MARKET WRAPS
Watch For:
U.S. New Home Sales for August; Kansas City Southern special
meeting of shareholders to vote on acquisition by Canadian National
Railway.
Opening Call:
Stock futures wavered and bond yields ticked up to multi-month
highs, as uncertainty lingered about the future of heavily indebted
property giant China Evergrande Group.
"There has been a growing feeling that there is a pullback
waiting," said Seema Shah, chief strategist at Principal Global
Investors. "The market is so vulnerable to any kind of shock right
now given growth is slowing and valuations are looking
stretched."
Markets have been whipsawed this week by fears that the possible
collapse of Evergrande could spill over into global markets and add
to an already darkening outlook for global growth. Evergrande
inched closer to a potential default Friday as a deadline on a key
interest payment to its U.S. dollar bondholders passed without any
announcement.
"It is one of the largest companies in the second largest
economy in the world and if something pulls down Chinese growth it
is going to pull down global growth," said Ms. Shah.
The company's shares slumped over 12% in Hong Kong as the
Thursday deadline for the $83.5 million coupon payment passed.
Evergrande's shares have fallen over 80% this year.
In U.S. off hours trading, Meredith Corp. surged 19% off hours
after The Wall Street Journal reported the People Magazine
publisher was in talks to be acquired by Barry Diller's
IAC/InterActiveCorp.
Shares of Nike fell 4% in premarket trading after the sportswear
giant lowered revenue guidance, citing supply-chain disruptions in
Asia. Rival Adidas slipped 3% in European trading. Shares in
warehouse grocery chain Costco ticked up 0.8% after the warehouse
grocery giant reported quarterly sales.
Forex:
The DXY dollar index fell, erasing some of the gains in the wake
of Wednesday's U.S. Federal Reserve announcement that took it to a
one-month high, but investors should return to buy the currency due
to prospects of tighter monetary policy, ING said.
"We are still inclined to think markets will buy the dips in the
dollar given the reinforced backdrop of policy normalisation in the
U.S.," it said.
The Fed said it could start tapering asset purchases as early as
November while interest rates could rise by the end of next year.
ING said markets for now seem reluctant to "trust" the Fed's
interest-rate projections and may need more evidence from U.S.
data.
The pound traded steady, failing to build on Thursday's gains
after a Bank of England policy statement suggested the central bank
was moving closer to tightening monetary policy, and MUFG said it
could reverse these gains due to near-term risks to the U.K.
economy.
These include reduced pandemic-related support, surging gas
prices and continuing supply bottlenecks. The hit to real incomes
from surging utility bills just as an increase to benefit payments
added during the pandemic is taken away "could undermine consumer
confidence and weaken consumer spending," said MUFG's Derek
Halpenny.
Sterling advanced nearly 1% versus the dollar Thursday "but
near-term elevated risks leave us more wary of the move reversing,"
he said.
Bonds:
Markets were contending with a rise in government bond yields,
after several central banks-including the Fed-this week signaled
they were on the path toward removing pandemic-era stimulus
measures. The yield on the benchmark 10-Year U.S. Treasury note
rose to 1.437% Friday, from 1.408% Thursday, hitting its highest
level since July.
OFI Asset Management expects a gradual rise in U.S. and eurozone
bond yields by year-end as central banks intend to gradually remove
some monetary stimulus, said Jean-Marie Mercadal, head of
investment strategies.
OFI AM's year-end targets for the 10-year U.S. Treasury and
German Bund yields are 1.75% and -0.20%, respectively, with the
expected increases not triggering any major price fluctuations in
markets.
Markets seem to have priced in the Fed's intention to scale back
asset purchases, he said.
The European Central Bank also decided in September to continue
asset purchases at a "moderately lower" level in the coming quarter
compared with 2Q and 3Q.
Commodities:
Oil prices rose, with both benchmarks on course for weekly
gains. Brent's trading close to its October 2018 high, with UBS's
Giovanni Staunovo pointing to the supply disruptions and recovering
oil demand that have caused volatility in the market since
August.
On top of Hurricane Ida, maintenance work in Kazakhstan, as well
as outages in Nigeria, Mexico, and Libya have all contributed to
rising prices in recent weeks, he added, forecasting a Brent price
of $80 a barrel for the end of the month.
Gold rebounded after a steep fall on Thursday that was prompted
by rising bond yields and signs that global central banks could
soon hike rates to tame inflation. The precious metal slumped as
low as $1,739.70 in the previous session as U.S. treasury yields
rose to their highest level since July.
"The market is showing a little bit of a taper tantrum," says
Seema Shah, chief strategist at Principal Global Investors, of the
rising bond yields. Signs that global central banks were moving to
remove pandemic-era stimulus measures are behind the move in bond
markets, she said.
TODAY'S TOP HEADLINES
China Evergrande Never Got Auditor Warning Despite Big Debt
Load
Last year as China Evergrande Group's stock and bond prices
seesawed, it offered deep discounts to keep sales growing during
the pandemic and the government effectively said it had borrowed
too much.
Yet the property developer's auditor gave it a clean bill of
health in an annual report issued this spring.
Read More ->
China Evergrande Keeps Dollar Bondholders Guessing on Key
Interest Payment
Global investors who own China Evergrande Group's U.S. dollar
bonds were in the dark Thursday about whether the property giant
would make a key interest payment, a major test of the highly
indebted developer's ability to avoid a default.
Evergrande was on the hook to make $83.5 million in coupon
payments on Sept. 23 on dollar bonds with a face value of $2.03
billion. As of late afternoon in New York on Thursday, bondholders
hadn't received the money, according to people familiar with the
matter.
Read More ->
Barry Diller's IAC in Talks to Buy Magazine Publisher
Meredith
IAC/InterActiveCorp. is in advanced talks to acquire magazine
publisher Meredith Corp., owner of brands including People and
Better Homes & Gardens, according to people familiar with the
situation, in an effort to build more scale in online
publishing.
The deal, which is expected to be valued at more than $2.5
billion, would vastly expand IAC's collection of online
publications, which include Brides, Serious Eats and TripSavvy, the
people said. It would also bulk up IAC's portfolio of websites,
which has shrunk recently after the company moved to spin off
online-dating behemoth Match Group Inc. and video-hosting and
sharing platform Vimeo Inc.
Read More ->
Nike's Revenue Pinched by Supply-Chain Disruptions
The Covid-19 pandemic has caught up with Nike Inc. The sneaker
giant's revenue growth is being limited by supply-chain disruptions
that have slowed the production and delivery of shoes and other
goods around the world.
Nike on Thursday reported revenue of $12.25 billion for the
quarter ended Aug. 31, up 16% from a year earlier and essentially
flat with the June quarter. The results were below expectations of
Wall Street analysts, who had expected revenue to reach $12.47
billion.
Read More ->
Costco Sales Rose 17% in Latest Quarter
Costco Wholesale Corp.'s sales increased in its latest quarter
but inflationary pressures continued to build.
The company posted $62.68 billion in revenue for its quarter
ended Aug. 29, up 17% from a year earlier. Analysts had predicted
the chain would report $61.41 billion in revenue, according to
FactSet.
Read More ->
Alibaba, Under Beijing Pressure, Moves to Sell Stake in
State-Owned Broadcaster
Alibaba Group Holding Ltd. plans to dispose of its minority
ownership in a state-owned broadcaster, the first concrete step the
Chinese internet giant is taking to dismantle its sprawling media
empire following pressure from Beijing.
Mango Excellent Media, a subsidiary of the government-run Hunan
TV, said in a stock exchange filing on Friday that Alibaba plans to
sell its entire 5% stake in the Shenzhen-listed company less than a
year after buying it. It didn't provide a reason for the proposed
sale. Alibaba declined to comment.
Read More ->
Apple Insists EU Push for Universal Charger Would Repress
Innovation, Create Waste
Apple Inc. hit back at European Union moves to introduce a
universal charger for smartphones, tablets and other electronic
devices, saying such legislation would be anti-innovation and would
serve to increase waste.
The European Commission, the bloc's executive arm, said Thursday
that it is proposing USB-C as the standard port for smartphones,
tablets, headphones, portable speakers, cameras, and some videogame
consoles, regardless of the device brand. The move aims to cut
waste related to the production and disposal of chargers.
Read More ->
CDC Chief Backs Pfizer Boosters for Front-Line Workers in Break
With Panel
The director of Centers for Disease Control and Prevention said
workers at high risk of Covid-19 infection should receive a booster
of Pfizer Inc.'s vaccine, in a decision that deviated from the
recommendation of an advisory panel that the CDC typically
follows.
CDC Director Rochelle Walensky signed off on a series of
recommendations from the panel, saying boosters should be offered
to people 65 and over as well as those 50 to 64 years with
underlying medical conditions, according to the Associated Press.
The extra dose would be given at least six months after the last
shot.
Read More ->
Fintech Lender Affirm Leans on Investors to Fund Rapid
Growth
Fintech lender Affirm Holdings Inc. is relying more on financing
from investors instead of lenders to fund its growth as its "buy
now, pay later" installment plans are becoming more popular.
"Buy now, pay later" loans often appeal to customers who don't
qualify for credit cards or prefer fixed-payment plans. Consumers
spent between $15 billion and $20 billion using such loans on
e-commerce purchases in 2020, up from $6 billion to $9 billion in
2019, according to estimates from credit ratings firm DBRS
Morningstar.
Read More ->
Retirement Savers Love the Backdoor Roth IRA Strategy. It Might
Not Last.
Many Americans are using a previously little-known tax method to
boost their savings. Now, the government is trying to stop it.
The tax strategy at issue is the mega-backdoor Roth conversion
and it has allowed some Americans to amass sizable balances in
tax-free Roth retirement accounts. On Sept. 15, the House Ways and
Means Committee approved legislation from House Democrats that
would prohibit use of the mega-backdoor Roth conversion starting
Jan. 1, 2022.
Read More ->
Buying a Share of a Collectible Guitar? In This Market, You May
Get Shredded.
Space-tourism companies, flying-taxi startups and pizza-related
cryptocurrencies are among the unlikely ventures to have recently
reached public markets. Now it is the turn of electric guitars.
This month, American guitar maker Gibson said it would use
Rally, a site specializing in collectibles, to issue shares in
prototype instruments designed in collaboration with famous
players. Ownership of an EDS-1275 doubleneck model approved by
Slash, of the band Guns N' Roses, was chopped into 13,000 parts and
sold for $5 apiece to 562 investors in just two hours.
Read More ->
China Evergrande Keeps Dollar Bondholders Guessing on Key
Interest Payment
Global investors who own China Evergrande Group's U.S. dollar
bonds were in the dark Thursday about whether the property giant
would make a key interest payment, a major test of the highly
indebted developer's ability to avoid a default.
Evergrande was on the hook to make $83.5 million in coupon
payments on Sept. 23 on dollar bonds with a face value of $2.03
billion. As of late afternoon in New York on Thursday, bondholders
hadn't received the money, according to people familiar with the
matter.
Read More ->
Democratic Leaders Scramble to Find Areas of Agreement on $3.5
Trillion Spending Bill
WASHINGTON-Democratic leaders raced Thursday to find enough
agreement around a roughly $3.5 trillion spending package to
assuage concerns between the party's dueling centrist and liberal
factions that threatened to derail a separate vote on an
infrastructure package next week.
Liberal Democrats have said the two bills are linked and have
balked at voting for the roughly $1 trillion infrastructure package
on Monday in the House unless the broader healthcare, education and
climate-change package has passed. The infrastructure bill has
already cleared the Senate with bipartisan support, and moderates
have urged leadership to bring it to the floor in the House.
Read More ->
IMF Calls for Lending Clamps to Cool Australia's Housing Price
Surge
SYDNEY--The International Monetary Fund has added to calls for
regulatory steps to be taken to cool surging house price growth in
Australia, warning of building "incipient risks" in the market.
In an Article IV discussion paper, the IMF said so-called
macroprudential policy should be tightened to address gradually
rising financial stability risks.
Read More ->
Talking Markets: Europe Faces Challenging Winter Amid Energy
Squeeze
Europe is in for a difficult winter: Energy prices are soaring,
and power supply may not stretch far enough, threatening to cause
outages, disrupt the continent's industry and hurt the economic
recovery.
Electricity prices have risen to their highest levels in more
than a decade in recent weeks, according to the International
Energy Agency. This is largely attributable to prices for natural
gas world-wide, which have soared due to demand being higher than
expected, spurred by the global economic rebound, and because of
crimped supply.
Read More ->
German Business Sentiment Falls for Third Month Running in
September
German business sentiment worsened again in September, as
supply-chain bottlenecks clouded the short-term outlook.
The Ifo business-climate index decreased to 98.8 points in
September from 99.6 points in August, data from the Ifo Institute
showed Friday. This marks the third consecutive month of decline
after it peaked at 101.8 in June.
Read More ->
U.K. Consumer Confidence Wanes in September on Inflation
Fears
Confidence among British consumers took a hit in September,
falling to a five-month low, as concerns over high inflation and
the end of government support soured consumers' mood.
GfK's consumer-confidence barometer came in at minus 13 in
September, down five points from August and missing economists
expectations, who had forecast a reading of minus seven when polled
by The Wall Street Journal.
Read More ->
Pelosi Says Government Funding Won't Lapse
WASHINGTON-House Speaker Nancy Pelosi said Congress wouldn't let
government funding expire next week, the first hint that Democratic
leaders might decouple the government's funding from a contentious
increase in the debt limit, on the same day that the Biden
administration began preparing for a possible partial shutdown.
The Biden administration said Thursday that federal agencies are
reviewing contingency plans in the event that funding runs out at
12:01 a.m. on Oct. 1. The White House said it expects Congress to
take action to fund the government after its current funding
expires and is preparing out of an abundance of caution.
Read More ->
America's Cash Might Stay on the Sidelines
If Americans ever feel comfortable again, they have a lot of
money that they can spend. But who knows when that comfort will
come?
The Federal Reserve on Thursday reported that the net worth of
U.S. households was $134 trillion in the second quarter-up from
$128.4 trillion in the first quarter. That figure stood at $110
trillion In the fourth quarter of 2019, before the pandemic took
hold. Including nonprofits, accumulated household net worth in the
second quarter hit a record $141.7 trillion.
Read More ->
Commerce Secretary Gina Raimondo Aims to Strengthen Business
Ties With China
WASHINGTON-Commerce Secretary Gina Raimondo said she would seek
to improve U.S. business ties with China, seeing mutual benefit at
a time of increasing tensions between the two nations over
national-security and human-rights issues.
In an interview, Ms. Raimondo said she plans to lead delegations
of U.S. chief executives overseas, including to China, to hunt for
business and discuss longstanding trade issues, though nothing has
yet been put on the calendar.
Read More ->
Democrats Hunt for Redistricting Wins Despite GOP Tilt
DEMOCRATS CLAW FOR SEATS as they face an uphill battle in
redistricting. Republicans hold the pen in 20 of the 35 states
where legislatures control redistricting and the state has more
than one congressional seat, compared with Democratic control of 11
such states, so Democrats are using legal, legislative and
political maneuvers to try to improve their position as maps start
to take shape.
In Oregon, the Democratic House Speaker withdrew from a deal
with Republicans to have a bipartisan commission draw congressional
districts, saying Republicans didn't engage constructively. The
House will instead move to adopt a map as the state gains a new
seat that will likely result in a 5-1 congressional advantage for
Democrats, who currently have a 4-1 edge. Republicans are calling
the moves shameful, but have little recourse to block the plan,
though they will attempt to at least delay it. In Wisconsin, a
state with a Democratic governor and a Republican legislature,
Democrats have so far successfully advanced a pre-emptive federal
lawsuit against Republican-drawn maps (which haven't been
finalized). Republicans would prefer any court battles be fought in
state courts, which tilt conservative. The state Supreme Court on
Wednesday said it would take up a similar lawsuit, as well.
Read More ->
Trapped in Kabul, Prominent Afghan Women Fear Retribution Under
Taliban Rule
KABUL-Nabila, a 31-year-old Afghan judge, used to grant divorces
to the wives of militants while their husbands languished in
prison. Two days after the Taliban captured Kabul on Aug. 15 and
emptied prisons across the country, she received threatening calls
from several of these men.
She broke her SIM card, packed light and went into hiding.
Read More ->
North Korea Calls Peace-Deal Proposal by South's Moon Jae-in
Premature
SEOUL-North Korea dismissed a proposal by South Korea's
president for a peace declaration, calling the proposition
premature as Pyongyang sees what it calls continuing aggression
from Washington and Seoul.
During a speech Tuesday at the United Nations General Assembly,
South Korean President Moon Jae-in suggested the adoption of a
peace deal that would replace the armistice that halted hostilities
in the 1950-1953 Korean War. He proposed that the U.S., along with
the two Koreas and possibly China, agree to declare the war
over.
Read More ->
U.S. Officials Call for Fines Against Companies That Don't
Report Hacks
Top U.S. cyber officials on Thursday urged Congress to add more
teeth to any legislation forcing firms that operate critical
infrastructure to disclose hacks, calling for a narrow reporting
window after a breach and fines against companies that don't
comply.
Such mandates could help federal agencies and critical economic
sectors to respond to incidents, security experts say. But many
businesses and some lawmakers are wary of the tighter regulation
and potential penalties for which the Biden administration is
advocating.
Read More ->
Write to sarka.halas@wsj.com
TODAY IN CANADA
Earnings:
Nothing major scheduled
Economic Indicators (ET):
Nothing major scheduled
Stocks to Watch:
No items published
Other News:
No items published
Market Talk:
No items published
Expected Major Events for Friday
00:30/JPN: Sep Japan Flash Manufacturing PMI
05:00/JPN: Aug Supermarket sales
05:30/JPN: Aug Tokyo area department store sales
05:30/JPN: Aug Nationwide department store sales
08:00/GER: Sep Ifo Business Climate Index
08:00/ITA: Sep Consumer Confidence Survey
08:00/ITA: Sep Business Confidence Survey
08:59/JPN: Jul Final Labour Survey - Earnings, Employment &
Hours Worked
10:00/UK: Sep CBI Distributive Trades Survey
14:00/US: Aug New Residential Sales
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Friday
ASA Gold & Precious Metals Ltd (ASA) is expected to report
for 2Q.
Carnival Corp (CCL) is expected to report $-1.44 for 3Q.
Great Elm Group Inc (GEG) is expected to report for 4Q.
PFSweb (PFSW) is expected to report $0.01 for 2Q.
Taylor Devices (TAYD) is expected to report for 1Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
Allogene Therapeutics Raised to Outperform From Market Perform
by Raymond James
Amgen Cut to Neutral From Outperform by Daiwa Capital
AvalonBay Raised to Hold From Sell by Deutsche Bank
Delta Air Cut to Hold From Buy by Argus Research
Eargo Cut to Equal-Weight From Overweight by Wells Fargo
Eargo Cut to Market Perform From Outperform by William Blair
Eargo Cut to Underweight From Overweight by JP Morgan
Equity Residential Raised to Hold From Sell by Deutsche Bank
General Dynamics Raised to Neutral From Sell by Goldman
Sachs
L3Harris Technologies Cut to Sell From Neutral by Goldman
Sachs
Lockheed Martin Cut to Neutral From Buy by Goldman Sachs
Mercury Systems Cut to Neutral From Buy by Goldman Sachs
Northrop Grumman Raised to Neutral From Sell by Goldman
Sachs
Plug Power Raised to Overweight From Neutral by Piper
Sandler
RBC Bearings Raised to Buy From Hold by Truist Securities
Roku Raised to Buy From Neutral by Guggenheim
Signify Health Cut to Neutral From Outperform by Baird
Trimble Cut to Underweight From Equal-Weight by Morgan
Stanley
United Rentals Cut to Mixed From Positive by OTR Global
Ventas Raised to Strong Buy From Outperform by Raymond James
Warner Music Group Raised to Overweight From Equal-Weight by
Barclays
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
September 24, 2021 06:12 ET (10:12 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.