
  • The U.S. health insurer said it was expecting to post an adjusted profit of $21.10 to $21.60 per share in 2022.
  • Analysts on average were estimating a profit of $21.65 per share, according to Refinitiv IBES data.
  • UnitedHealth, however, raised the lower end of its 2021 adjusted earnings forecast by 10 cents.
  • It had previously forecast a range of $18.65 per share to $18.90 per share.

Cyber Monday online sales drop 1.4% from last year to $10.7 billion, falling for the first time ever – CNBC, 11/30/2021

  • Consumers logged online on Monday and spent $10.7 billion, marking a 1.4% decrease from year-ago levels, according to data from Adobe Analytics.
  • This year’s tally marks the first time that Adobe has tracked a slowdown in spending on major shopping days.
  • Adobe first began reporting on e-commerce in 2012, and it analyzes more than 1 trillion visits to retailers’ websites.
  • Retailers rang up $8.9 billion in sales online on Black Friday, down from the record of about $9 billion spent on the Friday after Thanksgiving a year earlier, Adobe said.
  • And on Thanksgiving day, consumers spent $5.1 billion on the internet, flat from year-ago levels.
  • So far, from Nov. 1 through Cyber Monday, consumers in the United States have spent $109.8 billion online, which is up 11.9% year over year, Adobe said.
  • And on 22 of those days, consumers purchased more than $3 billion worth of goods, another new milestone, it said.
  • Adobe anticipates digital sales from Nov. 1 to Dec. 31 will hit $207 billion, which would represent record gains of 10%.

Fattest Profits Since 1950 Debunk Wage-Inflation Story of CEOs – Bloomberg, 11/30/2021

  • In the past two quarters, U.S. corporations outside of the finance industry posted their fattest margins since 1950 — one reason why stock markets keep hitting all-time highs.
  • On earnings calls, plenty of executives complained about the squeeze from rising costs of labor as well as materials.
  • But overall, profits were up 37% from a year earlier, according to data out last week from the Commerce Department.
  • Businesses have been paying out more cash to their employees too, with total compensation up 12% in the last quarter from a year earlier.
  • That’s partly because millions of Americans went back to work — but also because many got a raise when they did so. Hourly earnings broadly kept up with the fast-rising cost of living, and in some low-pay industries like leisure and hospitality they comfortably outpaced it.

Gas Prices Pressure Drivers’ Finances – Wall Street Journal, 11/30/2021

  • U.S. gasoline prices have climbed about 50% in a year with drivers paying an average of $3.40 a gallon for regular, up from $2.27, according to data from price tracker GasBuddy. This year’s rise is on pace to be the largest percentage increase in at least a decade.
  • Regional differences in taxes, regulations and energy infrastructure can translate into significant differences in prices, which are highest on the West Coast, where refining capacity is limited.
  • Motorists in some California cities are paying as much as $4.75 a gallon, shattering the previous record set around a decade ago.
  • Prices are lower in Texas, Oklahoma and Wisconsin, where they recently reached around $3 a gallon, compared with below $2 at this time last year.
  • Gas prices remain some distance from their record above $4 set in 2008. Analysts see several factors that may weigh on prices in coming weeks, including the prospect of new travel restrictions related to the rise of the Omicron variant.
  • A decision by energy producers to lift supply could also rein in prices.

OPEC oil output boost in November again falls short of target – Reuters, 11/30/2021

  • The increase in OPEC’s oil output in November has again undershot the rise planned under a deal with allies, a Reuters survey found on Tuesday, bringing a lack of capacity in some producers into focus ahead of a policy meeting this week.
  • The Organization of the Petroleum Exporting Countries (OPEC) pumped 27.74 million barrels per day (bpd) in November, the survey found, a rise of 220,000 bpd from the previous month but below the 254,000 increase allowed under the supply deal.
  • OPEC+ meets on Thursday. A U.S.-led release of oil stocks by consumer nations to lower prices and the appearance of the Omicron coronavirus variant have cast doubt whether a 400,000 bpd output boost planned in January will go ahead, analysts say.
  • The OPEC+ agreement allowed for a 400,000 bpd production increase in November from all members, of which about 253,000 bpd is shared by the 10 OPEC members covered by the deal, OPEC figures seen by Reuters show.

America’s Power Plants Are Low on Coal – Wall Street Journal, 11/30/2021

  • A lump of coal would be a welcome gift for many U.S. utilities.
  • Coal piles at power plants have dwindled to their lowest point since the 1970s, and the race to build up inventories ahead of heating season has sent domestic thermal coal prices to their highest levels in more than a decade.
  • Central Appalachian coal hit $100 a short ton this autumn, twice the price a year ago and the highest since fossil-fuel prices surged in 2008, according to S&P Global Platts.
  • Powder River Basin coal, which is mined in Wyoming and Montana and produces less energy when burned, this month reached $35 a short ton.
  • Before September, the highest Powder River prices in the firm’s data going back to 2001 were about a third of what they are now.

Airlines bosses worry about impact of Omicron variant – Reuters, 11/30/2021

  • Airline bosses voiced concern on Tuesday that travel restrictions linked to the emergence of the Omicron variant of the coronavirus risked blowing an industry recovery off course.
  • The strongest warning came from Emirates airline President Tim Clark who said a major hit to the peak December travel season would cause “significant traumas” in the global aviation business.
  • British budget airline easyJet also spoke of a softening in demand in recent weeks as the resurgence of the virus in parts of continental Europe prompted customers to rethink city break plans.
  • Multiple countries including Japan, the United States, Britain and Israel have imposed travel curbs in order to slow the spread of the new variant which it is feared could prove more resistant to vaccines.

ViacomCBS to sell iconic Studio Center for $1.85 billon – Reuters, 11/30/2021

  • ViacomCBS said on Tuesday it would sell CBS Studio Center, where the iconic sitcom “Seinfeld” was shot, for nearly $1.85 billion, as it looks to raise funds to invest in strategic areas including streaming services.
  • The company will sell the studio located in the highly competitive Los Angeles studio marketplace to Hackman Capital Partners LLC and Square Mile Capital Management LLC.
  • The more than 1 million square feet property includes 22 stages, a production office and other buildings.
  • ViacomCBS said in September it was restructuring the operations of Paramount Pictures’ movie and television production unit, in a broader shakeup aimed at ramping up content on its cable and streaming services.

US ECONOMY & POLITICS

U.S. Consumer Confidence Fell to a Nine-Month Low in November – Bloomberg, 11/30/2021

  • U.S. consumer confidence decreased to a nine-month low in November as accelerating inflation and a pickup in Covid-19 cases weighed on Americans’ views on the economy.
  • The Conference Board’s index declined to 109.5 from a downwardly revised 111.6 reading in October, according to the group’s report Tuesday. Economists in a Bloomberg survey called for a drop to 110.9.
  • The group’s measure of current conditions fell to the lowest since April and future expectations also dropped.
  • The share of consumers who said jobs were “plentiful” rose to a new record of 58%.
  • Consumers were less optimistic about their financial prospects and job outlook over the next six months. Fewer Americans also said they were planning to purchase homes, cars and major appliances over the same time period.

U.S. Home-Price Growth Decelerated in September – Wall Street Journal, 11/30/2021

  • Home-price growth slowed slightly in September as sky-high prices deterred some buyers.
  • The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 19.5% in the year that ended in September, down from a 19.8% annual rate the prior month.
  • The median existing-home sales price in October rose 13.1% from a year earlier to $353,900, the National Association of Realtors said earlier this month.
  • Rising home prices are pushing some buyers out of the market. While the number of home sales rose in October, the proportion of first-time buyers fell to 29%, down from 32% a year earlier, according to NAR.
  • The Case-Shiller 10-city index gained 17.8% over the year ended in September, compared with an 18.6% increase in August. The 20-city index rose 19.1%, after an annual gain of 19.6% in August. Price growth decelerated in 14 of the 20 cities.
  • A separate measure of home-price growth by the Federal Housing Finance Agency also released Tuesday found a 17.7% increase in home prices in September from a year earlier.

Powell Warns Omicron Variant Could Worsen Inflation-Boosting Bottlenecks – Wall Street Journal, 11/30/2021

  • Federal Reserve Chairman Jerome Powell is grappling with how to chart policy amid an inflationary surge far larger than officials anticipated and threatening to become more unpredictable because of the emergence of the new Omicron coronavirus variant.
  • Mr. Powell appears Tuesday morning before the Senate Banking Committee alongside Treasury Secretary Janet Yellen for two days of hearings.
  • In prepared testimony, Mr. Powell said the variant, identified in South Africa last week, risks intensifying supply-chain disruptions that have fueled a surprising surge in inflation this year while also potentially restraining the supply of labor.
  • “We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched,” Mr. Powell said in prepared testimony.

EUROPE & WORLD

As Omicron, Supply-Chain Problems Loom, Eurozone Inflation Hits Record – Wall Street Journal, 11/30/2021

  • The eurozone’s annual rate of consumer-price inflation jumped to a record in November, adding to the challenges facing the European Central Bank as the new coronavirus variant, supply-chain disruptions and soaring energy prices complicate its policy decisions for the coming year.
  • The European Union’s statistics agency Tuesday said consumer prices in the currency area were 4.9% higher than in November 2020, by far the fastest annual rise since records began in 1997 and more than double the ECB’s 2% target.
  • Economists had expected to see a pickup in inflation during the month, but only to 4.5%.
  • Much of the recent surge in eurozone inflation has been driven by energy prices, particularly natural gas. That was again the case in November, with energy prices up 27.4% from a year earlier, compared with a 23.7% rise in October.
  • Most economists expect energy prices to moderate in 2022.
  • However, there was also a sharp acceleration in the prices of services, which are seen by policy makers as more reflective of underlying inflationary pressures coming from within the currency area. The figures recorded a similar pickup in the prices of manufactured goods, which is a reflection of supply-chain disruptions.
  • As a result, the core inflation measure—which excludes energy and food—jumped to 2.6%, a record, from 2%.

Hong Kong’s Hang Seng Index Tumbles to Its Lowest Level in More Than a Year – Wall Street Journal, 11/30/2021

  • Hong Kong’s stock-market benchmark slid to its lowest level in nearly 14 months, as China’s regulatory crackdowns combined with investor worries about the new Omicron Covid-19 variant to push down many stocks listed in the city.
  • The Hang Seng Index dropped 1.6% on Tuesday to close at its lowest level since Oct. 2 last year, according to FactSet.
  • The index, which is undergoing a major overhaul that will give more sway to technology stocks, fell 7.5% in November alone and has lost close to a fifth of its value over the past six months.
  • On Monday and Tuesday, the Hong Kong-listed stocks of Macau casino operators fell sharply, after the chairman of a junket operator in the Chinese territory was arrested over the weekend and held for questioning along with 10 other individuals.
  • A string of uninspiring quarterly results and weaker growth outlooks from some of China’s biggest internet companies have contributed to the recent market malaise.

India’s Economy Hampered by Weak Consumer Spending – Wall Street Journal, 11/30/2021

  • India’s economy is rebounding after a brutal pandemic-induced recession, but job losses related to Covid-19 are weighing on consumer spending and the country’s economic recovery.
  • The South Asian nation’s gross domestic product grew 8.4% in the three months ended September, compared with a year earlier. The quarter reflected the aftermath of India’s devastating spring Covid-19 surge, which set global records for daily cases and deaths in a single country.
  • The country’s unemployment rate fell to 7.75% in October from 11.84% in May, according to the Centre for Monitoring Indian Economy, an independent think tank in Mumbai.
  • Consumer sentiment remained pessimistic in September at 57.7, up from 48.6 in July, according to a bimonthly survey from the Reserve Bank of India. Anything under 100 shows pessimism, while anything above 100 indicates optimism.

Factmonster – TODAY in HISTORY

  • Barbados became independent of Great Britain. (1966)
  • The fossilized remains of a female human ancestor named Lucy (after the Beatles song Lucy in the Sky with Diamonds) were found in Ethiopia. (1974)
  • The Brady Bill, requiring a five-day waiting period for handgun purchases, is signed. (1993)
  • President Bill Clinton became the first U.S. president to visit Northern Ireland. (1995)

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