Daily Market Report | November 9, 2021
US FINANCIAL MARKET
Stocks Fall Back Slightly After Notching Records – Wall Street Journal, 11/9/2021
- The S&P 500 fell 0.3% Tuesday, after the benchmark index closed at an all-time high for the eighth consecutive session—the longest streak of records since 1997.
- If the index were to close higher again Tuesday, it would be the longest record streak since 1955.
- The Dow Jones Industrial Average ticked down 0.3% Tuesday, after the blue-chip index closed at a record for the 44th time in 2021. The technology-focused Nasdaq Composite fell 0.4%.
- Consumer discretionary stocks led gains at the open. General Electric gained 4.9% after the industrial giant said it planned to form three public companies focusing on healthcare, energy and aviation.
- Tesla shares fell 7.8%. The stock fell Monday after Chief Executive Elon Musk signaled he was open to selling a stake in the electric-vehicle maker worth around $21 billion.
- Meantime, Roblox shares jumped nearly 30% after the online entertainment company said its revenues more than doubled in the third quarter.
- Data out Tuesday showed producer prices in October rose 0.6% from September and 8.6% on the year, signaling that inflation remains elevated.
- Bond markets have calmed after a spell of volatility that inflicted losses on some hedge funds.
- The yield on benchmark 10-year Treasury notes ticked down to 1.446% Tuesday from 1.496% Monday.
- The yield on two-year notes, meantime, edged lower to 0.423% from 0.447% Monday.
- Brent crude, the global oil benchmark, gained 0.6% to $83.95 per barrel from $84.34 Monday.
- Overseas stock markets were mixed. The pan-continental Stoxx Europe 600 ticked down 0.2%.
- In Asia, the Shanghai Composite Index and Hong Kong’s Hang Seng ticked up 0.2%, while Japan’s Nikkei 225 fell 0.8%.
- PayPal reported revenue growth for the third quarter of 13% on Monday and said it’s teaming up with Amazon to let U.S. customers pay with Venmo at checkout, starting in 2022.
- However, after initially rising in extended trading, PayPal shares reversed course and fell 5% after the company issued a revenue forecast for next year that missed analysts’ estimates.
- Revenue: $6.18 billion vs. $6.23 billion expected
- Total payment volume rose 26% to $310 billion for the quarter ended Sept. 30, and the company added 13.3 million net new active accounts, bringing the total to 416, PayPal said in a statement.
- PayPal’s Venmo app, which began supporting cryptocurrency services in April, saw payment volume jump 36% to $60 billion.
- PayPal said volume on eBay marketplaces dropped 45% in the quarter and now represents less than 4% of revenue.
- Earnings per share: $1.11, adjusted, vs. $1.07 expected in a Refinitiv survey of analysts
- For the fourth quarter, PayPal sees adjusted earnings of $1.12 per share on net revenue of between $6.85 billion and $6.95 billion.
- Analysts surveyed by Refinitiv had expected $1.27 in adjusted earnings per share on $7.24 billion in revenue.
- The company said on the call that revenue for the year will increase about 18%, which would equal full-year sales of close to $30 billion.
- Analysts were projecting revenue of $31.6 billion, according to FactSet. PayPal highlighted supply chain constraints as well as general concerns around the economy and spending habits.
Palantir reports 36% revenue growth, projects strong finish to year – CNBC, 11/9/2021
- Palantir, which makes software and analytics tools for the government and large corporations, reported third-quarter earnings on Tuesday that beat analyst expectations on revenue and met earnings estimates.
- Palantir’s revenue grew 36% year-over-year to $392 million. That’s a slowdown from two consecutive quarters of 49% year-over-year growth, but the company also provided a strong outlook for the current quarter.
- Palantir added 34 net new customers in the third quarter and closed 33 deals worth $5 million or more and 18 deals valued at $10 million or more.
- During the quarter, U.S. commercial revenue grew 103% year-over-year and its commercial customer count was up 46% from the previous quarter, Palantir said. The company reported government revenue of $218 million.
- Palantir said it expects revenue to come in at $418 million, beating current Refinitiv estimates of $402 million.
- Revenue for the full year is expected to come in about $1.53 billion or 40% year-over-year growth, the company said. Palantir also reaffirmed that it expects annual revenue growth of 30% or more through 2025.
Roblox Shares Skyrocket on Better-Than-Expected Earnings – Wall Street Journal, 11/9/2021
- Shares in Roblox surged after the online-entertainment company reported third-quarter earnings and disclosed metrics for the current quarter, during which it experienced a significant outage.
- Roblox on Monday said revenue more than doubled to $509.3 million and bookings, which includes deferred revenue, rose 28% to $637.8 million for the quarter ended in September.
- Analysts polled by FactSet were expecting bookings of $636.5 million.
- Roblox said average daily users in October dropped slightly to 47.1 million from 47.3 million in the third quarter. The company estimates bookings for the month were between $189 million and $192 million.
- Roblox widened its loss to $74 million, up from $48.6 million a year earlier, due to increased spending on efforts to grow its business during the quarter. Analysts had been expecting a loss of $86.2 million.
AMC Reports Narrower Loss as Moviegoers Return to Theaters – Wall Street Journal, 11/9/2021
- AMC Entertainment Holdings reported a sharply narrowed loss as moviegoers returned to theaters during the September quarter, but the company’s chief executive said AMC is far from out of the woods.
- Revenue surged to $763.2 million, up from $119.5 million a year earlier and $444.7 million in the previous quarter.
- The world’s biggest movie-theater company reported nearly 40 million attendees during the quarter, up from about 22 million in the June quarter but still behind pre-pandemic levels.
- AMC’s third-quarter loss narrowed to $224.2 million from $905.8 million a year earlier. On a per-share basis, the loss was 44 cents.
- Analysts surveyed by FactSet expected an adjusted loss of 53 cents a share and $708.3 million in revenue.
- Admissions revenues in October 2021 were almost 90% of that seen in October 2019, Mr. Aron said on a conference call following the earnings announcement.
- ADT has struck a deal to buy a top solar-panel-installation company in a push to offer more products and services to its residential customers, the companies said.
- The home-security company is buying Sunpro Solar for about $825 million, including debt, using $160 million in cash and 77.8 million shares of ADT stock.
- Founded by Marc Jones in 2008, Sunpro designs, installs and maintains solar panels on residential and commercial properties.
- The company, which is based in Mandeville, La., employs 3,600 people in 22 states and has been growing quickly.
- The solar industry is fragmented, and ADT is betting that customers who already have a home-security system will be more likely to buy solar from a trusted supplier with name recognition.
Snarled Supply Chain Is Making U.S. Warehouse Shortage Worse – Bloomberg, 11/9/2021
- Record numbers of cargo ships bob in the waters off Southern California, unable to unload. A late shipment of patio furniture gets moved — three times — before finding a home for the winter. With no warehouse space, a crew assembles holiday displays in a parking lot in an effort to get them to clients on time.
- A complex web of factors, exposed by the Covid-19 pandemic, is snarling supply chains: Severe labor shortages, antiquated infrastructure, containers in the wrong places and free-spending U.S. shoppers spurring an import surge have all disrupted the normally synchronized flow of global trade.
- Developers can’t build fast enough. Every $1 billion increase in online sales equates to a need for an additional 1 million square feet of warehouse space, CBRE Group estimates. And U.S. suppliers will need 800 million square feet more to store backup inventory in case critical parts for autos and other products run short, according to Prologis.
- In the Inland Empire, east of Los Angeles, about 20 million square feet of new space is under construction in a market that needs 50 million square feet to meet demand, CBRE Managing Director Ian Britton said.
General Electric to Split Into Three Public Companies – Wall Street Journal, 11/9/2021
- General Electric said it would split into three public companies, breaking apart the more than century-old company that was once a symbol of American manufacturing might and has struggled in recent years.
- GE said it is spinning off GE Healthcare, which makes MRIs and other hospital equipment, in early 2023, with GE expecting to retain a stake of 19.9% that it plans to sell over time. In 2020, the unit had about $17 billion in revenue.
- GE plans to combine its power unit and renewable energy unit, which make turbines for power plants and wind farms, respectively, and spin off that operation in early 2024.
- The company’s remaining digital division will also be moved into the power business. Those units together had about $33 billion in revenue in 2020.
- That would leave behind a GE focused on making and servicing jet engines. The unit, a key supplier to Boeing, has been hard hit by the pandemic and had about $22 billion revenue in 2020.
- Single-family homes built to rent are emerging as the hottest corner of the U.S. property market, as investors respond to booming demand from home-seekers priced out of housing for sale.
- Rents on homes are rising faster than ever. New household formation is also increasing the demand for rentals, as more young people get their own places.
- The expected risk-adjusted annual return for built-to-rent investments in the private market is now about 8% on average, according to securities advisory Green Street, the highest of 18 property sectors tracked by the firm.
- The weighted average return for all property sectors was 6.1%, Green Street said.
- Close to 100,000 built-to-rent homes will have started construction this year, according to estimates from Brad Hunter, founder of the Hunter Housing Economics consulting firm. Investors have poured about $30 billion in debt and equity into the sector in 2021, with many billions more in future commitments, Mr. Hunter said.
- Traditional home builders like Lennar and D.R. Horton have made building rental houses a major component of their business.
- Giant investment firms like KKR and Blackstone are also piling up cash to add already-built rental houses to their portfolios.
US ECONOMY & POLITICS
US ECONOMY & POLITICS
U.S. Producer Prices Climb 0.6%, Adding to Inflation Concerns – Bloomberg, 11/9/2021
- Prices paid to U.S. producers accelerated in October, largely due to higher goods costs, fueling concerns about the persistence of inflationary pressures in the economy.
- The producer price index for final demand increased 0.6% from the prior month and 8.6% from a year earlier, matching forecasts, Labor Department data showed Tuesday. The annual advance was the largest in figures back to 2010.
- Excluding the volatile food and energy components, the so-called core PPI rose 0.4% and was up 6.8% from a year ago.
- More than 60% of the headline increase was due to goods, which jumped 1.2%. Higher energy costs, including that for gasoline, drove the gain.
- The cost of services rose a more moderate 0.2% for a second month, reflecting a further pullback in the cost of securities brokerages and investment advice.
- Trucking freight costs jumped a record 2.5% from September.
- Producer prices excluding food, energy, and trade services — a measure often preferred by economists because it strips out the most volatile components — rose 0.4% from the prior month. Compared with a year earlier, the gauge increased 6.2%.
- Costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, increased 2.1% in October, the most since May. Compared with a year earlier, the measure jumped 25.4%, the most since 1975.
- The potential for U.S. public health to worsen as the Covid-19 pandemic continues is one of the greatest near-term risks to the financial system, the Federal Reserve said, while noting that asset prices are susceptible to large declines should investor sentiment shift.
- “Asset prices may be vulnerable to significant declines should risk appetite fall, progress on containing the virus disappoint, or the recovery stall,” the central bank said in its semiannual Financial Stability Report.
- Still, other parts of the financial system appear resilient. Banks remain well capitalized, the central bank said, and key measures of vulnerability from business and household debt have largely returned to pre-pandemic levels.
- “Little evidence exists of widespread erosion in mortgage underwriting standards or speculative practices,” the report said. “However, with valuations at high levels, house prices could be particularly sensitive to shocks.”
- The Fed also warned that structural vulnerabilities persist in some types of money-market mutual funds and other cash-management vehicles, as well as in bond and bank loan mutual funds. The vulnerabilities could amplify shocks to the financial system in times of stress, as they have in prior crises, the central bank said.
New Hampshire Gov. Chris Sununu Declines to Enter Senate Race – Wall Street Journal, 11/9/2021
- A popular GOP governor has declined to run for Senate, delivering a setback to Republicans’ chances of taking control of the 50-50 chamber in next year’s midterms.
- New Hampshire Gov. Chris Sununu said Tuesday he won’t challenge incumbent Sen. Maggie Hassan for her seat. Republicans had said Mr. Sununu, who has governed as a centrist, was one of their best hopes to win a Democrat-held seat if he ran.
- A handful of competitive races, including in New Hampshire, will decide which party will control the chamber in 2023. Thirty-four Senate seats are up for re-election in 2022, but only nine are currently considered competitive, according to nonpartisan election watcher Cook Political Report.
- Israel has used it to intercept thousands of Palestinian rockets and mortars. Now the Iron Dome missile-defense system is being tested in Guam by U.S. military planners concerned about possible Chinese attacks.
- The dome can protect only against limited types of missiles, and the U.S. is pursuing separate plans to beef up defenses against Chinese ballistic missiles that descend from space.
- Still, the Iron Dome test points to the wide range of U.S. hardware heading to the Asia-Pacific region as the Pentagon addresses a Chinese buildup that it has called its No.1 challenge.
- Beijing in August tested a missile with a hypersonic warhead that could use a less predictable flight path to evade defenses after descending from space, including those on Guam.
- China also boasts a growing fleet of bombers able to launch sea-skimming cruise missiles that could reach Guam. That is where the Iron Dome comes in.
EUROPE & WORLD
TSMC, Sony to Open $7 Billion Chip Plant in Japan in 2024 – Wall Street Journal, 11/9/2021
- Taiwan Semiconductor Manufacturing and Sony said they would build a $7 billion chip plant in Japan in a bid to ease the strained global supply chain for semiconductors.
- The plant isn’t set to start mass production until late 2024, so it won’t help solve the immediate shortages hitting production of cars and electronics. But when it does open, it will make an older type of chip that has been in particularly short supply this year and fill a gap in an industry that puts most of its investment dollars into the most advanced chips.
- The Taiwanese chip maker said Tuesday it would form a joint venture with Sony’s semiconductor subsidiary, which plans to invest about $500 million for a stake of less than 20% in the venture. The companies plan to kick off construction next year.
- TSMC and Sony, both major suppliers to Apple, said the plant would focus on manufacturing less-advanced chips that are commonly used in cars and smartphone components.
Factmonster – TODAY in HISTORY
- Jack the Ripper killed his last victim, Mary Jane Kelly. (1888)
- Nazis burned and looted temples and Jewish-owned stores and houses in Germany and Austria in what became known as Kristallnacht (Crystal Night—referring to broken glass on streets). (1938)
- Former French president Charles De Gaulle died at age 79. (1970)
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