MARKET WRAPS
Watch For:
Weekly Jobless Claims; Toronto-Dominion Bank 4Q earnings
Opening Call:
Stock futures pointed to a stronger start Thursday, in what's
becoming an increasingly volatile market due to uncertainty over
the spread of coronavirus and the direction of interest rates.
Commentary from scientists and pharmaceutical executives has
helped drive market sentiment, as investors await more concrete
data on vaccine efficacy against the Omicron variant. On Thursday,
investors were focused on comments from the World Health
Organization's chief scientist suggesting vaccines were likely to
still offer some protection.
"It seems that investors' main concern remains the uncertainty
surrounding omicron and the implications any new restrictions could
have to the global economy," said Charalambos Pissouros, head of
research at JFD Group.
Market sentiment soured Wednesday after the confirmation of the
first U.S. omicron variant case, which sent the S&P 500 below
its 50-day moving average for the first time since Oct. 13.
It also came as Jerome Powell, for a second day, brought up the
prospect of a quicker taper, which in turn sets the stage for more,
and faster, interest-rate hikes.
"It is not about covid; it is about the Fed and what they plan
to do. This selling will grow much worse; this will become about
how much pain the Fed can endure," said Michael Kramer, chief
executive of Mott Capital Management.
Four Fed officials are due to speak Thursday, as the latest
jobless claims report gets released. The OPEC+ grouping also will
be debating production policy in response to the virus.
Earnings season is ongoing, with food-retailer Kroger and Dollar
General scheduled to report Thursday before the opening bell.
Cosmetics company Ulta Beauty and gunmaker Smith & Wesson
Brands are expected to post earnings after markets close.
Overseas, the pan-continental Stoxx Europe 600 fell 1%.
"It does seem like European countries are a bit more reactive to
Covid news. We expect European stocks to be more sensitive to
what's going on with Omicron, or Covid broadly," said Salman Baig,
a multiasset investment manager at Unigestion. "Right now we have a
significant preference for U.S. equities over European."
Stocks to Watch:
Hopes that Apple will see a rebound in demand for its products
after the holiday season were dimmed following a report that the
company has warned suppliers of softness stretching into 2022.
According to a Bloomberg article published early Thursday, the
company has informed vendors that a production pick up in the new
year may not happen.
However, Equita Sim said Apple "is still on track for a record
holiday season, with consensus projecting a sales increase of 6% to
$117.9 billion in the final three months of the calendar year,
although it won't be the blockbuster quarter that Apple had
originally envisioned."
Equita Sim also said Apple should be able to report an increase
in sales in its fiscal first quarter despite news that iPhone
demand is slowing.
---
AT&T isn't making changes to how it operates due to the
Omicron variant, said CFO Pascal Desroches. "This is the latest of
what will be a continuation of many different variants," Desroches
said earlier this week, adding that he considers new lockdowns
unlikely. AT&T's international roaming business could be
negatively impacted by the variant, while its streaming services
could benefit, he said. AT&T has been pursuing a hybrid
approach in recent quarters, with a proportion of its employees
continuing to work from home.
---
Blackstone, which has sought to reduce carbon emissions at
portfolio companies and said in November that Jean Rogers would
join as ESG head in January, announced a deal in line with its
environmental goals. The firm's Tactical Opportunities unit said it
bought Sustana Group, a maker of recycled fiber, paper and
packaging products, from H.I.G. Capital. Sustana's projects have
included working with Starbucks to recycle coffee cups.
---
Costco comparable sales, those from stores or digital channels
operating for at least 12 months, rose 9.2% in the four weeks ended
Nov. 28 compared to last year, excluding the impact of gas sales
and currency fluctuation. Ecommerce sales rose 11.7% during that
time compared to the same period last year.
The warehouse retailer has reported a string of strong sales
this year on top of high sales growth last year, when pandemic
buying behavior sent shoppers to Costco for bulk goods, electronics
and furniture.
---
Fannie Mae named Chryssa Halley as CFO. Halley, whose
appointment took effect Nov. 29, most recently served as controller
of the government-sponsored firm, which guarantees mortgage loans.
She joined Fannie Mae in 2006. In her new role, Halley succeeds
Celeste Brown, who resigned in May to become finance chief at
Evercore.
---
It is too early to tell whether the Omicron variant will impact
Hewlett Packard Enterprise's guidance, CFO Tarek Robbiati said. "We
will have to figure this one out and see if it impacts us." While
he doesn't expect new lockdowns, the company's existing
regulations, which include a vaccine requirement for U.S.
employees, will remain in place. "The world will have to learn to
live with the virus," Robbiati said.
---
Cancer victims who blame Johnson & Johnson's talc-based baby
powder for their disease asked for the dismissal of chapter 11
proceedings the company filed, in an effort to drive a settlement.
A committee of injury claimants said J&J's decision to place
talc-related liabilities into bankruptcy was meant only to shield
assets and avoid jury trials, which isn't what chapter 11 is
for.
J&J has said the bankruptcy by its LTL Management subsidiary
was designed to facilitate a fair settlement and avoid wasteful
spending on nearly 40,000 talc-related injury lawsuits filed around
the country. Talc claimants disagree, saying J&J is exploiting
legal protections meant for "honest but unfortunate"
businesses.
"The world is watching this case," they said in Wednesday's
filing in the U.S. Bankruptcy Court in Trenton, N.J. J&J
maintains its talc products are safe and don't cause cancer. A
hearing on the dismissal request is set for mid-February.
---
Walmart is bringing back a $150 Covid-19 vaccine incentive
payment to encourage its 1.6 million U.S. workers to get the shot,
citing rising concern about variants. It's also extending its
paid-leave policy through March 31.
The policy provides up to two weeks of paid time off to workers
who test positive for Covid-19 if a facility is part of a mandated
quarantine or if a worker is required to quarantine. Walmart said
more than 90% of corporate staff are fully vaccinated.
---
Shares of WeWork dropped over 5% in off-hours trading. The
office-sharing company said in a securities filing that it would
restate several quarters of its results, including its latest one,
and that management had concluded there was a material weakness in
its internal controls.
Forex:
The dollar inched higher in Europe as concerns about omicron
continued to dominate markets, leaving limited effect for now from
the prospect of faster monetary tightening by the Federal
Reserve.
However, the dollar should strengthen by the beginning of next
year as monetary policy takes center stage, said MUFG. "We expect
the Fed to continue to tighten policy. It leaves room for rates and
the dollar to rise further at the start of next year," said
currency analyst Lee Hardman.
Comments this week from Jerome Powell "provided strong guidance"
that the pace of asset-purchase tapering would be speeded up,
potentially allowing interest rates to rise sooner, Hardman
added.
The "hawkish" tilt from the Fed earlier this week has moved its
statements in line with market expectations and it now looks likely
the taper will be completed by March, said Charles Diebel, head of
fixed income at Mediolanum International Funds.
"This will allow rates to start moving higher from June onwards
with market pricing now for two to three hikes in 2022, Diebel
said. "Obviously set against recent virus concerns, volatility will
remain elevated but unless there is a major growth side effect, we
would expect the FOMC to lift off next year and potentially at a
faster pace than currently discounted by the market."
The Turkish lira depreciated 1.1% against the dollar, after
President Recep Tayyip Erdogan named a loyalist as the new finance
minister. The lira has lost around 45% of its value this year on
concerns about Turkey's economic policy.
Bitcoin extended losses into a third consecutive day. It traded
at around $56,650, down 0.7% from its level at 5 p.m. Wednesday,
and around 18% lower than its last record high.
Bonds:
The yield on the benchmark 10-year Treasury note edged up in
Europe. The yield curve has flattened this week, with shorter-dated
bond yields rising and longer-dated ones ticking down.
Markets are still reacting to Jerome Powell's comments earlier
in the week, said Georgina Taylor, a multiasset fund manager at
Invesco. She said the central bank was prepared to accelerate the
pullback of stimulus, as the risk of higher inflation has
increased.
How do we balance this potential growth impact from Omicron,
with more signals of policy tightening from the Fed, Ms. Taylor
asked. "Markets are all over the place."
The problem for the bond market posed by the omicron variant "is
to know not only how big this threat is, but whether it is
deflationary or inflationary," said Steve Barrow, head of G-10
strategy at Standard Bank.
Policy makers in the U.S. and the U.K. "seem to be skewing the
risks towards higher inflation and we think this is correct," he
said. "So, while there's no doubt that bonds will rally and yields
fall if risk aversion takes an even firmer grip, bond bulls have to
remember that the cost of omicron could be higher inflation--and
higher yields--over the longer term."
Commodities:
Oil held gains of more than 1% in Europe as investors awaited
signals from OPEC on what policy it will take into its ministerial
summit with non-cartel allies.
Previous OPEC+ policy had been to raise production by 400,000
barrels a day in January. Now, with Omicron and recent U.S.
Strategic Petroleum Reserve releases, analysts expect no action
this month. "The combination of both these forces will be enough to
push OPEC+ to pause its monthly output hikes for one month," said
MUFG's Ehsan Khoman.
Gold prices weakened around 0.7%, with Jerome Powell's comments
on tapering prompting investors to exit gold exchange traded
funds.
Gold ETFs tracked by FactSet registered net outflows just shy of
$170 million on Wednesday. The outflows came in the wake of
Powell's comments that the tapering of stimulus measures could
happen faster, opening the door to earlier rate hikes.
TODAY'S TOP HEADLINES
WeWork to Restate Results Due to Classification Error With Its
SPAC Acquirer
WeWork Inc. said in a securities filing that it would restate
several quarters of its results, including its latest one, and that
management has concluded there was a material weakness in its
internal control.
The office-sharing company, which went public in October through
a combination with BowX Acquisition Corp., a special-purpose
acquisition company, said Wednesday that the reinstatement relates
to accounting classification of common shares issued as part of
BowX's initial public offering.
FAA Chief Steve Dickson Takes On Fight Over 5G and Aviation
Safety
In the battle over new 5G wireless service and aviation safety,
a decision that could disrupt U.S. air travel will come down to a
regulator known for methodical reviews and a cautious streak.
Over more than two years as the nation's top aviation regulator,
Steve Dickson's approach to safety at the Federal Aviation
Administration has created obstacles for companies including Boeing
Co., as well as Pentagon officials.
Macau Casinos Shut High-Roller Rooms Tied to Arrested
Operator
HONG KONG-Macau's casinos have shut down the VIP rooms of the
city's largest junket operator, and its leader, Alvin Chau, has
resigned following his arrest on illegal gambling and
money-laundering allegations.
Casino operators informed Macau's Gaming Inspection and
Coordination Bureau that they have ended their relationship with
the junket operator known as Suncity, and suspended its rooms for
high rollers starting on Dec. 1, the regulator said in a statement
late Wednesday.
Disney Elects Susan Arnold as Board Chairman, Replacing Robert
Iger
Walt Disney Co.'s board of directors has elected Susan Arnold
its new chairman, replacing Robert Iger, the longtime chief
executive who is set to depart from the company later this
month.
Ms. Arnold, whose career in business has included positions at
the Carlyle Group Inc. and Procter & Gamble Co., has been a
Disney board member since 2007 and is to become chairman on Dec.
31. She most recently served as its lead independent director.
GlaxoSmithKline Says Sotrovimab Antibody Retains Activity
Against Omicron
GlaxoSmithKline PLC said Thursday that preclinical data shows
its Sotrovimab antibody retains its effectiveness against key
mutations found in the Omicron coronavirus variant.
The British pharmaceutical major said that the data was created
through pseudo-virus testing of specific individual mutations found
in the variant, and to date Sotrovimab has demonstrated persistent
activity against all tested variants of concern and interest
defined by the World Health Organization.
Novartis Says Top Drugs Should Fuel Sales Growth Through
2026
Novartis AG said Thursday ahead of its research-and-development
day starting later today that it expects sales to keep growing in
the mid-term mainly thanks to its main in-market growth drivers,
while several new assets could be approved by 2026.
The Swiss pharma giant said that sales should continue to rise
at a compound annual growth rate of at least 4% through 2026,
driven by multi-billion dollar sales from its medicines Cosentyx,
Entresto, Kesimpta, Zolgensma, Kisqali and Leqvio.
Low Initial Jobless Claims Reflect Tight Labor Market
The number of people filing new claims for unemployment benefits
is expected to have remained near pandemic lows last week as
employers continued to hold on to their workers in a tight labor
market.
Initial jobless claims, a proxy for layoffs, are expected to
total a seasonally adjusted 240,000 for the week that ended on Nov.
26, according to economists surveyed by The Wall Street Journal,
following the prior week's report showing the lowest number of new
claims in 52 years.
Bond Investors Bet on Low Peak Interest Rates
U.S. government-bond yields have climbed a lot this year. Some
analysts are concerned that they haven't risen even further.
The reason is that the world has moved closer with each passing
month to the day when investors think that the Federal Reserve will
raise its benchmark federal-funds rate above its current level near
zero.
Derby's Take: Fed Taper Not Taking Wind Out of Treasury Market's
Sails
The performance of the Treasury bond market over recent weeks is
again suggesting that the idea of a clear link between the central
bank's asset buying and the movement of yields remains tenuous.
In the time the Fed has employed bond purchases to bolster the
economy, an unorthodox strategy during the financial crisis and its
aftermath now elevated to a normal part of the monetary-policy
toolkit, economists have struggled to measure what the central bank
gets for its buying.
Turkey's Erdogan Names Loyalist as Finance Minister Amid Lira
Rout
ISTANBUL-Turkey's President Recep Tayyip Erdogan named a
loyalist as the country's new finance minister Thursday, after the
incumbent resigned over clashes with the longtime leader's
unconventional economic policies that have intensified a currency
crisis shaking the country.
Nureddin Nebati, a former deputy finance minister, replaces
Lütfi Elvan at the top of the finance ministry.
Biden to Toughen Testing for International Travelers to Slow
Omicron
WASHINGTON-President Biden plans to tighten up Covid-19 testing
timelines for travelers entering the U.S. and extend a mask mandate
on airplanes and other public transportation as part of a broad
administration effort to combat the Omicron variant.
International travelers coming to the U.S. will have to test
within a day of departure, regardless of vaccination status, rather
than the 72 hours currently required for vaccinated travelers,
under new protocols early next week, senior administration
officials said. The new testing rules will apply both to U.S.
citizens and foreign nationals entering the country.
U.S. and South Korea to Update Wartime Plans for North Korea
SEOUL-The U.S. and South Korea said they would update their
joint wartime contingency plans for North Korea, as the Kim Jong Un
regime has kept pursuing military advances amid a stall in nuclear
talks.
During a visit to Seoul, Defense Secretary Lloyd Austin,
alongside his South Korean counterpart, approved an update to the
strategic guidance used for wartime operation plans, a document
that hadn't been updated since 2010. The precise nature of the
review, or what might change, wasn't immediately disclosed.
California Prepares for More Water Restrictions as Drought
Worsens
Californians may face new restrictions, including fines for
improperly washing their cars, as the state prepares to virtually
eliminate the water it supplies to local communities as it grapples
with an unrelenting drought.
The state's Department of Water Resources said Wednesday that
for the first time it is preparing to allocate 0% of the water it
is contracted to give next year to local districts, which handle
what goes into the taps of homes, businesses and farms. That means
that unless drought conditions ease, no supplies will be shipped
except for critical health and safety needs, such as drinking water
and sanitation.
Illinois Abortion Clinics Are Preparing for a Potential Post-Roe
World
As the Supreme Court weighs a case that could chip away at
federal abortion protections under Roe v. Wade, providers in
Illinois are preparing for a potential surge of patients.
The case before the high court, Dobbs v. Jackson Women's Health
Organization, centers on abortion restrictions enacted hundreds of
miles away in Mississippi. But in its brief, Mississippi took
direct aim at the 1973 Roe decision, arguing the ruling tramples
states' rights. The justices heard oral arguments Wednesday, and
several conservative justices signaled they might be receptive to
the state's arguments. A decision is expected no later than next
summer.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
Canadian Imperial Bank 4Q
Major Drilling 2Q
Toronto-Dominion Bank 4Q
Economic Indicators:
None scheduled
Stocks to Watch:
PHX Energy Services: Board of Directors Approves a C$10M
Increase to 2022 Cap Expenditure Program; Anticipates Spending
C$40M in Cap Expenditures During 2022-Yr
Expected Major Events for Thursday
05:00/JPN: Nov Consumer Confidence Survey
09:00/ITA: Oct Unemployment
11:00/FRA: Oct OECD CPI
12:30/US: Nov Challenger Job-Cut Report
13:00/RUS: Weekly International Reserves
13:30/US: 11/27 Unemployment Insurance Weekly Claims Report -
Initial Claims
13:30/US: U.S. Weekly Export Sales
14:45/US: Consumer Comfort Index
15:00/US: Oct Metropolitan Area Employment &
Unemployment
15:30/US: 11/26 EIA Weekly Natural Gas Storage Report
17:00/US: Nov Monthly U.S. Retail Chain Store Sales Index
21:30/US: Foreign Central Bank Holdings
21:30/US: Federal Discount Window Borrowings
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Thursday
Asana Inc (ASAN) is expected to report for 3Q.
Bit Digital Inc (BTBT) is expected to report for 3Q.
Buckle Inc (BKE) is expected to report.
Canadian Imperial Bank of Commerce (CM,CM.T) is expected to
report $3.45 for 4Q.
CleanSpark Inc (CLSK) is expected to report for 4Q.
Cooper Companies Inc (COO) is expected to report $2.80 for
4Q.
Cronos Group Inc (CRON,CRON.T) is expected to report $-0.10 for
3Q.
DocuSign Inc (DOCU) is expected to report $-0.08 for 3Q.
Dollar General (DG) is expected to report $2.03 for 3Q.
Domo Inc (DOMO) is expected to report $-0.74 for 3Q.
Duluth Holdings Inc (DLTH) is expected to report $-0.03 for
3Q.
Eargo Inc (EAR) is expected to report for 3Q.
Express Inc (EXPR) is expected to report for 3Q.
FP Newspapers (FP.V) is expected to report for 3Q.
GMS Inc (GMS) is expected to report $1.35 for 2Q.
Guidewire Software Inc (GWRE) is expected to report $-0.59 for
1Q.
Helix BioPharma (HBP.T,HBPCF) is expected to report $-0.02 for
4Q.
Jewett-Cameron (JCT-T,JCTCF) is expected to report for 4Q.
Kirkland's Inc (KIRK) is expected to report $0.57 for 3Q.
Kroger Co (KR) is expected to report $0.72 for 3Q.
Lands' End Inc (LE) is expected to report for 3Q.
Major Drilling Group International Inc (MDI.T,MJDLF) is expected
to report $0.15 for 2Q.
Methode Electronics (MEI) is expected to report $0.69 for
2Q.
Newmont Corp (NEM) is expected to report.
Ollie's Bargain Outlet Holdings Inc (OLLI) is expected to report
$0.47 for 3Q.
Ooma Inc (OOMA) is expected to report $-0.06 for 3Q.
SandRidge Mississippian Trust I (SDTTU) is expected to report
for 3Q.
SecureWorks Corp (SCWX) is expected to report $-0.19 for 3Q.
Smartsheet Inc (SMAR) is expected to report $-0.34 for 3Q.
Smith & Wesson Brands Inc (SWBI) is expected to report for
2Q.
TOR Minerals International Inc (TORM) is expected to report for
3Q.
Tilly's (TLYS) is expected to report $0.33 for 3Q.
Toronto-Dominion Bank (TD,TD.T) is expected to report $1.92 for
4Q.
Ulta Beauty Inc (ULTA) is expected to report $2.55 for 3Q.
Verint (VRNT) is expected to report $0.10 for 3Q.
Veru Inc (VERU) is expected to report $-0.08 for 4Q.
Village Super Market (VLGEA) is expected to report for 1Q.
Webco Industries Inc (WEBC) is expected to report for 1Q.
Yext Inc (YEXT) is expected to report $-0.23 for 3Q.
Zumiez (ZUMZ) is expected to report $1.00 for 3Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
American Water Works Cut to Underweight From Equal-Weight by
Wells Fargo
Ardelyx Raised to Buy From Neutral by Ladenburg Thalmann
BeyondSpring Cut to Neutral From Buy by HC Wainwright &
Co.
Brixmor Property Group Raised to Market Perform From
Underperform by BMO Capital
Capital One Raised to Neutral From Underperform by Baird
DoorDash Raised to Buy From Hold by Gordon Haskett
DR Horton Cut to Neutral From Buy by Goldman Sachs
DTE Energy Raised to Overweight From Equal-Weight by Wells
Fargo
Federal Realty Raised to Outperform From Market Perform by BMO
Capital
Immunogen Raised to Buy From Hold by Jefferies
Krispy Kreme Cut to Sell From Neutral by Goldman Sachs
Lennar Raised to Buy From Neutral by Goldman Sachs
Regency Centers Raised to Outperform From Market Perform by BMO
Capital
United Fire Group Raised to Overweight From Neutral by Piper
Sandler
Wolfspeed Cut to Sell From Neutral by Arete Research
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
December 02, 2021 05:56 ET (10:56 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.