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Daily Market Report | November 8, 2021

US FINANCIAL MARKET

Stocks Open Higher; Tesla Shares Fall – Wall Street Journal, 11/8/2021

  • U.S. stocks climbed toward fresh records, while Tesla shares fell after a Twitter poll run by Chief Executive Elon Musk urged him to sell a chunk of his stock.
  • The S&P 500 rose 0.2% in Monday morning trading. The broad market index hit a record high Friday after Labor Department data showed job growth rebounded in October.
  • The technology-focused Nasdaq Composite gained 0.2%, and the Dow Jones Industrial Average advanced 0.5%.
  • A strong earnings season has helped push stocks to new highs. About 82% of S&P 500 companies that have reported results this season have topped analysts’ earnings forecasts, according to FactSet data.
  • The spate of earnings have helped offset concerns that higher-than-anticipated inflation could hurt corporate profits.
  • Tesla shares declined 4%. Twitter users said Mr. Musk should sell 10% of his Tesla stock, after the chief executive polled them and pledged to abide by the outcome of the vote.
  • The stake could amount to around $21 billion, based on the stock’s Friday closing price.
  • Peloton Interactive continued to tumble. Shares of the fitness-equipment maker fell more than 7%, after plunging 35% on Friday.
  • The company reported last week that fewer people are joining its online workouts as the pandemic eases and traditional gyms mount a comeback.
  • In bond markets, the yield on the benchmark 10-year Treasury note climbed to 1.478% Monday from 1.451% Friday.
  • In commodities, Brent crude futures, the benchmark in global oil markets, rose 0.8% to $83.41 a barrel.
  • Overseas, the pan-continental Stoxx Europe 600 rose 0.2%. In Asia, Hong Kong’s Hang Seng declined 0.4%, while China’s Shanghai Composite added 0.2%.

Tesla Slumps as Twitter Users Back Musk Selling 10% of Stake – Bloomberg, 11/8/2021

  • Tesla tumbled the most in eight months after Elon Musk’s Twitter followers voted in favor of selling 10% of his stake in a poll set up by the electric-car chief.
  • A majority of 3.5 million Twitter users — 58% — said they’d support such a sale in a Twitter poll that Musk ran during the weekend. The stake would be valued at about $21 billion based on 170.5 million Tesla shares he holds.
  • Tesla shares dropped 4.7% to $57.55 at 9:34 a.m. Monday in New York after slumping as much as 7.3%, the most intraday since March 5. The stock had climbed 73% this year through Nov. 5 while the S&P 500 rose 25%.
  • Musk’s fortune stands at $338 billion, according to the Bloomberg Billionaires Index. About one-quarter of that consists of Tesla stock options that he’s free to exercise at any time.

Deere Strike Sows Worry in Farm Country – Wall Street Journal, 11/8/2021

  • A weekslong strike at Deere has dealers bracing for delayed deliveries of new equipment, and farmers fearing higher prices ahead.
  • Now, farmers and dealers worry that shipments from Deere, the largest seller of farm equipment in North America, will be further undermined after more than 10,000 union workers walked off their jobs Oct. 14.
  • Members of the United Auto Workers union this past week rejected a second proposed contract, deepening uncertainty during the fall harvest season about when regular production may resume.
  • Union members have said that the raises and expanded benefits Deere has offered aren’t sufficient when sales are booming and other companies are boosting wages and offering new perks to draw workers.
  • Deere this past week said the contract rejected Nov. 2 would have represented a $3.5 billion investment in its employees over six years, and was the company’s best and final offer.

Consumers Trade Rib-eye for Ground Beef as Grocery Prices Rise – Wall Street Journal, 11/8/2021

  • Supermarkets say shoppers are buying more store-brand meat products and trading down from beef to less-expensive alternatives such as chicken or pork, after prices for products such as rib-eye climbed about 40% from a year ago, according to research firm IRI.
  • Some consumers are replacing boneless chicken breast with cheaper bone-in chicken, retailers said.
  • The U.S. Bureau of Labor Statistics said that prices for all food consumed at home rose 4.5% in September, driven by a 10.5% jump in prices of meats, poultry, fish and eggs.
  • As overall grocery bills climb, shoppers are becoming more attuned to protein prices and looking for ways to save, buyers and executives say.
  • Store brands, which typically cost less than branded products, gained 2.7 points of market share in poultry, 2.5 points in frozen meat, and 2.1 points in breakfast meat in the four-week period ended Oct. 20 year over year, according to IRI.
  • Store brands lost 0.3 point of share in overall food during the same period.

Tragedy at Travis Scott Show in Houston Prompts New Questions for Concert Industry – Wall Street Journal, 11/8/2021

  • The casualties at the Travis Scott show in Houston on Friday night are prompting the concert business to search for what went wrong and raise fresh questions about the adequacy of security at music festivals.
  • At least eight people died and many were injured following an apparent crowd surge during Mr. Scott’s headlining set at the Astroworld Festival, making it one of the deadliest concert disasters in years.
  • Most say it is too early to assign blame given the host of factors involved and a dearth of knowledge about what sparked the reported crowd surge.
  • Authorities have launched an investigation into the surge, security measures and reports that someone was injecting fans with drugs. It remains unclear how either potential safety lapses or criminal activity might have been connected to the crowd surge.
  • A spokeswoman for Live Nation Entertainment, which owns the festival’s promoter, couldn’t immediately be reached for comment.

Apparel shortages to drive bumper holiday sales for secondhand retailers – Reuters, 11/8/2021

  • Newly listed secondhand apparel retailers ThredUp and Poshmark are expected to forecast strong end-of-year sales as a shortage of new clothing at stores pushes shoppers to consider thrifting as an option to fill their holiday shopping bags.
  • More than a third of shoppers say they are likely to buy second-hand apparel this holiday season, with that number rising to 50% for people under the age of 40, according to a survey of U.S. shoppers conducted by Accenture.
  • “Inventory is scarce right now. Consumers are going to shop where they find inventory to make sure they have things in time for the holidays,” said Jessica Ramirez, retail analyst at Jane Hali & Associates.

Red-Hot Housing Market Drives Biggest Home-Equity Drawdown Since 2007 – Bloomberg, 11/8/2021

  • Homeowners are taking advantage of a global housing boom by pulling equity out of their homes at the highest volume since the financial crisis.
  • In the U.S., homeowners withdrew $63 billion in equity from their properties through more than 1.1 million cash-out refinances in the second quarter of the year — the largest quarterly volume since mid-2007, according to data company Black Knight.
  • Just under one in five American homeowners say they have pulled money out of their properties in the last year, according to a survey in late October by market research firm Harris Poll, with another 18% saying they are considering it.
  • Homeowners elsewhere are also finding the idea attractive.
  • In the U.K., net equity withdrawals topped 13 billion pounds ($18 billion) in the first half of the year.
  • That’s the first time since 2008 that Britons took out additional equity instead of injecting cash into their homes, according to Bank of England data.

US ECONOMY & POLITICS

US ECONOMY & POLITICS

Biden Gets $1 Trillion Down Payment on Domestic Agenda; Obstacles Loom for Spending Bill – Wall Street Journal, 11/8/2021

  • President Biden notched a big win with the House passage of the $1 trillion public-works bill late Friday, but political obstacles loom ahead for the White House as attention shifts to an even bigger spending bill and next year’s midterm elections.
  • Congress is set to take a weeklong recess and return on Nov. 15 with a litany of items to complete in short order to avert a government shutdown and move forward on the roughly $2 trillion education, healthcare and climate package that has proven difficult to negotiate with the party’s slim majority in Congress.
  • The infrastructure bill passed with 13 Republicans voting in favor and six progressive Democrats opposing the measure.
  • A handful of centrist Democrats blocked passage of the larger, $2 trillion bill last Friday and said they would support it should the cost estimates match the details from the Congressional Budget Office.
  • A cost analysis can take several weeks, though Democratic holdouts may be satisfied with data tables. The legislation is expected to include $555 billion toward climate initiatives, fund a universal prekindergarten program, expand healthcare subsidies and raise taxes on very high-income Americans and corporations, among other steps.
  • Sen. Joe Manchin (D., W.Va.), a critical vote in the 50-50 Senate, has opposed a paid-leave measure that House Democrats added to the bill last week and raised broader questions about its impact on the deficit and inflation.

Top Fed Official Says Continued High Inflation Would Be Problematic for Central Bank – Wall Street Journal, 11/8/2021

  • A top Federal Reserve official said he expects this year’s surge in inflation to ease as supply and demand imbalances fade over time and that an extended run of higher prices through next year would be a problem for the central bank.
  • Those imbalances should dissipate “without putting persistent upward pressure on price inflation and wage gains adjusted for productivity,” said Fed Vice Chairman Richard Clarida in remarks prepared for delivery on Monday morning.
  • At the same time, Mr. Clarida said the rise in inflation this year—which increased 4.4% from a year earlier in September, according to the Fed’s preferred gauge—was much more than officials’ desired “moderate overshoot” of the central bank’s 2% inflation goal.
  • “I would not consider a repeat performance next year a policy success,” said Mr. Clarida. The Fed official said most of his colleagues who participate in rate-setting meetings believe the risks right now are tilted to higher-than-anticipated inflation outcomes.

EUROPE & WORLD

Xi Set to Unveil New Doctrine That Could Let Him Rule for Life – Bloomberg, 11/8/2021

  • Only two men in the Communist Party’s history have ever written a so-called historical resolution.
  • China is waiting to see whether President Xi Jinping becomes the third.
  • The first official declaration on Chinese history in 40 years is set to top the agenda when the ruling party huddles this week in the last major meeting before a twice-a-decade congress next year, where Xi’s expected to break precedent and secure a third term to extend his indefinite rule.
  • Mao Zedong and Deng Xiaoping’s historical resolutions came at critical junctures in the nation’s trajectory and enabled their authors to dominate party politics until their dying breaths.
  • Issuing his own magnum opus would not only put Xi on par with those party titans, but could signal big changes afoot in the world’s second-largest economy.

China Evergrande Scrapes Together More Cash From Tech Company Stake Sale – Wall Street Journal, 11/8/2021

  • China Evergrande Group raised around $145 million in recent days by selling a chunk of its shares in a film production and internet-media company, scraping together more cash as additional bond-payment deadlines loom.
  • The troubled property giant sold a roughly 5.7% stake in Hong Kong-listed HengTen Networks over the last three trading days, according to regulatory filings.
  • The further disposals this month took Evergrande’s stake down to 20.8% from 26.55%, the filings showed. HengTen’s market capitalization stood at $2.43 billion at the close of Hong Kong trading Monday, down sharply from a peak of more than $17 billion in February, according to FactSet.

Chinese Junk Bond Yields Top 25% as Property-Market Strains Intensify – Wall Street Journal, 11/8/2021

  • The biggest selloff that China’s international junk-bond market has ever seen has wiped out around a third of bondholders’ wealth in just six months.
  • The steep and rapid decline shows how regulatory curbs on borrowing, extremely dislocated credit markets, and slowing home sales have combined to pressure more Chinese property developers, which account for most of China’s high-yield issuance.
  • As of Friday’s close, the yield on an ICE BofA index of Chinese junk bonds topped 25% for the first time since March 2009, near the height of the global financial crisis.
  • The bonds in the index are collectively valued by the market at nearly $39 billion below their combined face value of $112 billion, the data shows. Six months earlier there was little difference between the market and face values of bonds in the index. Bond yields rise as prices fall.

China’s Economy Faces Risk of Yearslong Real-Estate Hangover – Wall Street Journal, 11/8/2021

  • China’s aggressive campaign to root out speculative real-estate activity could slow the country’s growth rate for years to come, economists say, even if the worst-case scenario—a major housing correction with sharply falling home prices—is averted.
  • Real-estate activity accounts for about one-fourth of gross domestic product in China—considerably more than in the U.S.—and speculative behavior has supported employment and revenue-collection in cities for years. Without a booming property market, China is more likely to clock annual growth of around 3% to 5% in the next few years, economists say, instead of the more than 6% growth it has been accustomed to.
  • The IIF projects China’s GDP to expand by an average of 3% or lower each year from 2022 to 2031 as its economy matures, per capita incomes rise and real estate slows.
  • Nearly 20% of China’s 285 million migrant workers earned income from construction-related jobs in 2020, data from China’s National Bureau of Statistics shows.

SoftBank Suffers $54 Billion Bruise From China’s Tech Crackdown – Wall Street Journal, 11/8/2021

  • SoftBank Group took a more than $50 billion beating from Beijing’s tech crackdown, but its leader said he still had money for share buybacks and was glad to be less dependent on China.
  • “Our China risk is not so huge. It is within our control,” Masayoshi Son said Monday as SoftBank reported that its net assets lost the equivalent of about $54 billion in value in just three months, falling to the equivalent of $184 billion.
  • Just over a year ago, the Alibaba holding represented nearly 60% of SoftBank’s net assets, but with Alibaba shares falling by half from their peak, the figure is now down to 28%.
  • SoftBank shares rose nearly 10% in after-hours trading on the news that the company would spend up to about $8.8 billion over the next year to buy back up to 14.6% of its shares outstanding.
  • Overall SoftBank posted a loss equivalent to $3.5 billion for the quarter. It was the first loss since the January-March quarter of 2020, when it recorded its worst result—a nearly $9 billion full-year loss—amid the pandemic.

Toshiba Considering Splitting Company Into Three to Boost Value – Bloomberg, 11/8/2021

  • Toshiba said it’s considering splitting up the company as one of its strategic options to strengthen shareholder value.
  • The Nikkei news organization said the Japanese conglomerate is set to divide itself into three companies to focus on infrastructure, devices and semiconductor memory as early as 2023.
  • All three of the companies that would be hived off are expected to be listed at some point, the Nikkei said.
  • The move would shore up shareholder value by creating independent companies with different profit structures and growth strategies, according to the report.

Factmonster – TODAY in HISTORY

  • Former president Grover Cleveland beat incumbent Benjamin Harrison and became the only president to win nonconsecutive terms in the White House. (1892)
  • Adolf Hitler attempted, and failed, to seize control of the German government in the Beer Hall Putsch. (1923)
  • John F. Kennedy defeated Richard M. Nixon for the presidency of the United States. (1960)
  • After a 40-year Democrat domination, the Republican Party gained control of the U.S. House of Representatives, as well as a Senate majority. (1994)

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