MARKET WRAPS

Watch For:

Weekly Jobless Claims; Existing Home Sales for September; results from AT&T, Intel; OMFIF Live Broadcast with Federal Reserve Board Governor Christopher Waller

Opening Call:

Stock indexes were poised for muted opening losses as investors awaited another batch of earnings reports and data on the labor market.

Stocks have risen in recent days, after solid earnings helping quell concerns that sent markets lower at the start of fall. Among those worries: A slowdown in China's economy, supply-chain blockages that have hampered sectors such as manufacturing and inflation pressures that could prompt central banks to withdraw stimulus.

Of the 80 companies on the S&P 500 to have reported through Wednesday, 81% had topped analysts' earnings forecasts, according to FactSet, better than three-quarters that did so each quarter in 2019.

"We've gone through a period of hesitation that's brought a bit of volatility but I think stocks will keep trending higher," said Paul Jackson, head of asset allocation research at Invesco. He expects households to keep spending savings accumulated during the pandemic.

On the economic front, data due at 8:30 a.m. ET are expected to show jobless claims remained near pandemic lows for the week ended Oct. 16. Figures from earlier in the month show companies have been holding on tightly to existing employees while hiring is difficult.

Existing-home sales are expected to have rebounded in September after an August slowdown. The data are scheduled for 10 a.m.

Overseas markets were broadly lower. Shares of China Evergrande Group slumped 13% in Hong Kong after the embattled developer canceled plans to sell a majority stake in its property-management unit, a setback in attempts to ease its ongoing cash crisis.

Stocks to Watch:

The supply chain challenges brought on by the pandemic have forced CSX to leave some business on the table.

"We're clearly constrained," the railroad's CEO Jim Foote said on an earnings call. "There was more business out there this quarter...that we could not handle." He said the primary reason was the labor shortage and difficulty hiring workers. That's easing a bit and CSX thinks it will be in better shape to capitalize on strong demand for transportation services.

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HP is building its bet on peripherals as a growth engine around booming business in gaming, video conferencing and retail point of sale.

The peripherals business, from headsets to USB microphones and console accessories, offers high profit margins and refresh rates, company officials said during a conference call with analysts, pointing to what they see as a big business opportunity with an estimated 8.9% CAGR.

Gaming, now a more than $2 billion business for HP, offers a significant expansion opportunity; but it's work and learn, which includes remote and hybrid arrangements that got a pandemic tailwind, that HP sees as posing the biggest opportunity.

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Las Vegas Sands CEO Rob Goldstein said the company isn't concerned about the Macau government's next steps on issuing casino licenses.

"We've always found the government very reasonable, very thoughtful and very fair," Goldstein said on a call with analysts.

In September, the Macau government announced a 45-day process for revising its gambling laws, a step toward issuing casino licenses. The government has said it's considering increased scrutiny and control over casino operations. The six licenses expire in June.

Goldstein doesn't see a scenario where the company isn't operating in Macau. "We have no trepidation...that there will be an issue with this. We knew this was coming...and we're prepared for it. And we're also prepared to wait until the government tells us how they want to proceed."

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Car dealership chain Lithia Motors expects consumer demand for vehicles will remain high in the final months of the year.

"What we see in [the third quarter], we expect that to continue to [the fourth quarter]," said CFO Tina Miller, referring to demand for the company's products during the latest quarter.

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Pinterest is rolling out a redesign of the feed that breaks the user experience into two tabs. The browse tab retains the platform's traditional grid layout, while the new watch tab presents a scroll of full-screen Idea Pins, posts made up of multiple clips and images, created by influencers.

Pinterest is trying to connect users to influencers as well as respond to changes in how consumers want to interact with content, said Naveen Gavini, senior vice president of products. "The whole goal for us in the next few years and how we think about ourselves is really like an inspiration-to-realization platform," Gavini said.

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Tesla CFO Zachary Kirkhorn said the first vehicles from the new plants near Austin and Berlin shouldn't be expected to make it into customer hands this year.

The company still aims to have production at the sites starting before year end, but beginning deliveries will take a bit longer, including for regulatory reasons and to ensure a certain level of production quality. How fast production can ramp up also is uncertain, he said. "There is quite an execution challenge ahead of us."

Forex:

The dollar was slightly higher in Europe and Morgan Stanley said it stands to benefit from higher oil prices.

Forex strategist James Lord said the currency used to have a negative relationship with oil prices when the U.S. was a big energy importer but that is no longer the case, as the country has become self-sufficient. The prospect of the Federal Reserve taking action in response to energy-led price pressures will also support the dollar, Lord said.

"The Fed is quite sensitive to inflation and inflation expectations at the moment so I think as oil prices go up, it will put more pressure on the Fed to sound more hawkish compared to other central banks."

Recent weakness in havens such as the yen and the dollar may be limited by renewed concerns about Evergrande after the sale of its property-management unit was abandoned. This has increased pressure on Evergrande to raise cash elsewhere, as the 30-day grace period on some of its interest payments comes to an end this week, said IG.

Bank of America said ahead of the next FOMC meeting in November, at which the start of bond tapering is expected to be announced, "we expect the USD to be supported and the U.S. to continue to act as the main driver of global FX market." BofA said previous sharp rises in global yields during the June 2013 taper tantrum, September 2019's money-market squeeze and June's hawkish FOMC meeting were bullish for the dollar.

However, Ebury said the dollar should weaken over the next year even though the Federal Reserve could start tapering asset purchases as soon as November and raise interest rates in the second half of 2022.

Analysts at the London-based financial services firm said the dollar has continued to benefit from concerns about coronavirus and rising inflation pressures slowing the global recovery but these worries are perhaps "slightly overblown." Market sentiment will "take a turn for the better," especially once developing nations have rolled out vaccines to a larger share of their populations, they said.

Ebury expects EUR/USD to rise to 1.22 and GBP/USD to rise to 1.45 by the end of 2022.

Bonds:

Treasury yields remained elevated, with the 10-year note yield holding at a five-month high following Wednesday's 20-year auction and the Beige Book report, which indicated the U.S. economy was growing at a "modest to moderate rate" amid a low supply of workers and elevated prices.

Bond investors are particularly attuned to the prospects of a potentially faster pace of Fed tapering, which would suggest that the central bank may be inclined to raise interest rates faster than expected to quell intensifying pricing pressures.

Pimco expects bonds to continue to provide diversification benefits in terms of overall asset allocation.

"While return expectations should be muted across asset classes, there are states of the world in which bonds could outperform equities--especially on the basis of return per unit of volatility."

A period of high inflation is not Pimco's baseline outlook, nonetheless. It remains of the view that Treasury inflation-protected securities, or TIPS, commodities and other real assets make sense to help hedge against inflation risks.

"Although we see upside risks to interest rates over the short term as economies continue to recover, over the secular horizon we expect rates to remain relatively range-bound, enabling lower but positive returns for core bond allocations."

Commodities:

Oil futures were lower in Europe, giving back the modest gains made Wednesday after the EIA released bullish weekly data, according to ING's Warren Patterson.

Crude stocks at the key distribution hub of Cushing, which was in danger of running out of storage space last spring, are now at their lowest since 2018.

"Continued strength in oil prices means that pressure on OPEC+ to pump more will only grow," Patterson said. He said that while the U.S., India and Japan have all called for more crude, "the reluctance of OPEC+ to pump more in the short term suggests that oil prices will remain well supported...this year."

Gold prices were flat, with the precious metal caught between a stronger dollar and investors' concerns about stagflation.

Concerns about rising inflation and flagging growth could keep the metal-supported in the coming months, said Giovanni Staunovo, a strategist at UBS. "Inflation expectations are rising and growth expectations softening for the short run." He added, however, that stagnation concerns will likely be short-lived as the Fed is likely to raise rates.

UBS expects gold prices to edge down to $1,700 an ounce by the end of the first quarter of next year, falling to $1,600 an ounce by the end of 2022.

   
 
 

TODAY'S TOP HEADLINES

China Evergrande Calls Off Plans to Sell Key Unit for $2.6 Billion

SINGAPORE-China Evergrande Group called off plans to sell a majority stake in its property-management unit for the equivalent of $2.6 billion, a major setback in the real-estate giant's attempts to ease its liquidity crunch.

The cash-strapped developer said Wednesday that it had planned to sell 50.1% of the profitable subsidiary, Evergrande Property Services Group Ltd., to a unit of rival developer Hopson Development Holdings Ltd.

Read More ->

Barclays Profit Rises on Investment Banking

Barclays PLC said its net profit more than doubled in the third quarter, driven by a continued strong performance at its investment bank.

Read More ->

Amazon Employee Group Seeks Worker Vote on Unionization

An Amazon.com Inc. employee group formed by warehouse workers in New York's Staten Island announced its goal to vote on unionization, becoming the latest labor-organizing effort from workers at one of the nation's largest employers.

The independent group of Amazon employees, called the Amazon Labor Union, plans to file with the National Labor Relations Board on Oct. 25 for an election. The organizing involves more than 2,000 workers across four Amazon facilities in Staten Island who have signed on to the effort, according to a statement from the group.

Read More ->

WeWork Set to Go Public via SPAC Deal, Two Years After Failed IPO

The shared-office company WeWork is set to trade publicly Thursday, capping a journey to a listing that included the implosion of its initial public offering in 2019.

WeWork is going public through a combination with BowX Acquisition Corp., a special-purpose acquisition company.

Read More ->

Plaid Pushes Into Payments Business After Scuttled Visa Deal

Financial-technology startup Plaid Inc. is making a move into the payments business, less than a year after an antitrust lawsuit scuttled its high-price sale to Visa Inc.

Plaid makes software that allows banks and other fintech companies to plug into their users' financial accounts, with their permission, and access their financial data to look up account balances or authenticate personal financial details. Plaid plans to unveil a new program Thursday that will use the software to make it easier and cheaper for consumers and businesses to make digital payments funded by their bank accounts.

Read More ->

China's Modern Land Withdraws Debt Extension Request on Liquidity Concerns

Modern Land (China) Co. has withdrawn its plan seeking permission from its debtholders to allow the Chinese property developer to delay repaying a $250 million bond, citing liquidity issues.

The company, which along with many Chinese developers are facing financial stress, said late Wednesday that it is in talks to engage a financial adviser to help assess Modern Land's capital structure, liquidity profile and financial condition.

Read More ->

PayPal's Vision Board Comes Into Focus With Pinterest

Enough with the idle pinning. PayPal Holdings might be hoping it can inspire Pinterest's users to start spending real money.

Read More ->

Trump's New Social-Media Company Plans to Go Public via SPAC

Former President Donald Trump unveiled a new digital-media venture Wednesday and said it would go public by merging with a special-purpose acquisition company.

Trump Media & Technology Group will create a social network called Truth Social to fight such companies as Facebook Inc. and Twitter Inc., the Trump company said in a press release late Wednesday. Mr. Trump's access to several social-media platforms was restricted following the Jan. 6 assault on the U.S. Capitol.

Read More ->

Moderna and J&J Covid-19 Boosters, Mixing and Matching Authorized by the FDA

U.S. health regulators significantly widened the nation's Covid-19 booster campaign, clearing use of extra doses of Moderna Inc. and Johnson & Johnson vaccines and also saying people can get a shot that is different from what they had previously received.

The moves, announced by the Food and Drug Administration on Wednesday, will make boosters available to the majority of adults who have been fully vaccinated and have passed the recommended waiting period.

Read More ->

Elliott Management Has Large Position in Canadian National Railway

Activist investor Elliott Management Corp. has a big stake in Canadian National Railway Co., people familiar with the matter said, adding to pressure on the railroad after its CEO resigned following a failed bid for rival Kansas City Southern.

Canadian National, facing a proxy fight from another activist, TCI Fund Management Ltd., said Tuesday Chief Executive Jean-Jacques Ruest is stepping down. TCI is seeking four board seats in a vote set to take place early next year.

Read More ->

Chinese Developer Defaults Pile Up as Evergrande Contagion Spreads

HONG KONG-The pain is spreading in the market for Chinese junk bonds.

Dollar-bond defaults from Chinese property developers are rising quickly as the country's housing market slumps, and the problem could worsen as a wave of debt from the beleaguered industry comes due in the coming months.

Read More ->

Tight Labor Market Keeps Jobless Claims Near Pandemic Lows

Unemployment claims are trending near the lowest levels since the Covid-19 pandemic hit in the spring of 2020, as companies are reluctant to lay off workers amid labor shortages.

Economists surveyed by The Wall Street Journal estimate jobless claims ticked up to 300,000 last week from a pandemic low of 293,000 a week earlier. Claims, a proxy for layoffs, are holding well below a recent peak of 424,000 in mid-July but remain above 2019's weekly average of 218,000.

Read More ->

Crypto Miners Struggle to Cut Carbon Emissions

Bitcoin mining has earned a bad reputation for guzzling cheap electricity in the pursuit of profit. Now bitcoin miners are trying to go green, to a point.

Companies that mine bitcoin are aiming to power their computers with renewable energy or sign up for data centers that rely on the sun or wind. Falling prices for renewables and rising prices for bitcoin make it possible to still earn a profit.

Read More ->

Critics Blast Private Equity at Senate Hearing

At a Senate hearing Wednesday, private-equity critics denounced what they characterized as buyout managers' abusive practices, as some Democratic lawmakers seek to rein in the rapidly growing industry.

Sen. Elizabeth Warren (D., Mass.) led the hearing of the U.S. Senate Committee on Banking, Housing and Urban Affairs, at which workers, an academic and a state treasurer loosed volleys of criticism against private-equity managers and asked lawmakers to increase federal oversight of them.

Read More ->

Trump Organization Faces Another New York Criminal Probe After Indictment

Local prosecutors are investigating financial dealings at a Trump Organization golf course north of New York City, according to people familiar with the matter, compounding the legal pressure on former President Donald Trump's company, which is already under indictment.

The criminal investigation, conducted by the office of Westchester County District Attorney Miriam Rocah, a Democrat, is examining whether the Trump Organization made misrepresentations to local officials related to the valuation of Trump National Golf Club, a private course in Briarcliff Manor, N.Y., the people familiar with the matter said. The Westchester district attorney's office has subpoenaed information about the course, the people said.

Read More ->

Write to paul.larkins@dowjones.com TODAY IN CANADA

Earnings:

Precision Drilling 3Q

Rogers Commun 3Q

Score Media and Gaming 4Q

Economic Indicators (ET):

0830 Sep New Housing Price Index

0830 Aug Employment Insurance

Market Talk:

Bank of Canada May Need to Start Raising Policy Rate Aggressively: Bank of Nova Scotia economists expect Canadian core inflation to rise well above the Bank of Canada's 2% target next year and in 2023, which would prompt aggressive rate increases starting in July 2022.

The bank said inflationary pressure from supply-chain bottlenecks have been underestimated. Scotiabank also expects inflationary pressure on the wage front, due to acute labor shortages, and in real estate, given shortage of housing units in Canada.

Scotiabank anticipates BOC will raise its policy rate by a full percentage point in 2H 2022, to reach 1.25%, and another full percentage point for all of 2023, to 2.25%. "If inflation rises more rapidly than we expect, we may need to forecast an earlier tightening," Scotiabank said.

   
 
 

Expected Major Events for Thursday

05:00/JPN: Sep Supermarket sales

06:00/JPN: Sep Revised Machine Tool Orders

06:00/UK: Sep Public sector finances

06:45/FRA: Oct Monthly business survey (goods-producing industries)

08:00/ITA: Aug Industrial turnover & orders

10:00/FRA: 2Q OECD Quarterly Employment Situation

10:00/UK: Oct CBI Industrial Trends Survey

12:30/US: Oct Philadelphia Fed Business Outlook Survey

12:30/CAN: Sep New Housing Price Index

12:30/CAN: Aug Employment Insurance

12:30/US: 10/16 Unemployment Insurance Weekly Claims Report - Initial Claims

12:30/US: U.S. Weekly Export Sales

13:00/RUS: Weekly International Reserves

13:45/US: Bloomberg Consumer Comfort Index

14:00/US: Sep Leading Indicators

14:00/US: Sep Existing Home Sales

14:30/US: 10/15 EIA Weekly Natural Gas Storage Report

20:30/US: Foreign Central Bank Holdings

20:30/US: Federal Discount Window Borrowings

23:01/UK: Oct UK Consumer Confidence Survey

23:30/JPN: Sep CPI (Nation), CPI ex-Food (Nation)

All times in GMT. Powered by Kantar Media and Dow Jones.

   
 
 

Expected Earnings for Thursday

AT&T Inc (T) is expected to report $0.64 for 3Q.

Alaska Air Group Inc (ALK) is expected to report $1.41 for 3Q.

Ally Financial Inc (ALLY) is expected to report $1.94 for 3Q.

AutoNation (AN) is expected to report $4.21 for 3Q.

Banc Of California Inc (BANC) is expected to report $0.13 for 3Q.

Brainstorm Cell Therapeutics Inc (BCLI) is expected to report $-0.20 for 3Q.

Bryn Mawr Bank Corp (BMTC) is expected to report $0.71 for 3Q.

Chart Industries Inc (GTLS) is expected to report $0.81 for 3Q.

City Holding Co (CHCO) is expected to report $1.24 for 3Q.

Dow Inc (DOW) is expected to report $2.54 for 3Q.

East West Bancorp (EWBC) is expected to report $1.51 for 3Q.

First American Financial (FAF) is expected to report $1.84 for 3Q.

Freeport-McMoRan Inc (FCX) is expected to report $0.81 for 3Q.

Gatx Corp (GATX) is expected to report $1.09 for 3Q.

Genuine Parts Company (GPC) is expected to report $1.64 for 3Q.

Herc Holdings Inc (HRI) is expected to report $2.33 for 3Q.

Heritage Financial Corp (HFWA) is expected to report $0.52 for 3Q.

Home BancShares Inc (HOMB) is expected to report $0.44 for 3Q.

IQVIA Holdings Inc (IQV) is expected to report $1.06 for 3Q.

Insteel Industries (IIIN) is expected to report $0.98 for 4Q.

Interpublic Group of Cos (IPG) is expected to report $0.46 for 3Q.

J.W. Mays Inc (MAYS) is expected to report for 4Q.

KeyCorp (KEY) is expected to report $0.57 for 3Q.

Lindsay Corp (LNN) is expected to report $0.79 for 4Q.

NVR Inc (NVR) is expected to report $88.77 for 3Q.

Nucor Corp (NUE) is expected to report $7.14 for 3Q.

Precision Drilling (PD.T,PDS) is expected to report for 3Q.

Quest Diagnostics (DGX) is expected to report $2.69 for 3Q.

Rogers Communications Inc - Class B (RCI,RCI.A.T,RCI.B.T) is expected to report $1.04 for 3Q.

S&T Bancorp Inc (STBA) is expected to report $0.63 for 3Q.

Sandy Spring Bancorp Inc (SASR) is expected to report $1.10 for 3Q.

Schnitzer Steel Industries Inc (SCHN) is expected to report $1.48 for 4Q.

Snap-On Inc (SNA) is expected to report $3.33 for 3Q.

Southwest Airlines (LUV) is expected to report $-0.12 for 3Q.

Tractor Supply Company (TSCO) is expected to report $1.68 for 3Q.

Tri Pointe Homes Inc (TPH) is expected to report $0.88 for 3Q.

Trinity Industries (TRN) is expected to report $0.18 for 3Q.

Union Pacific (UNP) is expected to report $2.52 for 3Q.

Valero Energy Corp (VLO) is expected to report $0.91 for 3Q.

Webster Financial Corporation (WBS) is expected to report $1.05 for 3Q.

Powered by Kantar Media and Dow Jones.

   
 
 

ANALYST RATINGS ACTIONS

Array Technologies Cut to Underweight From Equal-Weight by Barclays

Clearwater Paper Corporation Raised to Outperform From Sector Perform by RBC Capital

Healthcare Services Cut to Market Perform From Outperform by William Blair

This article is a text version of a Wall Street Journal newsletter published earlier today.

 

(END) Dow Jones Newswires

October 21, 2021 05:53 ET (09:53 GMT)

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