Early Look

Monday, October 25, 2021

U.S. futures looking slightly higher following a record closing high for the Dow Jones Industrial Average on Friday, as investors enter the busiest week of the third quarter earnings season with more than 160 S&P components expected to report this week including AAPL, AMZN, FB, MSFT, GOOGL, CAT. Markets have largely ignored rising inflationary concerns and likelihood of rising rates, with Treasury Secretary Yellen saying this weekend she doesn’t think the US will lose control over inflation, and she expects inflation levels to return to normal by the second half of next year as bottlenecks ease. Out of the 117 companies reporting so far, collective S&P 500 profits are set to rise 34.8% from last year to $430.3 billion. On Friday, the S&P 500 edged lower a day after the benchmark closed at a record. For the week, unofficially, the S&P rose 1.64%, the Dow added 1.08%, the Nasdaq gained 1.3%. Weekly gains were led by REITs, Financials, Healthcare and Utilities, while Materials, Consumer Staples and Communication Services were the biggest laggards. In Asian markets, The Nikkei Index fell -200 points to 28,600, the Shanghai Index rises 0.75% to 3,609, and the Hang Seng Index was little changed at 26,132. In Europe, the German DAX is up about +0.3% to 15,590, while the FTSE 100 gains over +0.5% to 7.245.

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -4.88 points, or 0.11%, to 4,544.90

·     The Dow Jones Industrial Average rose 73.94 points, or 0.21%, to 35,677.02

·     The Nasdaq Composite declined -125.50 points, or 0.82%, to 15,090.20

·     The Russell 2000 Index dipped -4.92 points, or 0.21% to 2,291.27

Events Calendar for Today

·     8:30 AM ET         National Activity Index for September

·     10:30 AM ET      Dallas Fed manufacturing Index for October

Earnings Calendar:

·     Earnings Before the Open: ARLP, BMRC, BOH, CBU, CDNS, DORM, HNI, KMB, LII, KFN, OTIS, SITC, TZOO

·     Earnings After the Close: ACC, AGNC, AIN, AMKR, ARE, ARI, AXTA, BRO, CALX, CATY, CCK, CR, FB, FLXS, HMST, HOPE, HSII, HSTM, HTLF, IBTX, INDB, JBSS, MEDP, OI, PCH, PETS, PKG, SSD, SUI, TBI, TNET, UHS

Other Key Events:

·     American Society for Radiation Oncology (ASTRO) Annual Meeting, 10/24-10/27, in Chicago, IL

World News

·     Democrats have almost reached an agreement on a pared-down social spending bill. House Speaker Nancy Pelosi said on Sunday. Democrats have struggled to agree on a framework of $2 trillion or less (down from their original price tag of $3.5 trillion) that will allow the House of Representatives to move forward next week on a $1 trillion bipartisan infrastructure bill and set the stage for passage of Biden’s larger “Build Back Better” social and climate-change package.

·     Treasury Secretary Yellen said this weekend she doesn’t think the US will lose control over inflation, and she expects inflation levels to return to normal by the second half of next year as bottlenecks ease.

·     After warning of a winter surge in coronavirus infections in the coming weeks, China took another series of steps to limit travel and business activity in Ejin, near Inner Mongolia, a hotspot of infections in the world’s second-largest economy. China’s National Health Commission warned over the weekend that Delta-variant infections, which has already spread to 11 different provinces around the country, will worsen in the coming week

Sector News Breakdown

Consumer

·     J.M. Smucker (SJM) boosts share buyback authorization by 5M shares

·     Tesla (TSLA) rolled back the latest version of its autonomous driving software, called full self-driving, or FSD. It’s a setback for Tesla. The decision will lead to questions about how Tesla introduces new features. It could also lead to some stock market volatility on Monday – Barron’s

·     Tesla (TSLA) has increased the price of its Model X Long Range and Model S Long Range variants by $5,000, according to Reuters. The Model X Long Range and Model S Long Range now sell for $104,990 and $94,990, respectively. https://reut.rs/2Zmwhti 

·     Xpeng Inc (XPEV) rises on reports it plans to upstage Tesla and domestic rivals on autonomous driving with a full-scenario driver-assistance system by the first half of 2023, South China Morning Post (SCMP) reported

Energy

·     Chesapeake Energy (CHK) now has the unlikely opportunity to become the standard-bearer for the Shale 3.0 movement, and its stock looks cheap, according to an article in Barron’s this weekend

·     Clearway Energy (CWEN), through its subsidiary Clearway Energy Operating LLC, announced it has entered into a binding agreement to sell its Thermal Business to KKR for total consideration of $1.9B, subject to closing adjustments

Financials

·     PayPal (PYPL) shares rise, PINS falls after PayPal said Sunday it is not pursuing an acquisition of digital pinboard site Pinterest (PINS) “at this time” following reports it was in discussions. Bloomberg news had reported last week that the payment company had approached Pinterest about a potential deal, based on a $70 a share valuation for the social media company, which would have given it a $45 billion market capitalization.

·     Nigeria will on Monday launch a digital currency, the eNaira, the central bank said, months after it barred banks and financial institutions from dealing in or facilitating transactions in cryptocurrencies.

·     China’s Evergrande has resumed work on >10 projects, all of which will be carried out to plan

·     HSBC Holdings (HSBC) Q3 Earnings: Q3 adjusted pretax $6b vs $4.87b cons, Q3 adj rev $12.2b vs $12.34b cons, announced share buyback of $2b, Q3 NIM 1.19%

Healthcare

·     Bristol-Myers (BMY) has expressed interest in buying Aurinia Pharmaceuticals (AUPH), Bloomberg reported late Friday citing people familiar with the matter, though notes that no final decision has been mad

·     Regeneron (REGN) and Sanofi (SNY) announced results from a second Phase 3 trial assessing the investigational use of Dupixent in patients 12 years and older with eosinophilic esophagitis, or EoE; the trial met its co-primary endpoints

Industrials & Materials

·     Sibanye-Stillwater (SBSW) is in advanced talks to buy two Brazilian miners for about $1 billion including debt, a bet on continued demand for metals used in the production of electric-car batteries, the WSJ reported

·     Otis Worldwide (OTIS) Q3 adj EPS $0.77 vs. est. $0.73; Q3 revs $3.62B vs. est. $3.54B; raises FY21 adjusted EPS view to $2.95 from $2.89-$2.93 (est. $2.96) and raises FY21 revenue view to $14.3B from $14.1B-$14.2B (est. $14.23B)

·     Roper Technologies (ROP) is exploring the sale of its process technology division, a transaction that could bring in as much as $3B, Bloomberg reported late Friday. The co has hired a financial adviser to consider its options for the business, the report said https://bit.ly/3CcxGBk

·     The U.S. government plan to give Rio Tinto (RIO) the land it seeks for the Resolution copper mine in Arizona appears to have won the support of the U.S. 9th Circuit Court of Appeals, Reuters reports.

Technology, Media & Telecom

·     HP Inc. (HPQ) mentioned positively in Barron’s saying the stock looks like “a screaming buy,” after the company held its first analyst meeting in two years this past week, and had surprisingly good news that drove the stock up 7%. With an improving growth story, shareholder-friendly policies, it looks like one of the cheapest stocks in the tech sector

·     Pinterest (PINS) shares dipped Friday afternoon following a post-market release confirming it will release its third-quarter financial results on Nov. 4, after the market closes, dampening some hopes that a deal was imminent for PayPal (PYPL) to take over Pinterest after reports surfaced mid-week.