US FINANCIAL MARKET
Stocks Rise After Omicron-Driven Selloff – Wall Street Journal, 12/2/2021
- U.S. stocks climbed Thursday after a seesaw day driven by uncertainty about the potential impact of the Omicron Covid-19 variant.
- The S&P 500 edged up 0.7%, indicating the broad-market index may recoup some losses.
- The Dow Jones Industrial Average rose 1.1%, while the Nasdaq Composite added 0.4%.
- Markets have bounced back and forth this week in reaction to pandemic headlines.
- Wall Street lost ground Wednesday after the first Omicron case was identified in the U.S.
- On Thursday, traders focused on comments from the World Health Organization’s chief scientist suggesting vaccines were likely to still offer some protection.
- The yield on the benchmark 10-year Treasury note edged down to 1.421%, declining for a third day.
- The yield curve has flattened this week, with shorter-dated bond yields rising and longer-dated ones ticking down.
- Apple declined 3% after Bloomberg reported that the company had said demand for iPhones was lower than expected ahead of the holiday season.
- Dollar General shares fell 3% after the company said its profit fell in the third quarter and cut its full-year guidance for same-store sales.
- Food retailer Kroger climbed 8.5% after it raised its full-year guidance.
- Boeing climbed 3.3% after China’s aviation authority issued a directive on the 737 MAX, bringing the plane a step closer to returning to Chinese skies.
- Weekly jobless claims came in at 222,000, a rise from the previous week.
- This was still lower than economists had expected, as employers held on to workers in a tight labor market.
- The pan-continental Stoxx Europe 600 index fell 1.7%.
- Swiss drugmaker Vifor Pharma jumped 19% on reports that biotech firm CSL may acquire it.
- In Asia, major benchmarks were mixed. The Shanghai Composite Index ticked down 0.1%, while Hong Kong’s Hang Seng advanced 0.3%.
- Japan’s Nikkei 225 declined 0.7%, with SoftBank closing down over 5%.
- Shares of the technology-investment firm have fallen for five straight days due to declines in some of its portfolio companies, such as Alibaba, WeWork and DoorDash.
Germany Curbs Target Unvaccinated; Omicron Spreads: Virus Update – Bloomberg, 12/2/2021
- Germany imposed stringent nationwide restrictions on people who aren’t vaccinated against Covid-19 to halt a surge in infections.
- Pfizer expects its vaccine to hold up against the omicron variant, an executive said, as the new strain continued to pop up in countries around the world, with a handful of infections discovered in countries including the Singapore, India and South Korea.
- Pfizer expects data on how well its shot protects against omicron to be available within two to three weeks.
- Germany imposed nationwide restrictions on people who aren’t vaccinated against Covid-19 and limited attendance at soccer games and other public events to check a brutal surge in infections.
- Finland confirmed its first case of the omicron variant on a person who had returned from Sweden.
- Greece has found its first case of the omicron variant of the coronavirus, Health Minister Thanos Plevris told reporters Thursday.
- Singapore has detected two imported cases who tested preliminary positive for the omicron variant, after both individuals arrived on a flight from Johannesburg.
- India confirmed two cases of the omicron variant in the southern state of Karnataka, home to the nation’s Silicon Valley.
- There’s no indication the omicron variant of is more deadly than other strains, Australia’s Chief Medical Officer Paul Kelly said in a recorded message. In fact, the opposite may be true, he said.
- “Of the over 300 cases that have now been diagnosed in many countries, they have all been very mild or in fact had no symptoms at all,” he said.
Scientists Studying Omicron in South Africa See Rise in Covid-19 Reinfections – Wall Street Journal, 12/2/2021
- Scientists in South Africa tracking the spread of Omicron say they are seeing a rise in coronavirus reinfections in people who had recovered from Covid-19, suggesting previous infection provides less protection against the new variant than with earlier versions.
- “Previous infection used to protect against Delta, and now with Omicron it doesn’t seem to be the case,” Professor Anne Von Gottberg from the National Institute for Communicable Diseases in Johannesburg said Thursday.
- However, she said a past infection should still offer protection against severe disease, hospitalization and death.
- Vaccines have also fended off the worst of the disease caused by variants with some similar characteristics to Omicron, giving reasons for hope that they will do so in the case of the new variant.
- In Norway, more than 50 people who attended an event in Oslo have tested positive for Covid-19 in what authorities in Norway said on Thursday was a suspected outbreak of the new variant.
- It wasn’t yet clear how severe or mild the cases were. All of the participants were asked to take Covid-19 tests before attending and the group was mostly vaccinated, the statement said. More than 70% of Norwegians are vaccinated.
GM Lifts Forecast on Strong Sales, Chip-Shortage Workarounds – Bloomberg, 12/2/2021
- General Motors expects to earn about $14 billion in pre-tax profit this year, more than its previous guidance to Wall Street analysts, the automaker’s chief financial officer said.
- The Detroit-based company had previously projected earnings of $11.5 billion to $13.5 billion before interest and taxes.
- Even though the chip shortage remains a problem, Jacobson said, GM has seen the situation stabilize to a point where it can start to boost sales.
- Lean inventories mean there isn’t much discounting on vehicle prices, which will help keep margins above 10% in GM’s North American business, the CFO said.
- The paradigm will likely remain throughout 2022, Jacobson said, with GM unable to get back to its traditional inventory levels next year.
Snowflake stock soars on strong revenue and Q4 guidance – CNBC, 12/2/2021
- Shares of the Snowflake data-analytics software company were up more than 13% on Wednesday after it released third-quarter earnings that surpassed analyst expectations for revenue and provided strong product revenue guidance.
- Revenue: $334.4 million, vs. $305.6 million expected by analysts, according to Refinitiv.
- Revenue grew 110% year over year in the fiscal third quarter, which ended on Oct. 31.
- In the previous quarter revenue increased by 104%.
- The company’s net loss decreased to $154.9 million, down from $168.9 million a year prior.
- Snowflake provided fourth quarter product revenue guidance between $345 million and $350 million. That would represent year-over-year growth between 94% and 96%. The projection came in above the FactSet consensus estimate of $315.9 million.
- For the full 2022 fiscal year Snowflake called for $1.126 billion to $1.131 billion in product revenue. That would represent year-over-year growth between 103% and 104%. That guidance was also above the $1.06 billion and $1.07 billion FactSet consensus.
CrowdStrike Boosts Fiscal-Year Revenue Forecast. The Stock Inches Higher. – Barron’s – 12/2/2021
- CrowdStrike was rising slightly in premarket trading after the cybersecurity company boosted its forecast for the fiscal year.
- Revenue of $380.1 million topped forecasts of $363.6 million.
- Annual recurring revenue rose 67% to $1.51 billion in the quarter.
- CrowdStrike said $170 million was net new ARR added in the quarter.
- CrowdStrike reported third-quarter adjusted earnings of 17 cents a share, higher than analysts’ expectations of 10 cents a share.
- CrowdStrike said it expects fiscal 2022 earnings of 57 cents to 59 cents a share on revenue of as much as $1.43 billion.
- Previously, the company forecast fiscal 2022 earnings of 43 cents to 49 cents a share on revenue of $1.39 billion to $1.41 billion.
- Analysts had been expecting CrowdStrike to report profits of 46 cents a share in fiscal 2022 on revenue of $1.4 billion.
Splunk’s Revenue Forecast Misses Estimates. The Stock Is Gaining. – Barron’s – 12/2/2021
- Splunk shares were holding up well Thursday after the software company issued fresh fourth-quarter and fiscal-year revenue forecasts that were below analysts’ estimates.
- Splunk late Wednesday reported a third-quarter adjusted loss of 37 cents a share, narrower than Wall Street estimates of a loss of 52 cents a share.
- Revenue in the third quarter was $664.8 million vs. Wall Street forecasts of $646.5 million.
- Annual recurring revenue for Splunk’s cloud operations was $1.11 billion, up 75% from a year earlier.
- Total ARR at the end of the third quarter was $2.83 billion, up 37% year over year.
- The company said it expects fourth-quarter revenue of between $740 million and $790 million, and fiscal-year revenue of $2.51 billion to $2.56 billion.
- Analysts surveyed by FactSet predicted fourth-quarter revenue of $828.3 million for Splunk, and fiscal 2022 revenue of $2.58 billion.
Okta Stock Gains. Earnings Were Better Than Expected. – Barron’s – 12/2/2021
- Okta shares were gaining the morning after reporting better-than-expected financial results for the fiscal third quarter ended on October 31.
- The provider of identity management software posted revenue for the quarter of $351 million, up 61% from a year ago, and ahead of both the company’s guidance range of $325 million to $327 million and the Street consensus at $327 million.
- The company said revenue excluding its recently completed acquisition of Auth0 was $305 million, up 40%, accelerating from 39% growth one quarter earlier.
- Billings were $389 million, up 54%, slowing from 83% growth in the July quarter.
- Okta posted a non-GAAP loss of 7 cents a share, narrower than the guidance range of a loss of 24 cents to 25 cents a share.
- Under generally accepted accounting principles, the company lost $221 million, or $1.44 a share.
- For the fiscal fourth quarter ending in January, the company sees revenue of $358 million to $360 million, with a non-GAAP loss of 24 cents to 25 cents a share. Street consensus calls for $354.8 million and a loss of 28 cents a share.
- Okta raised its full year forecast to a range of $1.275 billion to $1.277 billion, from a previous range of $1.243 billion to $1.25 billion.
- Okta now sees a non-GAAP loss for the quarter of 52 cents to 53 cents a share, narrowing from a previous forecast of a loss of 74 cents to 77 cents a share.
Veeva Stock Tumbles On Light 2023 Sales Outlook Despite Quarterly Beat – Investors Business Daily, 12/2/2021
- Medical software company Veeva Systems offered a slightly short view for fiscal year 2023 sales, and VEEV stock plunged late Wednesday.
- Sales increased 26% and topped calls for $466 million.
- Subscriptions brought in $380.7 million in sales, also up 26% vs. the year-earlier period.
- On an adjusted basis, Veeva earned 97 cents a share and reported $476.1 million in sales.
- Profit climbed more than 24% year over year and beat projections for 88 cents.
- Guidance for fourth-quarter sales came in slightly low, however. Veeva expects $478 million to $480 million in sales.
- The high end of the guidance touched VEEV stock analysts’ call for $480 million.
- Adjusted profit guidance for 88 cents a share was 2 pennies above estimates.
- For the fiscal year ending Jan. 31, Veeva expects adjusted income of $3.69 per share and $1.843 billion to $1.845 billion in sales.
- The profit outlook handily topped VEEV stock analysts’ view for $3.58.
- The sales guidance was narrowly above forecasts for $1.835 billion.
- For the fiscal year ending in January 2023, Veeva expects $2.15 billion to $2.17 billion in sales.
- But that was well below analyst forecasts for $2.185 billion in sales.
Kroger Logs Higher Quarterly Sales as Eat-At-Home Trends Persist – Wall Street Journal, 12/2/2021
- Kroger’s reported higher sales in the latest quarter and raised its full-year guidance as consumers continued to opt for eating at home, though inflationary pressures increased costs during the quarter.
- The grocery chain said sales were $31.86 billion for the third quarter, a 7.2% increase from the year-earlier period.
- Analysts were targeting $31.16 billion in sales, according to FactSet.
- Merchandise costs, which includes advertising, warehousing and transportation, rose 9% to $25 billion.
- The company said it incurred a last in, first out charge—an accounting method that deducts the most recent cost of goods from sales—of $93 million during the quarter, an increase of more than 300% over last year due to inflationary pressures, including from grocery and meat.
- The Cincinnati-based supermarket company said net profit attributable to the company was $483 million, down from $631 million in the comparable period a year earlier.
- Earnings were 64 cents on a per-share basis, compared with 80 cents in the prior year.
- Kroger raised its adjusted earnings for the year to around $3.40 to $3.50 a share from $3.25 to $3.35 a share as it earlier projected.
Dollar General forecasts tepid full-year profit as costs surge – Reuters, 12/2/2021
- Dollar General on Thursday forecast annual sales and profit largely below expectations as the discount retailer battles higher costs triggered by the pandemic.
- Spiraling freight costs, shipping delays and other supply-chain snarls at a time when labor and raw materials are getting costlier have pinched profit outlooks at dollar stores that already operate on razor-thin margins.
- Net sales rose to $8.52 billion in the third quarter ended Oct. 29, marginally above analysts’ expectations, from $8.20 billion a year earlier.
- Dollar General narrowed its fiscal 2021 sales growth forecast to between 1% and 1.5%, the midpoint of which was below expectations.
- Its full-year earnings forecast of $9.90 to $10.20 per share was also largely below analysts’ average estimate of $10.20, according to Refintiv IBES data.
Synopsys: Fiscal Q4 Earnings Snapshot – The Sacramento Bee, 12/2/2021
- Synopsys on Wednesday reported fiscal fourth-quarter net income of $201.4 million. On a per-share basis, the Mountain View, California-based company said it had net income of $1.28. Earnings, adjusted for one-time gains and costs, were $1.82 per share.
- The results surpassed Wall Street expectations. The average estimate of five analysts surveyed by Zacks Investment Research was for earnings of $1.78 per share.
- The maker of software used to test and develop chips posted revenue of $1.15 billion in the period, which matched Street forecasts.
- For the current quarter ending in February, Synopsys expects its per-share earnings to range from $2.35 to $2.40. Analysts surveyed by Zacks had forecast adjusted earnings per share of $1.73.
- The company said it expects revenue in the range of $1.25 billion to $1.28 billion for the fiscal first quarter. Analysts surveyed by Zacks had expected revenue of $1.11 billion.
- Synopsys expects full-year earnings in the range of $7.73 to $7.80 per share, with revenue ranging from $4.72 billion to $4.78 billion.
Apple Falls on iPhone Demand Report, Weighing on Suppliers – Bloomberg, 12/2/2021
- Apple shares dropped after the iPhone maker was said to tell suppliers that demand for its flagship product has slowed, taking the shine off their recent record high.
- The stock fell as much as 4.2% to $157.80 on Thursday, the most since May 4, after Bloomberg reported that Apple told component makers that demand for its iPhone 13 lineup has weakened.
- Suppliers including LG Innotek and STMicroelectronics declined in Asia and Europe.
OPEC+ Sticks to Planned Supply Hike But Adds a Get-Out Clause – Bloomberg, 12/2/2021
- OPEC and its allies will proceed with their next oil-production hike, but said they could revisit the decision at any moment as the risk to demand from the omicron variant of Covid-19 becomes clearer.
- The group agreed to add 400,000 barrels a day of crude to global markets in January. However, it also left the door open to adjusting the plan at short notice if the market changes, an unusual step that underscores the uncertain outlook due to a resurgent pandemic and a U.S.-led release of emergency stockpiles.
- Oil fell as much as 4.8% to $62.43 a barrel in New York on the OPEC+ agreement, but recovered most of those losses as traders realized a potential get-out clause was baked in to the deal.
Square Changes Name to Block, Days After CEO Jack Dorsey Leaves Twitter – Wall Street Journal, 12/2/2021
- Square, the financial-services company co-founded and led by former Twitter Inc. chief Jack Dorsey, is changing its corporate name to Block.
- The change will be effective later this month, the company said Wednesday. Its ticker symbol will remain SQ.
- Square said the new name encompasses its various businesses better than the current name, which is mostly associated with its merchant-payment services. However, the new name also happens to align with Mr. Dorsey’s interest in cryptocurrencies and the technology behind them, called blockchain.
China aviation authority issues airworthiness directive on Boeing 737 MAX – Reuters, 12/2/2021
- China’s aviation authority on Thursday issued an airworthiness directive on the Boeing 737 MAX that will help pave the way for the model’s return to service in China after more than two and a half years.
- The directive instructs airline operators on the revisions required before the MAX returns to service, although it does not specify when China will lift a ban on the MAX in its airspace.
- Boeing described the directive as an “important milestone” toward the return of service in China and its shares jumped 4.3% on the news in pre-market trading, on track to break a four-day losing streak after the market was hit by concerns about the Omicron coronavirus variant.
- The Civil Aviation Administration of China (CAAC), which was the first regulator globally to ground the MAX in March 2019 after two deadly crashes, said it had completed a review of the design changes proposed by Boeing.
US ECONOMY & POLITICS
Biden to Toughen Testing for International Travelers to Slow Omicron – Wall Street Journal, 12/2/2021
- President Biden plans to tighten up Covid-19 testing timelines for travelers entering the U.S. and extend a mask mandate on airplanes and other public transportation as part of a broad administration effort to combat the Omicron variant.
- International travelers coming to the U.S. will have to test within a day of departure, regardless of vaccination status, rather than the 72 hours currently required for vaccinated travelers, under new protocols early next week, senior administration officials said. The new testing rules will apply both to U.S. citizens and foreign nationals entering the country.
- The administration will also require travelers to wear masks through mid-March on planes, buses and trains, and at domestic transportation hubs such as airports and indoor bus terminals, rather than allowing the requirement to expire on Jan. 18 as planned.
U.S. Jobless Claims Remain Low Following Prior Week’s Plunge – Bloomberg, 12/2/2021
- Applications for U.S. state unemployment benefits rose by less than forecast last week after a plunge tied to seasonal adjustments in the prior period.
- Initial unemployment claims in regular state programs totaled 222,000 in the week ended Nov. 27, an increase of 28,000 from the prior week, Labor Department data showed Thursday. The median estimate in a Bloomberg survey of economists called for 240,000 applications.
- The smaller-than-expected rise in claims suggests additional progress in the job market. At the same time, seasonal adjustment difficulties are likely to persist into the new year, making the figures tricky to interpret.
- The four-week average of initial applications, which smooths out large swings in the data, dropped to 238,750.
- On an unadjusted basis, claims fell by 42,000.
- Continuing claims for state benefits fell to 1.96 million in the week ended Nov. 20, a pandemic low.
Democrats and Republicans Reach Deal to Try to Prevent Government Shutdown – Wall Street Journal, 12/2/2021
- Democrats and Republicans reached an agreement to extend government funding through Feb. 18, taking the first step toward avoiding a government shutdown this weekend.
- With current funding set to lapse at 12:01 a.m. on Saturday, Dec. 4, lawmakers will now move to rapidly bring the legislation through the House and Senate. The House is expected to pass the bill on Thursday.
- Quickly passing the legislation in the Senate may be more complicated, though. Some Senate Republicans have pushed to attach a measure to the bill barring the Biden administration from enacting rules requiring many employers to ensure their workers are vaccinated or tested weekly for Covid-19.
- While that demand had initially raised the possibility of a drawn-out procedural process for the bill that could cause a brief shutdown, GOP lawmakers indicated Thursday that an amendment vote on the vaccine issue would likely clear the way to an accelerated process for the funding extension.
Supply Imbalances Continued to Hold Back U.S. Growth This Fall, Fed’s Beige Book Says – Wall Street Journal, 12/2/2021
- The U.S. economy grew at a “modest to moderate” pace this fall, with supply-chain issues and labor shortages holding back growth despite strong demand, the Federal Reserve said Wednesday.
- The Fed report, a periodic collection of business anecdotes from around the country known as the Beige Book, found that consumer spending throughout the country was strong but held back by low inventories. Strong demand allowed firms to raise prices with “little pushback” from consumers, and increases were widespread throughout the economy.
- In the Cleveland Fed district, 80% of firms surveyed said they had higher costs over the past two months. “Gas, electric, food, raw materials, products, everything is going [up],” a logistics business said.
- Most firms expect supply-chain disruptions to persist into next year, causing prices to continue to rise. Around 65% of businesses surveyed by the Cleveland Fed said they had raised prices, consistent with the past several reports.
- Fed Chairman Jerome Powell told lawmakers Wednesday that the risks of higher inflation have “moved up,” and said the Fed would act to “make sure that this high inflation we’re experiencing is not entrenched.”
EUROPE & WORLD
- Korea hits new COVID-19 record, halts quarantine exemptions to block Omicron – Reuters, 12/2/2021
- South Korea’s daily coronavirus case numbers rose to a new high on Thursday, as authorities halted quarantine exemptions for fully vaccinated inbound travellers for two weeks in a bid to fend off the Omicron variant.
- The Korea Disease Control and Prevention Agency (KDCA) reported 5,266 cases for Wednesday, a day after the daily tally rose above 5,000 for the first time amid concerns over a sharp rise in patients with severe symptoms.
- The country has fully inoculated nearly 92% of adults and is now focusing on vaccinating children and a booster program, but experts have warned that cases could continue to rise due in part to the spread of the potentially more transmissible variant.
- KDCA data showed the number of severe cases rose to a record 733, and 90% of intensive care unit beds in the greater Seoul area are occupied, with 915 patients waiting for admission.
- South Korea will require a 10-day quarantine for all inbound travellers for two weeks starting Friday, halting exemptions given earlier to fully vaccinated people, the KDCA said.
- The measure came after South Korea confirmed its first five cases of the Omicron variant late on Wednesday, including a fully vaccinated couple who arrived last week from Nigeria, followed by two of their family members and a friend.
Omicron may soon cause over half of COVID infections in Europe -EU – Reuters, 12/2/2021
- The European Union’s public health agency said on Thursday that the Omicron variant could be responsible for more than half of all COVID-19 infections in Europe within a few months.
- The estimate could lend weight to preliminary information about the very high transmissibility of the Omicron variant, above that of the Delta variant, which before Omicron was considered the most contagious of the main coronavirus strains.
- There is no conclusive evidence about Omicron’s transmissibility so far but the World Health Organization’s lead person on COVID-19, Maria van Kerkhove, said on Wednesday the agency expected to have data on this within days.
- Earlier on Thursday, the French government’s top scientific adviser Jean-Francois Delfraissy said that Omicron could take Delta’s place already by the end of January.
Euro zone producer prices surge in Oct, unemployment eases – Reuters, 12/2/2021
- Euro zone producer prices jumped more than expected in October, data showed on Thursday, driven mainly by a surge in energy prices, while unemployment eased again as the economy continued to recover from the pandemic-induced recession.
- The European Union’s statistics office Eurostat said prices at factory gates in the 19 countries sharing the euro rose 5.4% month-on-month for a 21.9% year-on-year surge.
- Energy prices were the main reason behind the sharp increase, surging 16.8% on the month and rocketing 62.5% year-on-year.
- Producer prices translate into higher prices for consumers and in November headline consumer inflation reached 4.9%, by far the highest level in the 25 years since the figure has been compiled, up from 4.1% a month earlier and well ahead of expectations for 4.5%.
- Eurostat said the euro zone jobless rate continued to decline, falling to 7.3% of the workforce in October, as expected by economists polled by Reuters, from 7.4% in September.
- Napoleon Bonaparte was crowned emperor of France in Paris by Pope Pius VII. (1804)
- President James Monroe outlined his famous doctrine opposing European expansion in the Western Hemisphere. (1823)
- The first controlled nuclear chain reaction was demonstrated at the University of Chicago. (1942)
- The Senate voted to condemn Republican senator Joseph R. McCarthy of Wisconsin for “conduct that tends to bring the Senate into dishonor and disrepute.” (1954)
- The Environmental Protection Agency (EPA) was established. (1970)
- Enron Corp., under CEO Kenneth Lay, filed for bankruptcy. (2001)