MARKET WRAPS
Watch For:
U.S. S&P CoreLogic Case-Schiller Home Prices Index for
August; U.S. New Home Sales for September; U.S. Conference Board --
Consumer Confidence for October; Raytheon Technologies Corp. 3Q
results; General Electric Co. 3Q results; United Parcel Service
Inc. 3Q results; Alphabet Inc. 3Q results; Microsoft Corp. 1Q
results; Visa Inc. 4Q results; Twitter Inc. 3Q results.
Opening Call:
Stock futures gained ahead of a bumper day of earnings from some
of America's largest corporations, including major tech names.
Tech behemoths Microsoft, Twitter and Google parent Alphabet are
set to report earnings after markets close, part of a major week
for an earnings season that has so far beaten investors'
expectations and helped lift indexes out of a September slump.
Investors have been buoyed by strong figures from major banks,
consumer companies and manufacturers. Meanwhile, jitters about the
labor market and inflation have somewhat given way to optimism
about a recovering economy.
"Covid numbers have crested, the economic data has been pretty
good, and the early read on third quarter earnings is positive,"
said David Donabedian, chief investment officer at CIBC Private
Wealth. "The bottom line is this is still a buy the dips
market."
Facebook, which was among the first of the major tech firms to
report third-quarter earnings, said late Monday that changes to
Apple's privacy rules had hit sales growth. The social-networking
company saw its shares rise 1.7% ahead of the opening bell, as the
hit wasn't as large as some analysts had been expecting.
Tech firms are likely to remain attractive to investors, and
their earnings should remain strong, despite the trend of fewer
people working from home, and the risk of increasing regulation,
said Mr. Donabedian.
"They are battleships-they just continue to post very strong
revenue and earnings growth," he said.
Blue chip firms set to post earnings ahead of Tuesday's market
open include United Parcel Service, General Electric, 3M, Raytheon
Technologies and Lockhead Martin. Robinhood Markets and Visa are
set to report after markets close.
Data on new home sales and consumer confidence are due at 10
a.m. ET, offering investors additional insight into the state of
the economy. Home sales are forecast to pick up in September, while
consumer confidence is expected to have weakened in October.
Forex:
The U.S. core personal consumption expenditures price index on
Friday will be more important for the dollar's direction than
third-quarter U.S. economic growth data on Thursday, BK Asset
Management said.
The core PCE index, which is the Federal Reserve's preferred
inflation measure, is seen hitting new highs and could drive
interest rate rise expectations and the dollar higher, Kathy Lien,
managing director of forex strategy at BK Asset Management,
said.
"So even if GDP growth eases like economists expect because of
softer retail sales and trade in the third quarter, taper
expectations will remain intact if inflation is hot."
The euro looks set to continue trading around its current level
or below ahead of the European Central Bank's policy decision on
Thursday, Commerzbank said.
"As it stands there are likely to be just a few courageous EUR
bulls in the run-up to the ECB meeting on Thursday," Commerzbank
currency analyst Thu Lan Nguyen said.
"Even though no monetary policy decisions are expected for
Thursday, the financial markets will nonetheless keep a close eye
on the meeting and on the ECB council's view of the current high
rates of inflation."
Positive market sentiment and the prospect of the Bank of
England tightening monetary policy are lifting sterling,
particularly against the euro, ActivTrades said.
Risk appetite is boosted by positive earnings, which tends to
support sterling, while the market seems "increasingly convinced"
that it's only a matter of time before the BOE raises rates,
ActivTrades analyst Ricardo Evangelista said.
Bonds:
The yield on the benchmark 10-Year U.S. Treasury note inched up
to 1.640% Tuesday from 1.634% on Monday. Bond prices and yields
move in opposite directions.
In the past six weeks, the 10-year U.S. Treasury yield has
increased by close to 40 basis points, while the two-year yield has
hit its highest level since the start of the pandemic, but these
moves haven't affected expectations for real yields, said Morgan
Stanley Wealth Management.
In 2013, the last time the Fed began to normalize policy, real
rates didn't lift off negative lows until balance-sheet growth
bottomed. "With balance sheet growth still strong and real rates
deeply negative, a revaluation may be ahead for long-duration
assets," it said.
ECB President Christine Lagarde is likely to face questions
about future asset purchases at her press conference on Thursday,
following a significant tightening of financial conditions in bond
markets over recent weeks, said Daiwa Capital markets.
Lagarde is likely to deflect questions on such issues as they
are unlikely to be discussed until the December meeting, Daiwa
said.
Should the Governing Council be concerned about the recent jump
in yields, Lagarde may flag the possibility of an accelerated pace
of net purchases if the bond market selloff continues, Daiwa
said.
Commodities:
Oil prices pared some of their gentle early-week gains that came
amid growing concerns over declining inventories at the key
delivery hub at Cushing, Oklahoma, according to ING's Warren
Patterson.
Balancing those supply concerns are reports that Iran and the
European Union will meet to discuss the prospect of reviving the
Iran nuclear deal. That would ultimately lead to the U.S. lifting
sanctions on Iranian oil exports and increasing global supply by
around 1.3 million barrels a day by the end of next year, Patterson
said.
Copper prices weakened as LME stocks rise, easing concerns about
an increasingly tight market. On-warrant stockpiles in LME
warehouses climbed for the fourth day, after hitting their lowest
level since 1998 earlier this month.
The inventory build was helping to ease concerns that strong
demand for the metal and supply challenges were causing stocks to
dwindle.
Aluminum fell due to declining thermal coal prices. The
light-weight metal hit its highest level since 2008 earlier this
month as input energy costs soared. China has said it is looking to
take measures to tamp down high coal prices, which pushed the
fuel's price down, bringing aluminum with it.
TODAY'S TOP HEADLINES
Pfizer-BioNTech Covid-19 Vaccine for Young Children to Be
Reviewed by FDA Advisers
Experts advising the Food and Drug Administration are scheduled
to meet Tuesday to consider endorsing the Covid-19 vaccine from
Pfizer Inc. and BioNTech SE for use in young children.
Their positive recommendation would likely soon lead to an
expansion of the U.S. vaccination campaign to millions of young
children.
Novartis Weighs Sale or Spinoff of Generic Drug Unit Sandoz
Novartis AG said it is considering the sale or spinoff of its
generic drugs business Sandoz, a move that would focus the
once-sprawling healthcare conglomerate solely on innovative
prescription drugs.
Sandoz, like many generic drugmakers, has struggled with falling
prices in the U.S. in recent years. Generic drugs are lower-cost
versions of prescription medicines whose patents have expired.
While their prices are usually far below those of the branded drugs
that they imitate, increased competition has driven those prices
even lower in recent years.
UBS Third-Quarter Earnings Driven Higher by Fees From Wealthy
Clients
UBS Group AG said fees from wealthy clients soared in the third
quarter and its investment bank also reaped more revenue.
The Swiss bank said its third-quarter net profit rose 9% to
$2.28 billion from $2.09 billion a year earlier. Analysts expected
a net profit of about $1.6 billion. UBS said client activity was
unusually high in the quarter and it expects it to slow down in the
final three months of the year.
3-D Printed Houses Are Sprouting Near Austin as Demand for Homes
Grows
A major home builder is teaming with a Texas startup to create a
community of 100 3-D printed homes near Austin, gearing up for what
would be by far the biggest development of this type of housing in
the U.S.
Lennar Corp. and construction-technology firm Icon are poised to
start building next year at a site in the Austin metro area, the
companies said. While Icon and others have built 3-D printed
housing before, this effort will test the technology's ability to
churn out homes and generate buyer demand on a much larger
scale.
Chinese Developer Modern Land Fails to Repay $250 Million U.S.
Dollar Bond
Modern Land (China) Co., a 21-year-old developer that focuses on
green projects, failed to repay a $250 million dollar bond that
matured Monday, adding to a string of missed payments by Chinese
real-estate companies.
In a statement Tuesday, the Beijing-based company attributed the
missed payment to an unexpected cash crunch caused by "factors
including the macroeconomic environment, the real-estate industry
environment and the Covid-19 pandemic."
Banks' Debt Sales Are Driving the Corporate Bond Market
U.S. banks are overrun with cash. So they are loading up on
debt.
The six largest U.S. lenders have issued some $314 billion of
bonds so far this year, already the most for any year since 2008,
according to Dealogic.
Cryptocurrency Company Snared in SEC Dragnet Sues Regulator
A cryptocurrency developer who was handed two subpoenas as he
walked inside a hotel last month won't comply with the demands-and
is instead suing the federal regulator that issued them.
Do Kwon, a South Korean citizen and resident, says the move by
the Securities and Exchange Commission violated the agency's rules
and was designed either to embarrass him or to stir up media
interest in its crackdown on the cryptocurrency market.
Democrats Negotiate Tax, Healthcare Provisions as Biden Seeks
Deal This Week
WASHINGTON-Democrats are sprinting to wrap up negotiations over
their social-spending and climate bill, hoping by this weekend to
resolve disagreements on issues including tax policy and
healthcare.
Senate Majority Leader Chuck Schumer (D., N.Y.) said Monday
there were three to four open issues. Lawmakers and aides said
major policy areas, including the tax increases to pay for the
package, Medicare and Medicaid provisions and a paid leave program,
remain unresolved. The bill, initially drafted at $3.5 trillion, is
now expected to cost between $1.5 trillion and $2 trillion.
Inflation Pinches Restaurants, but Customers Seem Willing to
Split the Check
Inflation is making casual-dining shareholders sick to their
stomachs. Relief is likely on the way.
Brinker International, owner of Chili's, said last Tuesday that
it earned 34 cents a share on an adjusted basis in its fiscal first
quarter, which ended in September-far below Wall Street analysts'
estimate of 68 cents a share.
Fed Prepares to Taper Stimulus Amid More Doubts on Inflation
Federal Reserve officials are set to wind down their $120
billion-a-month bond-purchase program in November, but questions
over how soon inflation pressures will fade are creating more
uneasiness inside the central bank.
Fed Chairman Jerome Powell and senior officials have played down
worries this year that a surge in prices during the uneven pandemic
recovery would lead to permanently higher inflation. The most
notable price increases have been tied to items most affected by
the shutdown and reopening of the economy, but there are signs that
inflation is coming from a broader set of products and
services.
Buyout Firms Set Record for Loading Companies With Debt to Pay
Themselves
Private-equity firms are taking advantage of a frothy credit
market to pay themselves record sums with borrowed money, a
controversial practice that critics say benefits buyout-firm
executives but can harm portfolio companies.
Companies backed by U.S. private-equity firms have taken on
$58.5 billion in dividend-recapitalization debt this year through
Oct. 20, S&P Global Market Intelligence's LCD unit said in
response to a Wall Street Journal data request. That is more than
levels of such debt for 2019 and 2020 combined. The previous
full-year record of $51.1 billion was set in 2013.
Energy-Stock Surge Leaves Climate-Focused Investors Behind
A surge in energy stocks is challenging climate-conscious money
managers who beat the market for years when the sector struggled
but are now missing out on Wall Street's hottest trade.
The S&P 500 energy sector has rebounded 54% this year,
outpacing the broad index's 21% climb and leading the second-best
performing group by about 16 percentage points. That would mark the
third-largest such gap between the top two sectors since 2000,
according to Dow Jones Market Data.
U.S. Treasury Creates New Post Focused on Racial Equity
WASHINGTON-The Treasury Department said Monday it had created a
new position to support the Biden administration's efforts to
promote economic opportunities for communities of color as the
nation recovers from the coronavirus pandemic.
Janis Bowdler, who most recently worked as president of the
JPMorgan Chase & Co. Foundation, will become the department's
first counselor for racial equity, the Treasury said in a
statement. Ms. Bowdler will be tasked with coordinating "efforts to
advance racial equity including engaging with diverse communities
throughout the country and to identify and mitigate barriers to
accessing benefits and opportunities with the department," the
Treasury said.
Afghan Refugees Can Be Sponsored by Private Citizens Under New
Program
WASHINGTON-Private citizens will be allowed to sponsor Afghan
families under a new program launched Monday by the Biden
administration, as overwhelmed agencies have left thousands stuck
on military bases in harsh conditions waiting to be resettled.
The Sponsor Circle Program will be run along with a nonprofit
that was set up last month to help refugees settle in the U.S.,
filling the role of traditional resettlement agencies. The program
will allow private citizens to group together to sponsor families
and help them access housing and other necessities like food,
clothing and education.
Russian Military Drills Near Afghan Border Deliver Warning to
Extremists
HARB-MAIDON RANGE, Tajikistan-Russia held a series of joint
military exercises with its Central Asian neighbors near the border
with Afghanistan last week, a reflection of the concern in Moscow
that ethnic tension or terrorism could spill over from the country
as extremists such as Islamic State challenge the Taliban's rule
there.
The Russian-led Collective Security Treaty Organization, or
CSTO, which also includes Belarus, Armenia, Kazakhstan, and
Kyrgyzstan, conducted a weeklong series of exercises that ended
Saturday on the Harb-Maidon training range, less than 20 miles
north of Tajikistan's border with Afghanistan.
Write to sarka.halas@wsj.com
TODAY IN CANADA
Earnings:
Canfor Corp. (CFP.T) 3Q
Canfor Pulp Products Inc. (CFX.T) 3Q
Capstone Mining Corp. (CS.T) 3Q
First Natl Fncl Corp (FN.T) 3Q
First Quantum Minerals Ltd. (FM.T) 3Q
FirstSvc Corp (FSV.T) 3Q
Neighbourly Pharmacy (NBLY.T) 2Q
Trican Well Svc Ltd. (TCW.T) 3Q
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 Tuesday
10:00/UK: Oct CBI Distributive Trades Survey
11:45/US: Weekly Chain Store Sales Index
12:55/US: 10/23 Johnson Redbook Retail Sales Index
13:00/US: Aug U.S. Monthly House Price Index
13:00/US: Aug S&P CoreLogic Case-Shiller Indices
14:00/US: Sep New Residential Sales
14:00/US: Oct Richmond Fed Business Activity Survey
14:00/US: Oct Consumer Confidence Index
17:00/US: Sep Money Stock Measures
20:30/US: 10/22 API Weekly Statistical Bulletin
23:01/UK: Oct REC JobsOutlook survey
23:01/UK: Oct Shop Price Index
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Tuesday
Acme United (ACU) is expected to report $0.57 for 3Q.
Arch Resources Inc (ARCH) is expected to report for 3Q.
Ares Capital Corp (ARCC) is expected to report $0.44 for 3Q.
Armstrong World Industries Inc (AWI) is expected to report $1.24
for 3Q.
Asbury Automotive (ABG) is expected to report $6.33 for 3Q.
CIT Group (CIT) is expected to report $1.14 for 3Q.
Camden National (CAC) is expected to report $1.03 for 3Q.
Centene Corp (CNC) is expected to report $0.95 for 3Q.
CommVault (CVLT) is expected to report $0.23 for 2Q.
Ecolab Inc (ECL) is expected to report $1.29 for 3Q.
Eli Lilly & Co (LLY) is expected to report $1.90 for 3Q.
Entegris Inc (ENTG) is expected to report $0.80 for 3Q.
FTI Consulting (FCN) is expected to report $1.49 for 4Q.
First Foundation Inc (FFWM) is expected to report $0.64 for
3Q.
Franklin Electric (FELE) is expected to report $0.88 for 3Q.
Franklin Resources (BEN) is expected to report $0.80 for 4Q.
Graphic Packaging Holding Co (GPK) is expected to report $0.31
for 3Q.
Greenbrier Cos (GBX) is expected to report $0.78 for 4Q.
Hasbro Inc (HAS) is expected to report $1.62 for 3Q.
Independent Bank MI (IBCP) is expected to report $0.63 for
3Q.
Invesco Ltd (IVZ,IVZ-LN) is expected to report $0.71 for 3Q.
JetBlue Airways (JBLU) is expected to report $-0.12 for 3Q.
Lakeland Bancorp (LBAI) is expected to report $0.43 for 3Q.
Lockheed Martin Corp (LMT) is expected to report $1.98 for
3Q.
MSCI Inc (MSCI) is expected to report $2.33 for 3Q.
Ocwen Financial Corp (OCN) is expected to report for 3Q.
PACCAR Inc (PCAR) is expected to report $1.29 for 3Q.
Peoples Bancorp (Ohio) (PEBO) is expected to report $0.80 for
3Q.
Polaris Inc (PII) is expected to report $1.90 for 3Q.
PulteGroup Inc (PHM) is expected to report $1.79 for 3Q.
Raytheon Technologies Corp (RTX) is expected to report for
3Q.
S&P Global Inc (SPGI) is expected to report $3.15 for
3Q.
Sherwin-Williams Co (SHW) is expected to report $1.95 for
3Q.
Shutterstock (SSTK) is expected to report $0.40 for 3Q.
Simmons First National Corp - Class A (SFNC) is expected to
report $0.57 for 3Q.
Southside Bancshares (SBSI) is expected to report $0.65 for
3Q.
TransUnion (TRU) is expected to report $0.62 for 3Q.
Triton International Limited (TRTN) is expected to report $2.19
for 3Q.
Turning Point Brands Inc (TPB) is expected to report $0.57 for
3Q.
World Acceptance (WRLD) is expected to report $2.58 for 2Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
Armada Hoffler Properties Cut to Underperform From Neutral by B
of A Securities
Carnival Cut to Neutral From Buy by Citigroup
Casper Sleep Cut to Neutral From Outperform by Wedbush
Essex Property Raised to Outperform From In-Line by Evercore ISI
Group
Five9 Raised to Overweight From Sector Weight by Keybanc
Independent Bank MA Cut to Neutral From Overweight by Piper
Sandler
IQVIA Holdings Is Maintained at Overweight by Barclays
IQVIA Holdings Price Target Raised to $287.00/Share From $285.00
by Barclays
Isabella Bank Cut to Neutral From Overweight by Piper
Sandler
Knight-Swift Transport Raised to Buy From Neutral by UBS
Regions Financial Raised to Outperform From Neutral by
Wedbush
Revance Therapeutics Cut to Equal-Weight From Overweight by
Wells Fargo
Simply Good Foods Raised to Buy From Hold by Stifel
Thor Industries Cut to Sector Weight From Overweight by
Keybanc
Vir Biotechnology Price Target Raised to $37.00/Share From
$29.00 by JP Morgan
Vir Biotechnology Raised to Neutral From Underweight by JP
Morgan
WSFS Financial Cut to Market Perform From Outperform by Keefe,
Bruyette & Woods
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
October 26, 2021 06:15 ET (10:15 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.