Daily Market Report | December 10, 2021
US FINANCIAL MARKET
Stocks Open Higher After Inflation Nears 40-Year High – Wall Street Journal, 12/10/2021
- U.S. share benchmarks and oil prices gained after fresh inflation data piqued investors’ hopes that price rises may be nearing a peak.
- The index retreated Thursday but was on track for its strongest week of gains since February.
- Labor Department figures showed that the consumer-price index (CPI)—which measures what people pay for goods and services—rose 6.8% in November from a year ago.
- The Federal Reserve will hold a meeting next week at which it may provide more details about how it plans to wind down its bond-buying program and when it plans to begin raising interest rates.
- In bond markets on Friday, the yield on the 10-year Treasury note—which rises when prices fall—ticked down to 1.474%, from 1.486% Thursday.
- Brent crude futures, the benchmark in global oil markets, rose 0.8% to $75.20 a barrel, and were recently up more than 8% for the month.
- In individual stocks, Oracle shares gained 18% after the database giant reported second-quarter results that beat estimates.
- Broadcom shares added more than 6% after the company posted better-than-expected results and strong January-quarter guidance, raised its dividend and announced a stock-repurchase program.
- Chewy shares shed 6% after the online food products retailer posted disappointing results, reflecting higher-than-expected supply chain and labor costs.
- Overseas, the pan-continental Stoxx Europe 600 was roughly flat.
- Hong Kong’s Hang Seng declined 1.1%, and Japan’s Nikkei 225 fell 1%. South Korea’s Kospi shed 0.6% and China’s Shanghai Composite edged down 0.2%.
Broadcom sees upbeat first-quarter sales, unveils $10 billion buyback plan – Reuters, 12/9/2021
- Semiconductor firm Broadcom forecast first-quarter revenue above Wall Street expectations and announced a $10 billion share buyback plan on Thursday, banking on a rebound in enterprise spending and sustained demand from cloud computing companies.
- Shares of the company rose 6.6% to $622 in extended trading.
- Analysts have pointed to strong near-term demand for Broadcom’s radio frequency and wireless chips as telecom firms spend more to roll out 5G technology, and continued strength in its broadband division.
- Enterprise demand rebounded sharply over 30% in the reported quarter, while revenue from semiconductor solutions is expected to grow 17% in the current quarter, Chief Executive Hock Tan said on a conference call with analysts.
- The San Jose, California-based company forecast first-quarter revenue of about $7.60 billion, well above analysts’ average estimate of $7.25 billion, according to Refinitiv data.
- Fourth-quarter revenue rose 15% to $7.41 billion, narrowly beating estimates of $7.36 billion, while earnings per share of $7.81 was also better than expected.
- Its infrastructure software revenue grew 8% to $1.77 billion in the fourth quarter.
Oracle shares rocket 17% on strong earnings and outlook – CNBC, 12/10/2021
- Shares of Oracle rose about 17% in morning trading Friday after the company reported earnings and revenue that beat analyst estimates for the second quarter of 2022.
- The spike is set to add roughly $42 billion to its market cap, bringing it to about $284 billion.
- The company reported $1.21 per share, adjusted in earnings, exceeding analyst estimates of $1.11 per share, according to Refinitiv.
- It also brought in $10.36 billion for the quarter in revenue, beating estimates of $10.21 billion.
- Oracle reported a net loss for the quarter of $1.25 billion, however, compared to net income of $2.44 billion it reported in the year-ago quarter.
- Oracle reported guidance for the fiscal third quarter that fell at the midpoint of Wall Street expectations, at an adjusted $1.16 per share.
- It also expects revenue to of $10.56 billion, implying about 5% revenue growth, on the high-end of analysts’ estimated range.
- The company reported $1.62 earnings per share adjusted vs. $1.41 expected.
- Revenue of $1.45 billion vs. $1.41 billion expected.
- Lululemon’s 3rd quarter net income rose to $187.8 million, or $1.44 per share, from $143.6 million, or $1.10 per share, a year ago.
- Excluding one-time items, it earned $1.62 per share, ahead of expectations for $1.41.
- Sales rose about 30% to $1.45 billion from $1.12 billion a year earlier. That was ahead of expectations for $1.41 billion.
- The boost was largely driven by Lululemon’s men’s business, which grew 44% year over year.
- Sales in womenswear, the company’s core business, were up 25%.
- Lululemon has said its plans to double its men’s division by 2023 are running way ahead of schedule.
- In North America, sales were up 28% year over year, while revenue climbed 40% internationally.
- Last year, as consumers shifted from working out at the gym to working out at home, Lululemon made a $500 million bet on Mirror.
- On Thursday, Lululemon lowered its outlook for Mirror sales for the year to be between $125 million and $130 million, while previously it was looking for between $250 million and $275 million.
- For the fourth quarter, Lululemon expects revenue to range from $2.13 billion to $2.17 billion, and adjusted earnings per share between $3.25 and $3.32.
- It raised its full-year revenue outlook to a range of between $6.25 billion and $6.29 billion.
- It sees annual diluted earnings per share in a range of $7.38 to $7.45. After adjustments, it expects to earn between $7.69 and $7.76 per share.
Costco Sales Rise During Start of Holiday Season – Wall Street Journal, 12/9/2021
- Costco Wholesale said sales rose in the most recent quarter, as the warehouse retailer navigates rising costs and shipping snarls that mean some toys will reach its stores after Christmas.
- About 79% of Costco’s imports are late by an average of 51 days, Chief Financial Officer Richard Galanti said on a call Thursday.
- Comparable sales, those from stores and digital channels operating for at least 12 months, rose 9.8% in the quarter ended Nov. 21 compared with the same period last year, excluding gas sales and currency fluctuations.
- E-commerce sales rose 13.3% during the quarter.
- For the latest quarter the company estimates that overall year-over-year price inflation was in the 4.5% to 5% range.
- In late October, Costco raised its starting wage for workers to $17 an hour, eating into profit, Mr. Galanti said.
- In the most recent quarter, net sales rose 17% to $49.4 billion, up from $42.4 billion in the same period last year.
- Analysts expected net sales of $49.7 billion for the quarter, according to FactSet.
- Net income hit $1.3 billion in the most recent quarter, up from $1.2 billion in the same period last year.
- Analysts expected net income of $1.2 billion, according to FactSet.
Chewy’s stock is down despite 24% jump in quarterly sales – MarketWatch, 12/10/2021
- Chewy tumbled in extended trading Thursday after the online retailer of pet food and other pet-related products reported fiscal third-quarter results.
- Chewy reported a net loss of $32.2 million, compared with a net loss of $32.8 million in the year-ago quarter.
- Net sales climbed 24% to $2.21 billion from $1.78 billion a year ago.
- Analysts surveyed by FactSet had expected a net loss of 8 cents a share on revenue of $2.2 billion.
- Shares of Chewy are down 37% this year, while the broader S&P 500 index has gained 24.5%.
- A federal judge on Tuesday issued a nationwide preliminary injunction after concluding that federal procurement law didn’t give the administration the clear authority to impose the vaccine rules for contractors.
- GE has paused its implementation of the executive order in response to the preliminary injunction, a company spokeswoman said.
- U.S. railroad operators, which had faced court challenges from unions representing their employees, also suspended their mandate.
- As of Dec. 8, 73% of Union Pacific workers were fully vaccinated and 7% are in progress, the spokeswoman said.
US ECONOMY & POLITICS
U.S. Consumer Prices Climb at Fastest Annual Rate Since 1982 – Bloomberg, 12/10/2021
- U.S. consumer prices rose last month at the fastest annual pace in nearly 40 years, underscoring how rapid and persistent inflation is eroding paychecks and increasing pressure on the Federal Reserve to tighten monetary policy.
- The consumer price index climbed 6.8% from November 2020, according to Labor Department data released Friday.
- The widely followed inflation gauge rose 0.8% from October, exceeding forecasts and extending a trend of sizable increases that began earlier this year.
- Annual CPI increases are anticipated to hover near 7% into 2022.
- Excluding the volatile food and energy components, so-called core prices rose 0.5% from the prior month.
- The core CPI was up 4.9% from a year earlier, a fresh 30-year high.
- Shelter costs — which are considered to be a more structural component of the CPI and make up about a third of the overall index — rose 0.5% in November from a month earlier.
- Compared with the same month last year, the 3.8% gain was the biggest since 2007.
- Food at home rose 6.4% from a year ago, the most since December 2008.
- Gasoline climbed 6.1% from the prior month, matching the October increase.
- Rent of primary residence and owners’ equivalent rent both increased 0.4% from October.
- The CPI report showed overall food costs, including away from home, rose 6.1% from a year earlier — the most since 2008.
Senate Clears Key Hurdle for Debt-Ceiling Increase to Avert Default – Wall Street Journal, 12/9/2021
- The Senate advanced the bill 64-36 in the critical procedural vote early in the afternoon, drawing the support of 14 Republicans to top the required 60-vote threshold.
- Hours later, the Senate voted 59-35 on final passage, which required just a simple majority.
- Republicans and Democrats settled on that novel, two-step method for raising the debt limit after weeks of negotiations between Senate Majority Leader Chuck Schumer (D., N.Y.) and Senate Minority Leader Mitch McConnell (R., Ky.).
- The bill, which the House passed earlier this week, also prevents possible spending cuts.
- Democrats will now turn to completing their roughly $2 trillion education, healthcare and climate bill.
U.S. Supreme Court permits challenge to Texas six-week abortion ban – Reuters, 12/10/2021
- The U.S. Supreme Court on Friday allowed abortion providers to pursue a legal challenge to a ban on most abortions in Texas, with the fate of the Republican-backed measure that allows private citizens to enforce it now hanging in the balance.
- The justices, who heard arguments on the case on Nov. 1, lifted a block on lower court proceedings, likely paving the way for a federal judge to formally block the law.
- The Supreme Court has yet to decide another major abortion rights case from Mississippi that could lead to the overturning of the landmark 1973 Roe v. Wade ruling that legalized the procedure nationwide.
EUROPE & WORLD
- The U.S. government won an appeal in its bid to extradite Julian Assange, clearing an important hurdle in Washington’s yearslong battle to put the WikiLeaks founder on trial on spying charges.
- In their ruling, Lord Chief Justice Ian Burnett and Lord Justice Tim Holroyde said diplomatic assurances given by the U.S. that Mr. Assange wouldn’t be held under the strictest maximum-security conditions if extradited were sufficient to clear the path to extradition.
- Mr. Assange, 50 years old, is wanted in the U.S. on 18 counts of conspiring to disclose classified information and conspiring to hack a military computer.
China Pushes Back Against Yuan Rally – Wall Street Journal, 12/10/2021
- The yuan has soared to multiyear highs against the dollar and other major currencies, reflecting strong demand for China’s exports and its financial assets, and prompting some pushback from the country’s central bank.
- This week, the more freely traded offshore yuan firmed below 6.35 to the dollar for the first time since May 2018, according to Refinitiv.
- It has gained roughly 2% this year against its U.S. equivalent.
- On Thursday evening in Beijing, the People’s Bank of China increased the proportion of foreign-currency deposits that domestic banks need to hold in reserve, lifting this reserve requirement ratio by 2 percentage points to 9%.
- By midafternoon Friday in Hong Kong, the offshore yuan had weakened modestly, to about 6.374 per dollar.
- Market-watchers say that while China has enjoyed an export boom, having too strong a currency, or too rapid a rise, could cut into overseas trade.
- GDP expanded by a weaker-than-expected 4.9% year-over-year in the third quarter.
Russia and Ukraine trade blame as ceasefire push breaks down – Reuters, 12/10/2021
- Ukraine and Russia blamed each other after a push to agree a new ceasefire in eastern Ukraine broke down late on Thursday as tensions over a Russian troop buildup near its southern neighbor persisted.
- Ukraine said Moscow had rejected a series of its proposals, including prisoner swaps, reopening a checkpoint and expanding a joint communications centre.
- Russia said late on Thursday that Kyiv had submitted “absolutely absurd” proposals and accused it of imitating negotiations at the talks.
- Russia on Thursday kept up a barrage of hostile rhetoric towards Ukraine and compared the crisis there to the most dangerous moment of the Cold War as it waited for U.S. President Joe Biden to invite it to possible talks with NATO countries.
Factmonster – TODAY in HISTORY
- Mississippi became the 20th state in the United States. (1817)
- The first Nobel Prizes were awarded in Stockholm, Sweden, in the fields of physics, chemistry, medicine, literature, and peace. (1901)
- The United Nations General Assembly adopted its Universal Declaration on Human Rights. (1948)
- Dr. Martin Luther King, Jr., received the Nobel Peace Prize. (1964)
- A U.S. passenger jet landed in Vietnam, the first one to do so since the Vietnam War ended nearly three decades earlier. (2004)
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