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Daily Market Report | December 3, 2021

US FINANCIAL MARKET

Stocks Give Up Early Gains After Jobs Report – Wall Street Journal, 12/3/2021

  • Major U.S. indexes gave up their strong early gains and turned lower, setting them on track to finish a bumpy week on Wall Street with losses.
  • The S&P 500 slipped 0.5%, dragged down by shares of tech companies.
  • The index rallied Thursday despite uncertainty about the Omicron variant’s potential impact on the global economy.
  • The tech-focused Nasdaq Composite lost 1.3%. The Dow Jones Industrial Average fell 0.2%.
  • The latest monthly jobs report, released Friday, highlighted how slower hiring threatens to cloud the economic recovery, though some analysts said they found some good news in the report. The report showed that employers added 210,000 jobs in November, below the 573,000 expected by economists polled by The Wall Street Journal.
  • The unemployment rate declined to 4.2% in November and the share of people either working or looking for work rose, a positive sign for the economy.
  • Brent crude futures, the benchmark in global oil markets, rose 3.7% to $72.25 a barrel Friday in recent trading.
  • OPEC and a group of Russia-led oil producers agreed Thursday to continue pumping more crude, betting that pent-up demand in a post-lockdown world would outweigh any hit to economic activity from the recent Covid-19 permutations.
  • The group said its session would remain open, a technical move that would allow it to reconvene quickly and change course if the Covid-19 situation changes dramatically.
  • In bond markets, the yield on the benchmark 10-year Treasury note fell to 1.436% from 1.447% Thursday.
  • Zillow’s stock jumped more than 7% after the real estate technology company authorized a share buyback.
  • U.S.-listed shares of Didi Global fell 14% after the Chinese ride-hailing group said it planned to move its listing to Hong Kong.
  • DocuSign shares plunged more than 35% after the e-signature software company posted earnings that suggested weakening demand, and guidance for the current quarter that fell shy of Wall Street’s expectations.
  • Overseas, the pan-continental Stoxx Europe 600 fell around 0.2%.
  • In Asia, major indexes closed broadly higher. China’s Shanghai Composite added 0.9%, Japan’s Nikkei 225 rose 1% and South Korea’s Kospi gained 0.8%. Hong Kong’s Hang Seng edged down 0.1%.
  • Two Chinese property developers sunk deeper into financial distress, with Kaisa Group Holdings failing to pull off a bond swap that would have bought it more time to repay creditors, and lenders calling in loans from China Aoyuan Group after credit downgrades.

UBS Bankers Grounded; Omicron in New York, Hawaii: Virus Update – Bloomberg, 12/3/2021

  • UBS Group AG is asking its advisory and deals bankers in Europe, the Middle East and Africa to avoid traveling for business purposes. The precautionary measure applies to employees in the global banking unit amid the uncertainty surrounding the omicron variant, according to a person familiar with the guidance.
  • At least five U.S. states have reported omicron cases, with Hawaii joining New York late Thursday in saying the variant had been detected.
  • It also has been found in California, Colorado and Minnesota, which said that a resident who had traveled to an anime convention at Manhattan’s Javits Center tested positive.
  • Germany has a long battle ahead against the pandemic, a top health official warned, with pressure set to increase on intensive-care units even as infections show signs of peaking.
  • Bayern Munich and Barcelona will play their UEFA Champions League soccer tie on Dec. 8 without spectators, after the German state of Bavaria introduced new restrictions on gatherings, ESPN reported.
  • Belgium ordered primary schools to extend the Christmas holiday in its third attempt to break a wave of infections that’s among the worst in Europe after experts singled out unvaccinated children as a catalyst of cases in broader society.
  • Singapore will require additional testing for travelers and extend travel curbs to more African countries, as it rolls out more measures to allow it time to figure out how to deal with the omicron variant.
  • South Africa’s National Institute for Communicable Diseases said that 68% of Covid hospital admissions in the Tshwane municipal area during the early part of the fourth wave were under 40 years old.
  • That compares with 66.1% of admissions being over 50 in the early part of the third wave, it said in a statement on Friday. In the early part of the fourth wave 32.9% of admissions were severe, compared with 66.1% in the same period of the third wave.

N.Y. Hospitals Fill as State Sees Most Covid Cases Since January – Bloomberg, 12/3/2021

  • New York state reported 11,300 new Covid-19 cases, the most since January, as dozens of hospitals neared capacity.
  • Total patients hospitalized for the virus have climbed by more than 1,000 in a month, reaching 3,093 on Wednesday.
  • As of Thursday, 56 hospitals in the state had a bed capacity of 10% or less, including Albany Medical Center Hospital, Mercy Hospital of Buffalo, Long Island Jewish Medical Center and Mount Sinai Hospital in New York City, according to the state health department.
  • Governor Kathy Hochul last week issued an executive order, which takes effect Friday, allowing state officials to limit non-essential hospital procedures in an effort to increase bed capacity and address staffing shortages.
  • New York is not the only state seeing the effects of a colder-weather virus surge and holiday gatherings. Hospital admissions are higher in 39 states, stressing the U.S. health-care system.
  • The seven-day average of hospital admissions with confirmed Covid-19 has climbed 18% in the past two weeks to 6,691, the highest since Oct. 13, according to U.S. Department of Health and Human Services data.

Ford pickup remains America’s top-selling truck for 45th year, automaker says – CNBC, 12/2/2021

  • Ford Motor’s F-Series pickup will remain America’s best-selling vehicle for a 40th straight year in 2021 and the industry’s top-selling truck for the 45th consecutive year, the company said Thursday.
  • While the pickup, which includes the F-150 model and other larger siblings, has topped U.S. sales for decades, retaining the titles this year was particularly notable given an ongoing shortage of semiconductor chips that reduced production across the industry.
  • The chip shortage may cause General Motors’ Chevrolet Silverado to lose its long-held second-place sales title this year to Stellantis’ Ram pickup. Through the first three quarters, Ram’s full-size pickup sales totaled 434,772 units compared to the Silverado at about 407,000.
  • Ford sold 663,508 F-Series trucks though November, a 7% decrease from a year earlier. That includes 534,831 units through the first three quarters of the year, giving it a sizeable lead over its Detroit crosstown rivals.
  • Ford confirmed its F-Series results Thursday in releasing its November sales, which increased 5.9% compared with a year earlier to 158,793 vehicles.
  • Ford, based on private industry data, said it was the only major U.S. automaker to post a year-over-year increase in November. It also said it was the top-selling automaker in the country for a third consecutive month, marking the first time since 1974 that it has accomplished that streak.

DocuSign shares plunge nearly 40% after the company gave weak guidance – CNBC, 12/3/2021

  • Shares of e-signature software maker DocuSign were down more than 39% Friday morning after the company reported guidance for the fourth quarter that fell short of analyst estimates.
  • Still, DocuSign beat analyst expectations for the third quarter, reporting earnings per share of 58 cents, adjusted, compared to 46 cents analysts anticipated, and $545.5 million in revenue versus $531 million expected, according to Refinitiv.
  • DocuSign reported its sixth straight period of revenue growth of over 40%, but said in the next quarter it anticipates growth to come in around 30%.
  • DocuSign predicted fourth-quarter revenue would come between $557 million and $563 million, while analysts had on average expected revenue of $573.8 million for the quarter, according to Refinitiv.

Google Delays Required Return to Office for Employees – Wall Street Journal, 12/3/2021

  • Alphabet’s Google said it is delaying its required return-to-office plans that were scheduled to start Jan. 10 at the earliest for U.S. offices.
  • The tech company said it would wait until next year to decide when its office-return plan will take effect, according to an email that Chris Rackow, Google’s vice president of global security, sent to employees Thursday. Google’s shifting office-reopening plans were earlier reported by CNBC.
  • Google previously said it wouldn’t recall staff to the office full time and instead was embracing a hybrid-work approach.
  • Currently more than 90% of Google’s U.S. offices are open to employees who are still allowed to work from home, Mr. Rackow said. Nearly 40% of U.S. employees have come into the office in recent weeks.

FTC Challenges Nvidia’s Deal for Arm Holdings – Wall Street Journal, 12/3/2021

  • The Federal Trade Commission on Thursday sued to block U.S. chip supplier Nvidia’s proposed landmark takeover of semiconductor-design specialist Arm Holdings, arguing the chip-industry deal is anticompetitive.
  • The lawsuit marks the beginning of what is likely to be an aggressive antitrust campaign by the FTC under the leadership of Chairwoman Lina Khan, a progressive tapped by President Biden in June to lead the agency.
  • The FTC’s lawsuit, filed in its own administrative court, alleges the acquisition would give Nvidia unlawful control over computing technology and designs that rivals need to develop their own competing chips.
  • If the deal were allowed, the combined firm could stifle next-generation technologies, including ones used to run data centers and driver-assistance systems in cars, the FTC alleges.
  • The commission, currently composed of two Democrats and two Republicans, voted 4-0 to file the lawsuit, adding a new layer of trouble for a deal that has been met with widespread regulatory skepticism.

Stores Like Home Depot and Best Buy Bolster Security After ‘Flash Mob’ Robberies – Wall Street Journal, 12/3/2021

  • Retailers and law enforcement around the country are ramping up security to combat a wave of thefts by criminal groups during the busy holiday shopping season.
  • Some of the most brazen crimes, sometimes known as “flash mob” robberies, have happened in recent weeks. In suburban Minneapolis dozens of people stole goods from three Best Buy stores over Thanksgiving weekend.
  • The week before, approximately 90 people stole goods from a Nordstrom near San Francisco, according to the local police department. Stores from Chicago to Los Angeles have been hit.
  • During the Nordstrom theft, dozens of people arrived at the store in cars at the same time, rushed inside to cause chaos and steal items, and then drove away. The police made a handful of arrests.
  • The National Retail Federation estimates that organized retail crime, a distinct category from shoplifting overall, costs retailers an average of $700,000 per $1 billion in sales. Stolen goods such as power tools, medicine and pricey handbags are often resold anonymously through Amazon.com, Facebook Marketplace and other platforms, these executives said.

Oil Rallies After OPEC+ Takes Flexible Stance on Supply – Bloomberg, 12/3/2021

  • Oil jumped after the OPEC+ alliance left the door open to reversing its decision to boost output, with the impact of the omicron Covid-19 variant on demand remaining highly uncertain.
  • West Texas Intermediate climbed above $68 a barrel after closing higher on Thursday following the producer group’s decision.
  • OPEC+ agreed to add 400,000 barrels a day of crude to global markets in January, but it essentially put a floor under prices by giving itself the option to change the plan at short notice.

US ECONOMY & POLITICS

U.S. Added Just 210,000 Jobs in November – Wall Street Journal, 12/3/2021

  • The U.S. economy added 210,000 jobs in November, marking a slowdown in hiring amid new Covid-19 uncertainties, but a tight labor market showed an early sign of loosening as almost 600,000 people joined the workforce.
  • Economists had expected more than half a million new jobs in November.
  • The slower pace of hiring last month—the smallest monthly gain since last December— followed an upwardly revised increase of 546,000 jobs in October, the Labor Department said.
  • The unemployment rate fell to 4.2% as more people joined the labor force, the department added.
  • That survey showed that 1.1 million more people were employed in November than in October and a labor-force participation rate increase to 61.8%, the highest level since March 2020 at the start of the pandemic.
  • Average hourly wages were up 4.8% in November from the previous year, roughly on par with October, but well above annual growth rates before the pandemic which hovered around 3%.
  • The retail sector lost 20,000 jobs in November, with losses concentrated in general merchandise, clothing and sporting goods stores that were partly offset by increases in food and beverage stores and building supply stores.
  • Transportation and warehousing added 50,000 positions and professional and business services added 90,000.

U.S. service sector activity gauge hits record high in November – ISM survey – Reuters, 12/3/2021

  • A measure of U.S. services industry activity unexpectedly rose in November, hitting a fresh record high as businesses boosted hiring, but there was little sign that supply constraints were easing and prices remained high.
  • The Institute for Supply Management said on Friday its non-manufacturing activity index increased to 69.1 last month, the highest reading since the series started in 1997, from 66.7 in October.
  • The ISM’s measure of services industry employment increased to a seven-month high of 56.5 from 51.6 in October. That offered hope that a pandemic-related labor crunch, which has hampered faster job growth, could be starting to ease.
  • Overall, supply constraints remained binding. The survey’s measure of supplier deliveries was unchanged at a high 75.6. A reading above 50% indicates slower deliveries.
  • The survey’s measure of prices paid by services industries ticked down to a still-high 82.3 from 82.9 in October. Federal Reserve Chair Jerome Powell told lawmakers on Tuesday that “the risk of higher inflation has increased.”
  • A measure of new orders received by services businesses held at a record 69.7 last month.

U.S. factory orders rise more than expected in October – Reuters, 12/3/2021

  • New orders for U.S.-made goods increased more than expected in October and businesses spending on equipment appeared to rebound after declining in the third quarter.
  • The Commerce Department said that factory orders increased 1.0% in October.
  • Data for September was revised higher to show orders gaining 0.5% instead of 0.2% as previously reported. Economists polled by Reuters had forecast factory orders rising 0.5%.
  • Orders increased surged 17.1% on a year-on-year basis.
  • Shipments rose 2.0% after advancing 1.0% in September. Inventories at factories gained 0.8% in October. Unfilled orders rose 0.3% after increasing 0.7% in the prior month.
  • 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 0.7% instead of 0.6% as reported last month.
  • Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, rose 0.4%. They were previously reported to have increased 0.3%.

Senate Approves Spending Bill Averting Government Shutdown – Wall Street Journal, 12/3/2021

  • Congress passed a short-term extension of government funding and sent the legislation to President Biden’s desk, averting a partial shutdown after resolving a standoff over vaccine rules.
  • Top Republicans and Democrats reached an agreement on the spending plan Thursday morning to extend funding through Feb. 18, then quickly maneuvered the legislation through both the House and Senate before the expiration of current funding at 12:01 a.m. Saturday. The legislation also includes $7 billion for assisting evacuees from Afghanistan.
  • Democrats and Republicans will turn to several other must-pass items in the coming weeks, including raising the government’s borrowing limit and passing an annual defense-policy bill.
  • Along with those two pieces of legislation, Democrats are hoping to finish their roughly $2 trillion education, healthcare and climate package before the end of the month.

Randal Quarles Says Fed Will Need to Raise Rates to Cool Inflation – Wall Street Journal, 12/3/2021

  • A top Federal Reserve official said it was time for the central bank to prepare to raise interest rates because inflation was likely to stay above the Fed’s 2% target for longer than anticipated.
  • Fed governor Randal Quarles, in his final public appearance before he leaves the central bank at the end of the month, said it was reasonable for the Fed to have held back from removing policy support for much of the year on the expectation that inflation was being driven primarily by idiosyncratic price increases related to the reopening of the economy.
  • But he said it had become clear in recent weeks that this was no longer a reasonable base-case scenario, and that instead, it was possible fiscal stimulus over the past two years had boosted demand to levels that might exceed the pre-pandemic trend.
  • “This is…not really a bottleneck story anymore,” he said.
  • The Fed needs to bring supply and demand into balance by raising interest rates to cool off the economy until businesses create more productive capacity to meet higher levels of demand, Mr. Quarles said. “Therefore, we should respond more quickly to constrain that demand,” he said.

SEC Moves a Step Closer to Delisting Chinese Companies in the U.S. – Bloomberg, 12/3/2021

  • The U.S. government is inching further on efforts to boot Chinese companies off American stock exchanges for not complying with Washington’s disclosure requirements.
  • The Securities and Exchange Commission on Thursday announced its final plan for putting in place a new law that mandates foreign companies open their books to U.S. scrutiny or risk being kicked off the New York Stock Exchange and Nasdaq within three years.
  • China and Hong Kong are the only two jurisdictions that refuse to allow the inspections despite Washington requiring them since 2002.

EUROPE & WORLD

Didi Global Plans to Delist From New York Stock Exchange – Wall Street Journal, 12/3/2021

  • Didi Global plans to delist its shares in the U.S. and pursue a listing in Hong Kong, a dramatic reversal just months after the Chinese ride-hailing group’s ill-fated initial public offering in New York.
  • The move, which Didi said Thursday was supported by its board, comes as authorities in Beijing wrap up a cybersecurity probe into the company. It would mark an escalation in the financial decoupling between the U.S. and China, which has already seen several Chinese companies expelled from American exchanges.
  • Didi’s Thursday statement didn’t specify how it plans to delist from New York. One option would be to first secure a listing elsewhere, while another route would be to pursue a take-private deal that would buy out the shares held by public investors—a transaction that would require billions of dollars of financing given its market capitalization.
  • Didi went public at a valuation of $68 billion—and its market value briefly shot even higher—before Beijing launched the regulatory assault on the company in early July.
  • It had a market capitalization of about $38 billion as of Thursday, according to FactSet.

Chinese border city restricts activities for cargos by highway as COVID-19 infections grow – Reuters, 12/2/2021

  • A Chinese city adjacent to Russia said that starting Friday, it would suspend certain activities for goods transported via highway, its latest move to tighten virus curbs along borders amid its COVID-19 resurgence.
  • The highway port of entry in Manzhouli city, a small town in the northern Chinese region of Inner Mongolia, will halt cargo loading and unloading, transportation and clearance at customs, part of the city’s efforts to strengthen virus control, a local government statement said on Thursday.
  • Manzhouli reported 53 locally transmitted COVID-19 infections with confirmed symptoms for Dec. 1, bringing the total number to 151 since Nov. 28.
  • The outbreak remains tiny compared with many clusters overseas, and no infections caused by the Omicron variant have been detected yet.
  • Still, Manzhouli has quickly launched multiple rounds of mass testing and banned residents from leaving, as it complies with Beijing’s zero tolerance for clusters.

China Evergrande Requests Help From Government After Warning of New Debt Crunch – Wall Street Journal, 12/3/2021

    • Chinese authorities on Friday said they would step in to help China Evergrande Group deal with its crisis, after the highly indebted property giant warned it risked defaulting on a large financial obligation and sought help from its provincial government.
    • The government of Guangdong, the southern Chinese province where the struggling developer is based, said late Friday it would dispatch a working group at the request of Evergrande to help the company manage its risks.
    • The decision was made after officials summoned the company’s chairman, Hui Ka Yan, to a meeting, the government said.
    • It added the working group would oversee and improve the company’s risk management and internal controls, as well as help Evergrande maintain normal operations.
    • China’s central bank said late Friday it was supportive of the Guangdong government’s decision to step in.
    • The People’s Bank of China said it would cooperate with the effort and work with other agencies and local governments to help lower Evergrande’s risks and maintain stability in the country’s property market. China’s banking and securities regulators also said they would work together to keep the broader property industry healthy.

Factmonster – TODAY in HISTORY

  • Oberlin College in Ohio became the first coed institution of higher learning in the U.S. (1833)
  • Dr. Christiaan N. Barnard performed the world’s first successful human heart transplant. (1967)
  • A cloud of deadly poison gas leaked from the Union Carbide plant in Bhopal, India, killing over 4,000 people. (1984)

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