Weekly Market Update: Stocks continue to climb the ‘wall of worry’ despite flattening yield curve and some notable earnings misses
2021-10-29T16:08:14.08
US stock markets continued probe new all-time highs this week as earnings season reached a crescendo. Equities remained in favor in spite of several notable Q3 disappoints that revealed supply-chain problems and tight labor markets have hit even some of the leading corporations quite hard. Investors were also forced to factor in an escalating central bank pivot away from emergency policy measures that will eventually open the door for rate normalization. Worries about the pandemic lingered as portions of Eastern Europe and Asia revisited lockdowns but future US vaccination rates may be heading substantially higher after the FDA approved the Pfizer/Biontech Covid-19 vaccine for use in children as young as five years old.
US housing and manufacturing data largely rebounded from prior months while inflation figures globally continued to run hot. Following meetings by the Bank of Canada and ECB, market based rate hike expectations continued to get pulled forward on the 2022 calendar. ECB President Lagarde even pushed back on that notion specifically at her press conference, but traders clearly favored her incrementally more hawkish view for the 2022 inflation horizon. Some EU sovereign yields returned to levels not seen since July 2020 while the US Treasury curve flattened noticeably amid continued upward pressure on short rates alongside solid demand for Treasury bonds. Washington remained a source of uncertainty as President Biden went off to Europe for key G20 and climate meetings without a vote on his infrastructure spending package. For the week, the S&P gained 1.3%, the DJIA added 0.4%, and the Nasdaq was up 2.7%.
In corporate news this week, a slew of major earnings made headlines. Apple shares fell as the company failed to meet profit expectations for the first time since 2016, as CEO Cook said supply chain constraints crimped revenues by $6B and that the impact would be even greater in the next quarter. Amazon posted a big miss on its top and bottom line as labor costs and supply chain hiccups weighed on the retail giant's outlook. Microsoft’s stronger than expected earnings pushed its market cap up enough to overtake Apple's amid growth in its cloud computing division. Facebook missed consensus estimates and cut its guidance as Apple restrictions on consumer data hurt its ad revenue. Alphabet’s Google on the other hand posted strong growth as small businesses continued to buy digital ads on its various platforms. Twitter missed on its top and bottom lines, though the social media company said the impact from Apple’s data curbs had been less than anticipated. Western Digital was negatively affected this quarter by supply chain troubles, leading it to guide Q2 below analyst expectations. Ford posted a beat and raised guidance, sending shares to their highest levels since late 2014. UPS also had a positive quarter, notching a higher than expected increase in profit amid strong e-commerce demand. On the M&A front, PayPal confirmed it will not be pursuing an acquisition of Pinterest at this time.
SUN 10/24
BMPS.IT UniCredit and Italy's Ministry of Economy and Finance confirm decision to cease the negotiations on potential acquisition of Monte dei Paschi
(US) Treasury Sec Yellen: Do not think we are about to lose control of inflation; Inflation will remain high until next year; Expects improvement in inflation rate in H2 2022
(TR) Turkey President Erdogan said to have ordered 10 foreign envoys be ousted, including envoys from US, France and Germany - press
(CN) China to launch pilot property tax schemes in some regions; the specific regions and other details will be determined by the State Council - Xinhua
MON 10/25
5.HK Reports Q3 Net $3.54B v $1.36B y/y, adj Pretax $6.00B v $4.4B y/y ($4.87Be), Rev $12.0B v $11.9B y/y ($12.3Be); To buy back up to $2.0B in shares
(US) US Senator Manchin (D-WV) said to be 'agreeable' to wealth tax for President Biden plan - US press
PINS PayPal confirms it is not pursuing an acquisition of Pinterest at this time
*(DE) GERMANY OCT IFO BUSINESS CLIMATE SURVEY: 97.7 V 98.0E (4th straight lower reading)
KMB Reports Q3 $1.62 v $1.66e, Rev $5.01B v $5.00Be; Cuts FY21 outlook citing significantly higher input cost inflation
MU Spokesperson: Taiwan earthquake on Oct 24th caused impact to production
*(US) OCT DALLAS FED MANUFACTURING ACTIVITY: 14.6 V 6.2E
ML.FR Reports 9M Rev €17.20B v €14.9B y/y
MRNA Spikevax: EMA recommendation on booster; EMA’s human medicines committee (CHMP) concludes booster dose of COVID-19 vaccine Spikevax may be considered in people aged 18 years and above
UNP Takes additional action to alleviate supply chain congestion; To offer $60/container refund for containers in-gated on Saturdays and Sundays
FB Reports Q3 $3.22 v $3.20e, Rev $29.0B v $29.6Be; Increases share repurchase program by $50B; Notes significant uncertainty ahead of Q4 and continued headwinds from Apple's iOS 14 changes
(HK) Hong Kong Chief Exec Lam: To remove most coronavirus quarantine exemptions
TUES 10/26
UBSG.CH Reports Q3 Net $2.28B v $2.1B y/y; Rev $9.13B v $8.94B y/y, To give strategic update Feb 1, 2022
NOVN.CH Reports Q3 Core EPS $1.71 v $1.65e, Rev $13.0B v $13.0Be; Commences review of options for Sandoz unit
Carmakers and other users of aluminium could be forced to halt production within weeks amid a “catastrophic” shortage of magnesium across Europe - financial press
LEN To partner with Icon to build community of 100 3D-printed homes - US financial press
UPS Reports Q3 $2.71 v $2.52e, Rev $23.2B v $22.6Be; Raises FY21 outlook
GE Reports Q3 $0.57 v $0.41e, Rev $18.4B v $19.1Be; Cuts FY21 Rev outlook, but raises FY21 profit outlook
MMM Reports Q3 $2.45 v $2.18e, Rev $8.94B v $8.67Be
HAS Reports Q3 $1.96 v $1.73e, Rev $1.97B v $1.96Be; Says it has orders to support the high end of the Rev growth range
RTX Reports Q3 $1.26 v $1.07e, Rev $17.0B v $16.5Be
SHW Reports Q3 $2.09 v $2.07e, Rev $5.15B v $5.11Be; Do not expect any moderation in raw material inflation any sooner than next year
WM Reports Q3 $1.26 v $1.33e, Rev $4.67B v $4.55Be; Cites additional labor costs and other inflationary cost pressures
GLW Reports Q3 $0.56 v $0.58e, Rev $3.60B v $3.66Be
LMT Guides initial FY22 Rev ~$66B** v $70.2Be, segment Op margin ~11% - earnings slides
*(US) OCT RICHMOND FED MANUFACTURING INDEX: 12 V 5E
*(US) OCT CONSUMER CONFIDENCE: 113.8 V 108.3E
*(US) SEPT NEW HOME SALES: 800K V 759KE
0728.HK FCC votes to revoke China Telecom America's authority to provide telecom services within the US - press
MSFT Reports Q1 $2.27 adj v $2.06e, Rev $45.3B v $43.9Be
GOOGL Reports Q3 $27.99 v $23.13e, Rev $53.6B (ex TAC) v $51.8Be
V Reports Q4 $1.62 v $1.53e, Rev $6.6B v $6.48Be; Raises Quarterly dividend 17.2% to $0.375 from $0.32 (indicated yield 0.65%)
AMD Reports Q3 $0.73 v $0.67e, Rev $4.31B v $4.12Be; 3rd Gen EPYC processor shipments ramped significantly in Q3
(US) Puerto Rico Senate and House have approved the debt restructuring bond bill; the final vote in the Senate was 14 to 13 - press
PFE VRBPAC Panel Votes In Favor (17 Yes; 0 No; 1 Abstain) that based on the totality of scientific evidence available, the benefits of PFE-BNTX COVID-19 Vaccine when administered as a 2-dose series (10 µg each dose, 3 weeks apart) outweigh risks for use in children 5-11 years of age - VRBPAC Meeting
WEDS 10/27
DBK.DE Reports Q3 Net €194M v €812M y/y, Rev €6.04B v €5.8Be; Rev performance developing in line with or better than previous 2022 ambitions
BAS.DE Reports Q3 Net €1.25B v €1.30Be, Adj EBITDA €2.77B v €2.69Be, Rev €19.7B v €17.8Be; Raises FY21 outlook
(DK) GERMANY NOV GFK CONSUMER CONFIDENCE: +0.9 V -0.5E (2nd straight month of positive readings)
HEIA.NL Issues Q3 Trading Update: Organic Beer volume -5.1% y/y
MCD Reports Q3 $2.76 v $2.46e, Rev $6.20B v $6.02Be
IP Reports Q3 $1.35 v $1.46e, Rev $5.71B v $5.84Be; Expect this inflationary environment to continue for the foreseeable future
GSK.UK Reports Q3 Adj EPS 36.6p v 29.1pe, Rev £9.08B v £8.8Be
GM Reports Q3 $1.52 v $0.89e, Rev $26.8B v $26.5Be; Raises guidance
(FR) France govt spokesperson Attal: Sanctions against UK will come into effect on Mon, Nov 1st; Announcement could come tomorrow
*(US) SEPT PRELIMINARY WHOLESALE INVENTORIES M/M: 1.1% V 1.0%E
*(UK) DEBT MANAGEMENT OFFICE (DMO) UPDATES ITS FINANCING REMIT: Gross issuance for FY21/22 at £194.8B
(US) Nevada reports Sept casino gaming Rev $1.16B, +41.1% y/y; Las Vegas strip Rev $640.6M, +80.6% y/y
*(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED; Ending QE and moving into reinvestment phase
*(US) DOE CRUDE: +4.3M V +0.5ME; GASOLINE: -2.0M V -2ME; DISTILLATE: -0.4M V -2ME
(US) Atlanta Fed GDPNow: cuts Q3 GDP forecast to 0.2% from 0.5%
COST Reportedly raised its minimum wage to $17/hr (had raised it to $16/hr in Feb) - CNN
F Reports Q3 $0.51 v $0.29e, Rev $35.7B v $34.2Be; Raises FY21 outlook; Says Ford has momentum from and expects to build on its strong performance in 2021
005930.KR Reports final Q3 (KRW) Net 12.3T v 9.36T y/y; Op 15.8T v 12.4T y/y, Rev 74.0T v 67.0T y/y
THURS 10/28
AIR.FR Reports Q3 adj Net €404M v -€767M y/y, Adj EBIT €666M v €820M y/y, Rev €10.5B v €11.2B y/y
NOKIA.FI Reports Q3 €0.08 v €0.05 y/y, Op €633M v €486M y/y, Rev €5.40B v €5.29B y/y; Works to mitigate the unprecedented component cost inflation the industry faces
ABI.BE Reports Q3 $0.85 v $0.64e, EBITDA $5.21B v $4.9Be; Rev $14.27B v $13.6Be
VOW3.DE Reports Q3 Net €2.90B v €2.75B y/y, Op €2.80B v €3.18B y/y, Rev €56.9B v €59.4B y/y; Says operating business in Q3 noticeably down due to semiconductor bottlenecks; Cuts FY21 deliveries outlook
SAN.FR Reports Q3 Business EPS €1.85 v €1.55 y/y, Op €3.04B v €2.52B y/y, Rev €10.4B v €9.48B y/y
066570.KR Reports final Q3 (KRW) Net 384.9B v 626.1B y/y; Op 540.7B v 959B y/y, Rev 18.8BT v 16.9T y/y
RDSA.NL Reports Q3 $0.53 v $0.12 y/y, Rev $61.6B (total Rev and other income) v $44.7B y/y
STLA Reports Q3 Rev €32.6B v €37.7B y/y; CFO says chip supplies improving in Oct and Sept
6758.JP Reports H1 Net ¥424.9B v ¥652.2B y/y, Pretax ¥566.3B v ¥572.3B y/y, Op ¥598.5B v ¥537.0B y/y, Rev ¥4.6T v ¥4.1T y/y
(FR) France EU Affairs Min Beaune: UK could face higher electricity prices
VOW3.DE CEO: Cuts FY21 Rev growth +10% (prior: +15%); Chip supplies should be much better in Q4 and to improve further in coming quarters despite some constraints persisting in 2022 - post earnings comments
(DE) German day-ahead baseload power price at €122.0/MWh -21.4% d/d
*(DE) GERMANY OCT NET UNEMPLOYMENT CHANGE: -39.0K V -20.0KE; UNEMPLOYMENT CLAIMS RATE: 5.4% V 5.4%E
RDS.A CFO: energy supply shortage to be mostly resolved over 2022 - post earnings comments
CAT Reports Q3 $2.66 v $2.26e, Rev $12.4B v $12.6Be; Says it is working to mitigate supply chain issues
MRK Reports Q3 $1.75 v $1.54e, Rev $13.2B v $12.4Be
AVNT Reports Q3 $0.70 adj v $0.68e, Rev $1.22B v $1.17Be; Notes unprecedented combination of inflation, supply chain disruptions, and labor shortages
HSY Reports Q3 $2.10 v $2.00e, Rev $2.36B v $2.31Be; Raises FY21 outlook to reflect elevated consumer demand across markets, an improved tax outlook and optimized brand investment
LH Reports Q3 $6.82 v $4.77e, Rev $4.06B v $3.58Be
MO Reports Q3 $1.22 v $1.26e, Rev $6.79B v $5.77Be; Expands share buyback program to $3.5B from $2B
RFL AVENGER 500 Phase 3 clinical trial for CPI-613 (devimistat) in Metastatic Pancreatic did NOT meet primary endpoint; Independent Data Monitoring Committee recommends Phase 3 clinical trial in relapsed or refractory acute myeloid leukemia be stopped due to lack of efficacy
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; Reiterates forward guidance on rates and QE program pace
CAT CFO: Sees supply-chain impacts lasting into 2022; Sees China demand falling in Q4, full year demand flat - media call
*(DE) GERMANY OCT PRELIMINARY CPI M/M: 0.5% V 0.4%E; Y/Y: 4.5% V 4.4%E (highest annual pace since 1993 reunification)
MA Reports Q3 $2.37 v $2.18e, Rev $5.0B v $4.96Be
*(US) INITIAL JOBLESS CLAIMS: 281K V 288KE; CONTINUING CLAIMS: 2.243M V 2.42ME
*(US) Q3 ADVANCE GDP ANNUALIZED Q/Q: 2.0% V 2.6%E; PERSONAL CONSUMPTION: 1.6% V 0.9%E
*(US) Q3 ADVANCE GDP PRICE INDEX: 5.7% V 5.3%E; CORE PCE Q/Q: 4.5% V 4.5%E
(EU) ECB chief Lagarde: Recovery continues but has "Moderated"; Inflation expected to rise further but ease during course of 2022 - prepared remarks
(EU) ECB chief Lagarde: Analysis does not support market-based lift-off expectations
(EU) ECB chief Lagarde: In her view the PEPP will end next March (as scheduled) - Q&A
*(US) SEPT PENDING HOME SALES M/M: -2.3% V 0.5%E; Y/Y: -7.2% V -3.1%E
(EU) ECB Policymakers said to be split about second round effect of inflation, some doubt CPI will ease below 2% in 2023 - press
HPE Guides initial FY22 $1.96-2.10 v $2.00e, Rev growth 3-4% (cc) y/y; Targets FY22-24 annual Rev CAGR 2-4% (prior 3-yr view 1-3%)
FB Rebranding company name to 'Meta' to reflect our full breadth of products and focus on Metaverse - Facebook Connect
AMZN Reports Q3 $6.12 v $8.71e, Rev $110.8B v $111.8Be
X Reports Q3 $5.36 v $4.85e, Rev $5.96B v $5.73Be; Raises dividend to $0.05 from $0.01; Announces $300M share repurchase program
AAPL Reports Q4 $1.24 v $1.24e, Rev $83.4B v $85.5Be; Supply chain constraints hurt sales by $6B in Q4; Expects continued supply constraints in Q1 resulting in larger headwinds
AAPL CEO Cook: Supply constraints now affecting ALL of Apple's product lines, but have seen improvement in disruptions in Southeast Asia as of late Oct - post earnings comments
KO Reportedly near deal to buy controlling stake in sports drink maker BodyArmor, valuing company at $8B - press
FRI 10/29
DAI.DE CFO: volume should come back in Q4; Market demand is so high, could expect higher passenger car sales in 2022 - post earnings comments
*(FR) FRANCE OCT PRELIMINARY CPI M/M: 0.4% V 0.3%E; Y/Y: 2.6% V 2.5%E
(DE) German day-ahead baseload power price at €82.0/MWh -32.2% d/d
*(DE) GERMANY Q3 PRELIMINARY GDP Q/Q: 1.8% V 2.2%E; Y/Y: 2.5% V 2.6%E
3328.HK Reports Q3 (CNY) Net 22.3B v 16.2B y/y, NII 40.8B v 40.2B y/y
*(EU) EURO ZONE OCT ADVANCE CPI ESTIMATE Y/Y: 4.1% V 3.7%E; CPI CORE Y/Y: 2.1% V 1.9%E (4th month above target and highest annual pace since 2008)
*(EU) EURO ZONE Q3 ADVANCE GDP Q/Q: 2.2% V 2.1%E; Y/Y: 3.7% V 3.5%E
CVX Reports Q3 $2.96 v $2.21e, Rev $44.7B v $42.5Be; Notes Q3 FCF was best ever reported
X Guides Q4 flat rolled segment EBITDA to be near the Q3 record level - earnings call
*(US) SEPT PERSONAL INCOME: -1.0% V -0.3%E; PERSONAL SPENDING: 0.6% V 0.6%E
XOM Reports Q3 $1.58 v $1.57e, Rev $73.8B v $73.3Be; Expects up to $10B share buyback over 12-24 months, starting in 2022
CCJ Reports Q3 -C$0.14 v -C$0.20 y/y, Rev C$361M v C$379M y/y
FDA approves PFE-BNTX Covid-19 Vaccine, BNT162b2 (Comirnaty), for use in children 5 through 11 years of age
