Weekly Market Update: Big firms announce breakups, while others post disappointing quarterly results; Inflation continues to run hot
2021-11-12T16:15:30.76
The US stock market finally saw its five-week winning streak come to an end this week. Equity markets encountered some resistance after US CPI data showed inflation rose to a three-decade high in October and broadened to impact a wide array of goods and services. Initially the US Treasury curve flattened and the US dollar firmed up. Signs that the flare-up in inflation will last longer than central bankers had forecast prompted traders to placer further bets the Federal Reserve would raise borrowing costs by next summer. The Biden administration further vented its frustration with stubbornly high oil prices calling on OPEC producers to help bring prices down. Government officials and central bankers on both sides of the pond continued to assert that much of the current upward pressure on prices will ultimately prove to be transitory.
Stocks found support on Friday despite the November University of Michigan sentiment reading falling to a 10-year low. September JOLTS jobs openings remained very strong while the quits rate pushed up to the highest level on record, suggesting the employment market will remain tight. US natural gas prices remained below $5 holding near a 3-month low while WTI crude drifted back towards $80/bbl providing some hope that the worst of the inflation spike may have passed. For the week, the S&P lost 0.3%, the DJIA was off 0.6%, and the Nasdaq slipped 0.7%.
In corporate news this week, breakups were in the air: Johnson & Johnson announced it plans to split into two companies, spinning off its consumer and pharmaceutical/medical device divisions into separate entities. GE also said it would break up, forming three public companies: GE Aviation; GE Healthcare; and the combined GE Renewable Energy, GE Power, and GE Digital businesses. Toshiba confirmed it too planned to separate into three standalone companies.
On the earnings front, Disney shares plummeted after reporting across-the-board misses and seeing decelerated streaming growth. PayPal missed on its top line and cut its FY outlook, sending the stock lower despite announcing a new partnership with Amazon. Beyond Meat posted a much wider loss than anticipated and analysts worried its Q4 forecast show that faux meat products could be reaching market saturation faster than expected. Rivian Automotive launched its IPO with great fanfare and earned a market cap greater than GM, while Tesla shares took a breather as Elon Musk sold some shares to pay his tax obligations.
SUN 11/7
BRK.A Reports Q3 EPS (Class A) $6,882 v $18,994 y/y, Rev $70.6B v $63.0B y/y
(US) House passes bipartisan $1.2T infrastructure bill, clearing the way for President Biden's signature
MON 11/8
(IE) Ireland Foreign Min Coveney: Evidence suggests UK govt is preparing to trigger Article 16 of the Northern Ireland Protocol; Sees this very severe and something the EU would want to prevent
(CN) China to issue more than a dozen licenses for companies to conduct after school tutoring - press
(DE) German Social Democrats (SPD) official Walter-Borjans: Every chance govt will be in place in early Dec; SPD-led coalition talks making good progress
CRS Increases base prices by 6-8% on specialty alloy portfolio; Effective on new orders placed after Nov 8
(US) Fed Vice Chair Clarida: Sees interest rate liftoff test met by end of 2022; We are clearly a ways away from considering raising rates
RBLX Reports Q3 -$0.13 v -$0.26 y/y, Rev $509.3M v $251.9M y/y; Based on our October results, we appear to be having a great start to Q4
PYPL Reports Q3 $1.11 v $1.07e, Rev $6.18B v $6.21Be; Venmo users in the US will be able to pay with Venmo on Amazon.com starting in 2022
(CN) Follow Up: More cities in China [including Tianjin, Shijiazhuang, Suzhou and Jiangsu] have tightened the use of proceeds from property pre-sales - Chinese press
TUES 11/9
7201.JP Reports H1 Net +¥54.1B v -¥16.7Be, Op +¥63.5B v -¥1.7Be; Rev ¥3.95T v ¥3.09T y/y; Cuts FY21 Rev outlook on lower deliveries. but raises profit outlook
TSLA Reportedly "likely" to open second factory in Shanghai, China - DigiTimes
*(DE) GERMANY NOV ZEW CURRENT SITUATION SURVEY: 12.5 V 18.3E; EXPECTATIONS SURVEY: 31.7 V 20.0E
(EU) EU said to ban payment for order flow as part of Mifid review to stem a practice helping meme-stocks - press
TSM Confirms to build $7B chip plant in Japan with Sony Semiconductor Solutions as minority shareholder; Sony to make $0.5B investment; Construction to begin in 2022 with production planned by end-2024 (as speculated)
GE Plans to form 3 public companies, GE Aviation, GE Healthcare, and the combined GE Renewable Energy, GE Power, and GE Digital businesses; Plans to execute tax-free spin-offs of Healthcare in early 2023, Renewable Energy and Power company in early 2024
DHI Reports Q4 $3.70 v $3.40e, Rev $8.11B v $7.88Be
SYY Reports Q1 $0.83 v $0.85e, Rev $16.5B v $15.8Be; Product cost inflation +13.4% in U.S.
*(US) OCT PPI FINAL DEMAND M/M: 0.6% V 0.6%E; Y/Y: 8.6% V 8.6%E
CLX CEO: Higher costs have been more pervasive than our earlier expectations; Supply chain situation is 'starting to ease' - press interview
COIN Reports Q3 $1.62 v $1.79e, Rev $1.31B v $1.56Be
WEDS 11/10
ADS.DE Reports Q3 Op €672M v €680Me, Rev €5.75B v €5.80Be; Cuts FY21 gross margin outlook
ALO.FR Reports H1 Adj Net €172M v €168M y/y, Rev €7.44B v €3.52B y/y
700.HK Reports Q3 (CNY) Net 39.5B v 38.5B y/y, Rev 142.4B v 125.5B y/y
ADS.DE CFO: Expects flattish Q4; Have developed action plan to address weakness in China - post earnings comments
VOW3.DE CEO: it is evident Volkswagen must break up certain structures and find new ways of working; It is not about job cuts, but new ways of thinking
3333.HK Reportedly some USD offshore bond holders of Evergrande have not received coupon payments by the end of 30-day grace periods on Wed, Nov 10th; Non-payment would trigger default condition - financial press
*(US) OCT CPI M/M: 0.9% V 0.6%E; Y/Y: 6.2% V 5.9%E (highest annual pace since Nov 1990)
*(US) INITIAL JOBLESS CLAIMS: 267K V 260KE; CONTINUING CLAIMS: 2.16M V 2.05ME (both post pandemic lows)
BAS.DE To raise prices by up to 35% on home care, industrial and institutional cleaning, and industrial formulators portfolio in Europe - press
*(US) DOE CRUDE: +1.0M V +1.5ME; GASOLINE: -1.6M V -0.5ME; DISTILLATE: -2.6M V -1ME
(US) Atlanta Fed GDPNow: cuts Q4 GDP forecast to 8.2% from 8.5%
RIVN IPO opens for trade at $106.75
*(US) TREASURY $25B 30-YEAR BOND AUCTION DRAWS 1.940%; BID TO COVER 2.20 V 2.21 PRIOR AND 2.22 OVER LAST 6 AUCTIONS
*(US) OCT MONTHLY BUDGET STATEMENT: -$165B V -$179.0BE
DIS Reports Q4 $0.37 v $0.52e, Rev $18.5B v $18.8Be
THURS 11/11
SIE.DE Reports Q4 Net €1.33B v €1.23Be, Industrial Business EBITA €2.27B v €2.45Be, Rev €17.4B v €16.7Be
SIE.DE Sees complex environment remains, easing challenges from Covid-19 & supply chain constraints during FY22 - earnings slides
*(UK) Q3 PRELIMINARY GDP Q/Q: 1.3% V 1.5%E; Y/Y: 6.6% V 6.8%E
(RU) Russia Parliament (Duma) said to be discussing legalizing crypto assets - financial press
(RU) US has privately warned Europe that Russian troops could plan an invasion of Ukraine - press
OPFI Reports Q3 Adj $0.21 v $0.16e, Adj Rev $92.0M v $62.8M y/y; Net Charge-Offs up to 36%
MOS Reports Oct Phosphates Rev $437M,+49% y/y; Volumes shipped 569K tonnes, -20% y/y
7203.JP Planning 800K vehicle production in Dec (vs ~760K y/y); Affirms FY21/22 production plan of 9.0M units
FRI 11/12
2317.TW Reports Q3 (NT$) Net 37B v 30.8B y/y; Op 36.2B v 32.4B y/y; Expects component shortage to last into H2 2022
6502.JP Reports H1 Net ¥59.8B v ¥3.5B y/y, Pretax ¥82.1B v ¥20.0B y/y, Op ¥45.0B v ¥3.1B y/y, Rev ¥1.55T v ¥1.37T y/y; Confirms Board approved to split into 3 companies focused on Infrastructure Service, Devices, Kioxia and Toshiba TEC
2317.TW Chairman: Has a cautious outlook for FY22 Rev; expects component shortage to last into H2 2022 - post earnings comments
(RU) Russia govt spokesperson Peskov: talk of possible Russia invasion of Ukraine unfounded; To supply gas to Europe regardless of Belarus
JNJ Confirms plans to separate consumer health business; Separation expected to complete in 18-24 months
6502.JP Confirms strategic reorganization to separate into three standalone companies to enhance shareholder value
*(US) SEPT JOLTS JOB OPENINGS: 10.44M V 10.30ME
(EU) EU's Sefcovic: The EU is committed to finding practical solutions; Nothing has changed with regard to our position on ECJ; We must make serious headway by end of next week
