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Category: topSource: foxnewsMay 25th, 2021

Futures Rise On Taper, Evergrande Optimism

Futures Rise On Taper, Evergrande Optimism US index futures jumped overnight even as the Fed confirmed that a November tapering was now guaranteed and would be completed by mid-2022 with one rate hike now on deck, while maintaining the possibility to extend stimulus if necessitated by the economy. Sentiment got an additional boost from a strong showing of Evergrande stock - which closed up 17% - during the Chinese session, which peaked just after Bloomberg reported that China told Evergrande to avoid a near-term dollar bond default and which suggested that the "government wants to avoid an imminent collapse of the developer" however that quickly reversed when the WSJ reported, just one hour later, that China was making preparations for Evergrande's demise, and although that hammered stocks, the report explicitly noted that a worst-case scenario for Evergrande would mean a partial or full nationalization as "local-level government agencies and state-owned enterprises have been instructed to step in only at the last minute should Evergrande fail to manage its affairs in an orderly fashion." In other words, both reports are bullish: either foreign creditors are made whole (no default) as per BBG or the situation deteriorates and Evergrande is nationalized ("SOEs step in") as per WSJ. According to Bloomberg, confidence is building that markets can ride out a pullback in Fed stimulus, unlike 2013 when the taper tantrum triggered large losses in bonds and equities. "Investors are betting that the economic and profit recovery will be strong enough to outweigh a reduction in asset purchases, while ultra-low rates will continue to support riskier assets even as concerns linger about contagion from China’s real-estate woes." That's one view: the other is that the Fed has so broken the market's discounting ability we won't know just how bad tapering will get until it actually begins. “The Fed has got to be pleased that their communication on the longer way to tapering has avoided the dreaded fear of the tantrum,” Jeffrey Rosenberg, senior portfolio manager for systematic fixed income at BlackRock Inc., said on Bloomberg Television. “This is a very good outcome for the Fed in terms of signaling their intent to give the market information well ahead of the tapering decision.” Then there is the question of Evergrande: “With regards to Evergrande, all those people who are waiting for a Lehman moment in China will probably have to wait another turn,” said Ken Peng, an investment strategist at Citi Private Bank Asia Pacific. “So I wouldn’t treat this as completely bad, but there are definitely a lot of risks on the horizon.” In any case, today's action is a continuation of the best day in two months for both the Dow and the S&P which staged a strong recovery from two-month lows hit earlier in the week, and as of 745am ET, S&P 500 E-minis were up 25.25 points, or 0.6%, Dow E-minis were up 202 points, or 0.59%, while Nasdaq 100 E-minis were up 92.0 points, or 0.60%. In the premarket, electric vehicle startup Lucid Group rose 3.1% in U.S. premarket trading. PAVmed (PVM US) jumps 11% after its Lucid Diagnostics unit announced plans to list on the Global Market of the Nasdaq Stock Market.  Here are some of the biggest movers today: U.S.-listed Chinese stocks rise in premarket trading as fears of contagion from China Evergrande Group’s debt crisis ease. Blackberry (BB US) shares rise 8.7% in premarket after co.’s 2Q adjusted revenue beat the average of analysts’ estimates Eargo (EAR US) falls 57% in Thursday premarket after the hearing aid company revealed it was the target of a Justice Department criminal probe and withdrew its forecasts for the year Amplitude Healthcare Acquisition (AMHC US) doubled in U.S. premarket trading after the SPAC’s shareholders approved the previously announced business combination with Jasper Therapeutics Steelcase (SCS US) fell 4.8% Wednesday postmarket after the office products company reported revenue for the second quarter that missed the average analyst estimate Vertex Energy Inc. (VTNR US) gained 2.1% premarket after saying the planned acquisition of a refinery in Mobile, Alabama from Royal DutVTNR US Equitych Shell Plc is on schedule Synlogic (SYBX US) shares declined 9.7% premarket after it launched a stock offering launched without disclosing a size HB Fuller (FUL US) climbed 2.7% in postmarket trading after third quarter sales beat even the highest analyst estimate Europe's Stoxx 600 index rose 0.9%, lifted by carmakers, tech stocks and utilities, which helped it recover losses sparked earlier in the week by concerns about Evergrande and China’s crackdown on its property sector. The gauge held its gain after surveys of purchasing managers showed business activity in the euro area lost momentum and slowed broadly in September after demand peaked over the summer and supply-chain bottlenecks hurt services and manufacturers. Euro Area Composite PMI (September, Flash): 56.1, consensus 58.5, last 59.0. Euro Area Manufacturing PMI (September, Flash): 58.7, consensus 60.3, last 61.4. Euro Area Services PMI (September, Flash): 56.3, consensus 58.5, last 59.0. Germany Composite PMI (September, Flash): 55.3, consensus 59.2, last 60.0. France Composite PMI (September, Flash): 55.1, consensus 55.7, last 55.9. UK Composite PMI (September, Flash): 54.1, consensus 54.6, last 54.8. Commenting on Europe's PMIs, Goldman said that the Euro area composite PMI declined by 2.9pt to 56.1 in September, well below consensus expectations. The softening was broad-based across countries but primarily led by Germany. The peripheral composite flash PMI also weakened significantly in September but remain very high by historical standards (-2.4pt to 57.5). Across sectors, the September composite decline was also broad-based, with manufacturing output softening (-3.3pt to 55.6) to a similar extent as services (-2.7pt to 56.3). Supply-side issues and upward cost and price pressures continued to be widely reported. Expectations of future output growth declined by less than spot output on the back of delta variant worries and supply issues, remaining far above historically average levels. Earlier in the session, Asian stocks rose for the first time in four sessions, as Hong Kong helped lead a rally on hopes that troubled property firm China Evergrande Group will make progress on debt repayment. The MSCI Asia Pacific Index climbed as much as 0.5%, with Tencent and Meituan providing the biggest boosts. The Hang Seng jumped as much as 2.5%, led by real estate stocks as Evergrande surged more than 30%. Hong Kong shares later pared their gains. Asian markets were also cheered by gains in U.S. stocks overnight even as the Federal Reserve said it may begin scaling back stimulus this year. A $17 billion net liquidity injection from the People’s Bank of China also provided a lift, while the Fed and Bank of Japan downplayed Evergrande risks in comments accompanying policy decisions Wednesday. Evergrande’s stock closed 18% higher in Hong Kong, in a delayed reaction to news a unit of the developer had negotiated interest payments on yuan notes. A coupon payment on its 2022 dollar bond is due on Thursday “Investors are perhaps reassessing the tail risk of a disorderly fallout from Evergrande’s credit issues,” said Chetan Seth, a strategist at Nomura. “However, I am not sure if the fundamental issue around its sustainable deleveraging has been addressed. I suspect markets will likely remain quite volatile until we have some definite direction from authorities on the eventual resolution of Evergrande’s debt problems.” Stocks rose in most markets, with Australia, Taiwan, Singapore and India also among the day’s big winners. South Korea’s benchmark was the lone decliner, while Japan was closed for a holiday In rates, Treasuries were off session lows, with the 10Y trading a 1.34%, but remained under pressure in early U.S. session led by intermediate sectors, where 5Y yield touched highest since July 2. Wednesday’s dramatic yield-curve flattening move unleashed by Fed communications continued, compressing 5s30s spread to 93.8bp, lowest since May 2020. UK 10-year yield climbed 3.4bp to session high 0.833% following BOE rate decision (7-2 vote to keep bond-buying target unchanged); bunds outperformed slightly. Peripheral spreads tighten with long-end Italy outperforming. In FX, the Bloomberg Dollar Spot Index reversed an earlier gain and dropped 0.3% as the dollar weakened against all of its Group-of-10 peers apart from the yen amid a more positive sentiment. CAD, NOK and SEK are the strongest performers in G-10, JPY the laggard.  The euro and the pound briefly pared gains after weaker-than-forecast German and British PMIs. The pound rebounded from an eight-month low amid a return of global risk appetite as investors assessed whether the Bank of England will follow the Federal Reserve’s hawkish tone later Thursday. The yield differential between 10-year German and Italian debt narrowed to its tightest since April. Norway’s krone advanced after Norges Bank raised its policy rate in line with expectations and signaled a faster pace of tightening over the coming years. The franc whipsawed as the Swiss National Bank kept its policy rate and deposit rate at record lows, as expected, and reiterated its pledge to wage currency market interventions. The yen fell as a unit of China Evergrande said it had reached an agreement with bond holders over an interest payment, reducing demand for haven assets. Turkey’s lira slumped toa record low against the dollar after the central bank unexpectedly cut interest rates. In commodities, crude futures drifted lower after a rangebound Asia session. WTI was 0.25% lower, trading near $72; Brent dips into the red, so far holding above $76. Spot gold adds $3.5, gentle reversing Asia’s losses to trade near $1,771/oz. Base metals are well bid with LME aluminum leading gains. Bitcoin steadied just below $44,000. Looking at the day ahead, we get the weekly initial jobless claims, the Chicago Fed’s national activity index for August, and the Kansas City fed’s manufacturing activity index for September. From central banks, there’ll be a monetary policy decision from the Bank of England, while the ECB will be publishing their Economic Bulletin and the ECB’s Elderson will also speak. From emerging markets, there’ll also be monetary policy decisions from the Central Bank of Turkey and the South African Reserve Bank. Finally in Germany, there’s an election debate with the lead candidates from the Bundestag parties. Market Snapshot S&P 500 futures up 0.7% to 4,413.75 STOXX Europe 600 up 1.1% to 468.32 MXAP up 0.5% to 200.57 MXAPJ up 0.9% to 645.76 Nikkei down 0.7% to 29,639.40 Topix down 1.0% to 2,043.55 Hang Seng Index up 1.2% to 24,510.98 Shanghai Composite up 0.4% to 3,642.22 Sensex up 1.4% to 59,728.37 Australia S&P/ASX 200 up 1.0% to 7,370.22 Kospi down 0.4% to 3,127.58 German 10Y yield fell 5.6 bps to -0.306% Euro up 0.4% to $1.1728 Brent Futures up 0.3% to $76.39/bbl Gold spot up 0.0% to $1,768.25 U.S. Dollar Index down 0.33% to 93.16 Top Overnight News from Bloomberg Financial regulators in Beijing issued a broad set of instructions to China Evergrande Group, telling the embattled developer to focus on completing unfinished properties and repaying individual investors while avoiding a near-term default on dollar bonds China’s central bank net-injected the most short- term liquidity in eight months into the financial system, with markets roiled by concerns over China Evergrande Group’s debt crisis Europe’s worst energy crisis in decades could drag deep into the cold months as Russia is unlikely to boost shipments until at least November Business activity in the euro area “markedly” lost momentum in September after demand peaked over the summer and supply chain bottlenecks hurt both services and manufacturers. Surveys of purchasing managers by IHS Markit showed growth in both sectors slowing more than expected, bringing overall activity to a five-month low. Input costs, meanwhile, surged to the highest in 21 years, according to the report The U.K. private sector had its weakest month since the height of the winter lockdown and inflation pressures escalated in September, adding to evidence that the recovery is running into significant headwinds, IHS Markit said The U.K.’s record- breaking debut green bond sale has given debt chief Robert Stheeman conviction on the benefits of an environmental borrowing program. The 10 billion-pound ($13.7 billion) deal this week was the biggest-ever ethical bond sale and the country is already planning another offering next month A more detailed look at global markets courtesy of Newsquaw Asian equity markets traded mostly positive as the region took its cue from the gains in US with the improved global sentiment spurred by some easing of Evergrande concerns and with stocks also unfazed by the marginally more hawkish than anticipated FOMC announcement (detailed above). ASX 200 (+1.0%) was underpinned by outperformance in the commodity-related sectors and strength in defensives, which have more than atoned for the losses in tech and financials, as well as helped markets overlook the record daily COVID-19 infections in Victoria state. Hang Seng (+0.7%) and Shanghai Comp. (+0.6%) were also positive after another respectable liquidity operation by the PBoC and with some relief in Evergrande shares which saw early gains of more than 30% after recent reports suggested a potential restructuring by China’s government and with the Co. Chairman noting that the top priority is to help wealth investors redeem their products, although the majority of the Evergrande gains were then pared and unit China Evergrande New Energy Vehicle fully retraced the initial double-digit advances. KOSPI (-0.5%) was the laggard as it played catch up to the recent losses on its first trading day of the week and amid concerns that COVID cases could surge following the holiday period, while Japanese markets were closed in observance of the Autumnal Equinox Day. China Pumps $17 Billion Into System Amid Evergrande Concerns China Stocks From Property to Tech Jump on Evergrande Respite Philippines Holds Key Rate to Spur Growth Amid Higher Prices Taiwan’s Trade Deal Application Sets Up Showdown With China Top Asian News European equities (Stoxx 600 +0.9%) trade on the front-foot and have extended gains since the cash open with the Stoxx 600 now higher on the week after Monday’s heavy losses. From a macro perspective, price action in Europe has been undeterred by a slowdown in Eurozone PMIs which saw the composite metric slip to 56.1 from 59.0 (exp. 58.5) with IHS Markit noting “an unwelcome combination of sharply slower economic growth and steeply rising prices.” Instead, stocks in the region have taken the cue from a firmer US and Asia-Pac handover with performance in Chinese markets aided by further liquidity injections by the PBoC. Some positivity has also been observed on the Evergrande front amid mounting expectations of a potential restructuring at the company. That said, at the time of writing, it remains unclear what the company’s intentions are for repaying its USD 83.5mln onshore coupon payment. Note, ING highlights that “missing that payment today would still leave a 30-day grace period before this is registered as a default”. The most recent reports via WSJ indicate that Chinese authorities are asking local governments to begin preparations for the potential downfall of Evergrande; however, the article highlights that this is a last resort and Beijing is reluctant to step in. Nonetheless, this article has taken the shine off the mornings risk appetite, though we do remain firmer on the session. Stateside, as the dust settles on yesterday’s FOMC announcement, futures are firmer with outperformance in the RTY (+0.8% vs. ES +0.7%). Sectors in Europe are higher across the board with outperformance in Tech and Autos with the latter aided by gains in Faurecia (+4.6%) who sit at the top of the Stoxx 600 after making an unsurprising cut to its guidance, which will at least provide some clarity on the Co.’s near-term future; in sympathy, Valeo (+6.6) is also a notable gainer in the region. To the downside, Entain (+2.6%) sit at the foot of the Stoxx 600 after recent strong gains with the latest newsflow surrounding the Co. noting that MGM Resorts is considering different methods to acquire control of the BetMGM online gambling business JV, following the DraftKings offer for Entain, according to sources. The agreement between Entain and MGM gives MGM the ability to block any deal with competing businesses; MGM officials believe this grants the leverage to take full control of BetMGM without spending much. Top European News BOE Confronts Rising Prices, Slower Growth: Decision Guide La Banque Postale Eyes Retail, Asset Management M&A in Europe Activist Bluebell Raises Pressure on Glaxo CEO Walmsley Norway Delivers Rate Lift-Off With Next Hike Set for December In FX, not much bang for the Buck even though the FOMC matched the most hawkish market expectations and Fed chair Powell arguably went further by concluding in the post-meeting press conference that substantial progress on the lagging labour front is all but done. Hence, assuming the economy remains on course, tapering could start as soon as November and be completed my the middle of 2022, though he continued to play down tightening prospects irrespective of the more hawkish trajectory implied by the latest SEP dot plots that are now skewed towards at least one hike next year and a cumulative seven over the forecast horizon. However, the Greenback only managed to grind out marginally higher highs overnight, with the index reaching 93.526 vs 93.517 at best yesterday before retreating quite sharply and quickly to 93.138 in advance of jobless claims and Markit’s flash PMIs. CAD/NZD/AUD - The Loonie is leading the comeback charge in major circles and only partially assisted by WTI keeping a firm bid mostly beyond Usd 72/brl, and Usd/Cad may remain contained within 1.2796-50 ahead of Canadian retail sales given decent option expiry interest nearby and protecting the downside (1 bn between 1.2650-65 and 2.7 bn from 1.2620-00). Meanwhile, the Kiwi has secured a firmer grip on the 0.7000 handle to test 0.7050 pre-NZ trade and the Aussie is looking much more comfortable beyond 0.7250 amidst signs of improvement in the flash PMIs, albeit with the services and composite headline indices still some way short of the 50.0 mark. NOK/GBP/EUR/CHF - All firmer, and the Norwegian Crown outperforming following confirmation of the start of rate normalisation by the Norges Bank that also underscored another 25 bp hike in December and further tightening via a loftier rate path. Eur/Nok encountered some support around 10.1000 for a while, but is now below, while the Pound has rebounded against the Dollar and Euro in the run up to the BoE at midday. Cable is back up around 1.3770 and Eur/Gbp circa 0.8580 as Eur/Usd hovers in the low 1.1700 area eyeing multiple and a couple of huge option expiries (at the 1.1700 strike in 4.1 bn, 1.1730 in 1 bn, 1.1745-55 totalling 2.7 bn and 1.8 bn from 1.1790-1.1800). Note, Eurozone and UK flash PMIs did not live up to their name, but hardly impacted. Elsewhere, the Franc is lagging either side of 0.9250 vs the Buck and 1.0835 against the Euro on the back of a dovish SNB Quarterly Review that retained a high Chf valuation and necessity to maintain NIRP, with only minor change in the ordering of the language surrounding intervention. JPY - The Yen is struggling to keep its head afloat of 110.00 vs the Greenback as Treasury yields rebound and risk sentiment remains bullish pre-Japanese CPI and in thinner trading conditions due to the Autumn Equinox holiday. In commodities, WTI and Brent have been choppy throughout the morning in-spite of the broadly constructive risk appetite. Benchmarks spent much of the morning in proximity to the unchanged mark but the most recent Evergrande developments, via WSJ, have dampened sentiment and sent WTI and Brent back into negative territory for the session and printing incremental fresh lows at the time of publication. Back to crude, newsflow has once again centred around energy ministry commentary with Iraq making clear that oil exports will continue to increase. Elsewhere, gas remains at the forefront of focus particularly in the UK/Europe but developments today have been somewhat incremental. On the subject, Citi writes that Asia and Europe Nat. Gas prices could reach USD 100/MMBtu of USD 580/BOE in the winter, under their tail-risk scenario. For metals, its very much a case of more of the same with base-metals supportive, albeit off-best given Evergrande, after a robust APAC session post-FOMC. Given the gas issues, desks highlight that some companies are being forced to suspend/reduce production of items such as steel in Asian/European markets, a narrative that could become pertinent for broader prices if the situation continues. Elsewhere, spot gold and silver are both modestly firmer but remain well within the range of yesterday’s session and are yet to recovery from the pressure seen in wake of the FOMC. US Event Calendar 8:30am: Sept. Initial Jobless Claims, est. 320,000, prior 332,000; Continuing Claims, est. 2.6m, prior 2.67m 8:30am: Aug. Chicago Fed Nat Activity Index, est. 0.50, prior 0.53 9:45am: Sept. Markit US Composite PMI, prior 55.4 9:45am: Sept. Markit US Services PMI, est. 54.9, prior 55.1 9:45am: Sept. Markit US Manufacturing PMI, est. 61.0, prior 61.1 11am: Sept. Kansas City Fed Manf. Activity, est. 25, prior 29 12pm: 2Q US Household Change in Net Wor, prior $5t DB's Jim Reid concludes the overnight wrap My wife was at a parents event at school last night so I had to read three lots of bedtime stories just as the Fed were announcing their policy decision. Peppa Pig, Biff and Kipper, and somebody called Wonder Kid were interspersed with Powell’s press conference live on my phone. It’s fair to say the kids weren’t that impressed by the dot plot and just wanted to join them up. The twins (just turned 4) got their first reading book homework this week and it was a bit sad that one of them was deemed ready to have one with words whereas the other one only pictures. The latter was very upset and cried that his brother had words and he didn’t. That should create even more competitive tension! Back to the dots and yesterday’s Fed meeting was on the hawkish side in terms of the dots and also in terms of Powell’s confidence that the taper could be complete by mid-2022. Powell said that the Fed could begin tapering bond purchases as soon as the November FOMC meeting, in line with our US economists’ forecasts. He left some room for uncertainty, saying they would taper only “If the economy continues to progress broadly in line with expectations, and also the overall situation is appropriate for this.” However he made clear that “the timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff.” The quarterly “dot plot” showed that the 18 FOMC officials were split on whether to start raising rates next year or not. In June, the median dot indicated no rate increases until 2023, but now 6 members see a 25bps raise next year and 3 members see two such hikes. Their inflation forecasts were also revised up and DB’s Matt Luzzetti writes in his FOMC review (link here) that “If inflation is at or below the Fed's current forecast next year of 2.3% core PCE, liftoff is likely to come in 2023, consistent with our view. However, if inflation proves to be higher with inflation expectations continuing to rise, the first rate increase could well migrate into 2022.” Markets took the overall meeting very much in its stride with the biggest impact probably being a yield curve flattening even if US 10yr Treasury yields traded in just over a 4bp range yesterday and finishing -2.2bps lower at 1.301%. The 5y30y curve flattened -6.7bps to 95.6bps, its flattest level since August 2020, while the 2y10y curve was -4.2bps flatter. So the market seems to believe the more hawkish the Fed gets the more likely they’ll control inflation and/or choke the recovery. The puzzle is that even if the dots are correct, real Fed funds should still be negative and very accommodative historically for all of the forecasting period. As such the market has a very dim view of the ability of the economy to withstand rate hikes or alternatively that the QE technicals are overpowering everything at the moment. In equities, the S&P 500 was up nearly +1.0% 15 minutes prior to the Fed, and then rallied a further 0.5% in the immediate aftermath before a late dip look it back to +0.95%. The late dip meant that the S&P still has not seen a 1% up day since July 23. The index’s rise was driven by cyclicals in particular with energy (+3.17%), semiconductors (-2.20%), and banks (+2.13%) leading the way. Asian markets are mostly trading higher this morning with the Hang Seng (+0.69%), Shanghai Comp (+0.58%), ASX (+1.03%) and India’s Nifty (+0.81%) all up. The Kospi (-0.36%) is trading lower though and is still catching up from the early week holidays. Japan’s markets are closed for a holiday today. Futures on the S&P 500 are up +0.25% while those on the Stoxx 50 are up +0.49%. There is no new news on the Evergrande debt crisis however markets participants are likely to pay attention to whether the group is able to make interest rate payment on its 5 year dollar note today after the group had said yesterday that it resolved a domestic bond coupon by negotiations which was also due today. As we highlighted in our CoTD flash poll conducted earlier this week, market participants are not too worried about a wider fallout from the Evergrande crisis and even the Hang Seng Properties index is up +3.93% this morning and is largely back at the levels before the big Monday sell-off of -6.69%. Overnight we have received flash PMIs for Australia which improved as parts of the country have eased the coronavirus restrictions. The services reading came in at 44.9 (vs. 42.9 last month) and the manufacturing print was even stronger at 57.3 (vs. 52.0 last month). Japan’s flash PMIs will be out tomorrow due to today’s holiday. Ahead of the Fed, markets had continued to rebound from their declines earlier in the week, with Europe’s STOXX 600 gaining +0.99% to narrowly put the index in positive territory for the week. This continues the theme of a relative outperformance among European equities compared to the US, with the STOXX 600 having outpaced the S&P 500 for 5 consecutive sessions now, though obviously by a slim margin yesterday. Sovereign bonds in Europe also posted gains, with yields on 10yr bunds (-0.7bps), OATs (-1.0bps) and BTPs (-3.2bps) all moving lower. Furthermore, there was another tightening in peripheral spreads, with the gap in Italian 10yr yields over bunds falling to 98.8bps yesterday, less than half a basis point away from its tightest level since early April. Moving to fiscal and with Democrats seemingly unable to pass the $3.5 trillion Biden budget plan by Monday, when the House is set to vote on the bipartisan infrastructure bill, Republican leadership is calling on their members to vote against the bipartisan bill in hopes of delaying the process further. While the there is still a high likelihood the measure will eventually get passed, time is becoming a factor. Congress now has just over a week to get a government funding bill through both chambers of congress as well as raise the debt ceiling by next month. Republicans have told Democrats to do the latter in a partisan manner and include it in the reconciliation process which could mean that a significant portion of the Biden economic agenda – mostly encapsulated in the $3.5 trillion over 10 year budget – may have to be cut down to get the entire Democratic caucus on board. Looking ahead, an event to watch out for today will be the Bank of England’s policy decision at 12:00 London time, where our economists write (link here) that they expect no change in the policy settings. However, they do expect a reaffirmation of the BoE’s updated forward guidance that some tightening will be needed over the next few years to keep inflation in check, even if it’s too early to expect a further hawkish pivot at this stage. Staying on the UK, two further energy suppliers (Avro Energy and Green Supplier) ceased trading yesterday amidst the surge in gas prices, with the two supplying 2.9% of domestic customers between them. We have actually seen a modest fall in European natural gas prices over the last couple of days, with the benchmark future down -4.81% since its close on Monday, although it’s worth noting that still leaves them up +75.90% since the start of August alone. There wasn’t much data to speak of yesterday, though US existing home sales fell to an annualised rate of 5.88 in August (vs. 5.89m expected). Separately, the European Commission’s advance consumer confidence reading for the Euro Area unexpectedly rose to -4.0 in September (vs. -5.9 expected). To the day ahead now, the data highlights include the September flash PMIs from around the world, while in the US there’s the weekly initial jobless claims, the Chicago Fed’s national activity index for August, and the Kansas City fed’s manufacturing activity index for September. From central banks, there’ll be a monetary policy decision from the Bank of England, while the ECB will be publishing their Economic Bulletin and the ECB’s Elderson will also speak. From emerging markets, there’ll also be monetary policy decisions from the Central Bank of Turkey and the South African Reserve Bank. Finally in Germany, there’s an election debate with the lead candidates from the Bundestag parties. Tyler Durden Thu, 09/23/2021 - 08:13.....»»

Category: blogSource: zerohedge50 min. ago

FOMC To Provide "Advance Notice" For November Tapering; May Deliver Two Potential Hawkish Surprises

FOMC To Provide "Advance Notice" For November Tapering; May Deliver Two Potential Hawkish Surprises At the conclusion of tomorrow's 2-day meeting, the FOMC is likely to provide the promised "advance notice" that tapering is coming, paving the way to announce the start of tapering at its November meeting, writes Goldman referencing a recent trial balloon by the WSJ which effectively reached the same conclusion. As we reported last weekend, the bank's standing forecast is that the FOMC will taper at a pace of $15bn per meeting, split between $10bn in UST and $5bn in MBS, ending in September 2022, although one possible alternative is for the Fed to accelerate the pace of tapering and cut each month instead of each meeting, thereby concluding its bond buying by next July. As Goldman's David Mericle writes, "while the start date now appears set, the pace of tapering is an open question.Our standing forecast is that the FOMC will taper at a pace of $15bn per meeting, split between $10bn in UST and $5bn in MBS, ending in September 2022. But a number of FOMC participants have called instead for a faster pace that would end by mid-2022, and we now see $15bn per meeting vs. $15bn per month as a close call." Specifically, Goldman expects that the September FOMC statement will include language similar to that used in July 2017 to foreshadow the start of balance sheet normalization at the next meeting. For example, it might say something along the lines of, “The Committee expects to begin reducing the pace of its asset purchases relatively soon, provided that the economy evolves broadly as anticipated." Separately, Goldman does not expect the FOMC to reveal the pace this week, though the minutes to the September meeting might eventually provide a clue. Moving down the list, the Fed's Summary of Economic Projections is likely to incorporate the recent stagflationary shifts in the economy, namely the large upside surprise to inflation and the large downside surprise to GDP growth over the last few months. As Goldman shows in the chart below, the bank's 2021 GDP growth forecast has fallen over 2pp on a Q4/Q4 basis since June, and we expect the FOMC to cut its 2021 projection substantially as well. Some more details here: Exhibit 3 shows that our GDP growth forecast for 2021 on a Q4/Q4 basis—the measure that Fed officials include in their projections—has come down by over 2pp since the FOMC’s June meeting. Both the disappointment on 2021Q2 growth and our downgrade to our 2021Q3 tracking estimate largely reflect the impact of supply chain disruptions on US production, especially auto production, which has resulted in a large drawdown of inventory to meet current demand. The Delta variant has also weighed on further recovery in the service sector, though the August retail sales report suggests that the impact on total consumer spending is likely to be more limited than we had initially feared. These delays in rebuilding inventory and reopening consumer services imply somewhat stronger growth in 2022, though the path forward for consumer spending now looks more difficult because government income support has dropped off and the remaining depressed service sectors, mainly very high-contact and office-adjacent services, are unlikely to recover rapidly during the winter virus season. As for the Fed's core PCE inflation projection for 2022, it is expected to remain stable at 2.1% in keeping with the Fed's narrative of "transitory" inflation, with some participants forecasting greater inflation momentum into next year and others forecasting more payback for stretched prices this year (Goldman expects the core PCE path will peak at a slightly higher 2.2% further ahead). Away from tapering, Goldman warns that the dots are an even closer call because a single participant could tip the balance upward relative to the bank's forecasts, which are shown in Exhibit 6. For 2022, only two participants would have to add a hike for the median to show a half-hike and three for the median to show a full hike. But the best guess here is that most of the potential marginal voters who could swing the balance are Governors at the Fed Board, and they are likely to join Chair Powell in submitting a no-hike baseline. After all, as Mericle notes, "it would be surprising if Powell showed a hike next year just weeks after his dovish speech at Jackson Hole reiterated his view that inflation pressures are likely to be transitory." In light of the above, Goldman expects the median dot to show no hikes in 2022, 2 hikes in 2023, and 3 hikes in 2024, anticipating that a quarterly pace of tightening back toward the neutral rate will be appropriate if everything goes well. While this would put the dots well above market pricing, Goldman does not expect much of a market reaction because the dots are a modal forecast corresponding to an economic baseline in which most participants will assume that the conditions for tightening will be met. They are not directly comparable to market pricing, a probability-weighted mean of a range of scenarios, including many in which the Fed would not hike. Moreover, Goldman rates strategists recently showed that markets have tended to put little weight on the Fed’s three year ahead dots in the past. In a slightly different take from Standard Chartered's Steven Englander, he expects the dots will signal one 2022 hike (vs no hikes according to Goldman), and two added hikes in both 2023 and 2024. Specifically, he expects seven FOMC participants to indicate two 25bps hikes in 2022 – five a single hike and six no hikes. The median is a single 2022 hike, but with a hawkish lean given so many participants pointing to two hikes. There is a risk that the hawkish 2022 skew could be even more pronounced, "but we do not think the 2022 dots will show a two-hike median. We estimate that about 18bps is priced by end-2022, somewhat low given what we expect" While Goldman is generally sanguine about tomorrow's FOMC, the banks concedes the bank catuions that risks to its expectations are tilted in a hawkish direction (more below). Some Fed officials have expressed greater concern about inflation recently, reflecting stronger wage pressures, increases in some short-term measures of inflation expectations, and the possibility that supply chain disruptions could last well into next year, as even the Fed realizes that inflation at this point is anything but "transitory." The two most likely hawkish risks according to Goldman would be if the FOMC reveals next week that it intends to taper at a faster pace or if the 2022 median dot shows a hike. However, client surveys suggest that the majority do not view either of these as the base case, meaning that either would be hawkish surprises to current market expectations, prompting a selloff and as everyone knows, that's what the Fed will avoid at all costs. The Fed leadership has historically preferred to avoid delivering hawkish surprises at FOMC meetings to the extent that it can, preferring the information to be priced in advance (like it did with the WSJ leak last weekend). While the dots are sometimes out of the leadership’s control, in this case we think it can probably prevent either of these two potential hawkish surprises from materializing this week. Tyler Durden Tue, 09/21/2021 - 13:53.....»»

Category: blogSource: zerohedgeSep 21st, 2021

AutoZone 4th Quarter Same Store Sales Increase 4.3%; 4th Quarter EPS Increases to $35.72; Annual Sales of $14.6 Billion

MEMPHIS, Tenn., Sept. 21, 2021 (GLOBE NEWSWIRE) -- AutoZone, Inc. (NYSE:AZO) today reported net sales of $4.9 billion for its fourth quarter (16 weeks) ended August 28, 2021, an increase of 8.1% from the fourth quarter of fiscal 2020 (16 weeks). Domestic same store sales, or sales for stores open at least one year, increased 4.3% for the quarter. "Our strong sales and earnings this quarter are a testament to our AutoZoners' ongoing commitment to going the extra mile for our customers. Our retail business performed very well this quarter ending with virtually flat same store sales on top of last year's historic growth of over 20%.  And, our commercial business growth continues to be exceptionally strong at 21.2%. The investments we are making continue to strengthen our competitive positioning in all the sectors and markets we compete. We are optimistic about our growth prospects heading into our new fiscal year," said Bill Rhodes, Chairman, President and Chief Executive Officer. For the quarter, gross profit, as a percentage of sales, was 52.3%, a decrease of 82 basis points versus the prior year. The decrease in gross margin was primarily driven by the initiatives to accelerate growth in our Commercial business. Operating expenses, as a percentage of sales, was 31.0% versus 30.7% last year. Our expense growth was primarily driven by higher payroll to support our sales and customer service initiatives, partially offset by a decrease in pandemic related expenses. In addition, we are investing in   technology to underpin our growth initiatives and we are seeing higher wage costs in our stores and distribution centers. Operating profit increased 2.6% to $1.0 billion. Net income for the quarter increased 6.1% over the same period last year to $785.8 million, while diluted earnings per share increased 15.5% to $35.72 from $30.93 in the year-ago quarter. For the fiscal year ended August 28, 2021, sales were $14.6 billion, an increase of 15.8% from the prior year, while domestic same store sales were up 13.6%. Gross profit, as a percentage of sales, was 52.8% versus 53.6%. The decrease in gross margin was primarily attributable to the initiatives to accelerate growth in our Commercial business. Operating expenses, as a percentage of sales, were 32.6% versus 34.5%. The reduction in operating expenses as a percent of sales was driven by strong sales growth and a decrease in pandemic related expenses. For fiscal 2021, net income increased 25.2% to $2.2 billion and diluted earnings per share increased 32.3% to $95.19 from $71.93. Return on invested capital finished at 41.0%. Under its share repurchase program, AutoZone repurchased 592 thousand shares of its common stock for $900 million during the fourth quarter, at an average price of $1,519 per share. For the fiscal year, the Company repurchased 2.6 million shares of its common stock for $3.4 billion, at an average price of $1,303 per share. At year end, the Company had $417.6 million remaining under its current share repurchase authorization. The Company's inventory increased 3.7% over the same period last year, driven by new stores and improved product assortment. Inventory per store was $686 thousand versus $683 thousand last year and $701 thousand last quarter. Net inventory, defined as merchandise inventories less accounts payable, on a per store basis, was negative $203 thousand versus negative $104 thousand last year and negative $167 thousand last quarter."While the COVID-19 pandemic continues to impact our customers' and AutoZoners' lives, our primary focus remains everyone's health and well-being. We will continue to help wherever we can to make our stores the best and safest place to shop for everyone's automotive needs. We remain committed to helping our AutoZoners during these difficult times. As always, we will take nothing for granted while striving for continued sales growth in fiscal 2022. As we continue to prudently invest capital in our business, we remain committed to our long-term, disciplined, approach of increasing operating earnings and cash flow while utilizing our balance sheet effectively," said Rhodes. During the quarter ended August 28, 2021, AutoZone opened 76 new stores in the U.S., 29 stores in Mexico and five stores in Brazil. At our fiscal year end, the Company had 6,051 stores in the U.S., 664 in Mexico and 52 in Brazil for a total store count of 6,767. AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the Americas. Each AutoZone store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations and public sector accounts. We also have commercial programs in all stores in Mexico and Brazil. AutoZone also sells the ALLDATA brand diagnostic and repair software through www.alldata.com. Additionally, we sell automotive hard parts, maintenance items, accessories and non-automotive products through www.autozone.com and our commercial customers can make purchases through www.autozonepro.com. We also provide product information on our Duralast branded products through www.duralastparts.com. AutoZone does not derive revenue from automotive repair or installation. AutoZone will host a conference call this morning, Tuesday, September 21, 2021, beginning at 10:00 a.m. (EDT) to discuss its fourth quarter results. This call is being web cast and can be accessed, along with supporting slides, at AutoZone's website at www.autozone.com and clicking on Investor Relations. Investors may also listen to the call by dialing (877) 407-8031. In addition, a telephone replay will be available by dialing (877) 481-4010 through October 19, 2021,11:59 pm (EDT). This release includes certain financial information not derived in accordance with generally accepted accounting principles ("GAAP"). These non-GAAP measures include adjustments to reflect return on invested capital, adjusted debt and adjusted debt to EBITDAR. The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Company's comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP. Management targets the Company's capital structure in order to maintain its investment grade credit ratings. The Company believes this is important information for the management of its debt levels and share repurchases. We have included a reconciliation of this additional information to the most comparable GAAP measures in the accompanying reconciliation tables. Certain statements contained in this press release constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically use words such as "believe," "anticipate," "should," "intend," "plan," "will," "expect," "estimate," "project," "positioned," "strategy," "seek," "may," "could," and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: product demand; energy prices; weather; competition; credit market conditions; cash flows; access to available and feasible financing; future stock repurchases; the impact of recessionary conditions; consumer debt levels; changes in laws or regulations; risks associated with self-insurance; war and the prospect of war, including terrorist activity; the impact of public health issues, such as the ongoing global coronavirus pandemic; inflation; the ability to hire, train and retain qualified employees; construction delays; the compromising of confidentiality, availability or integrity of information, including cyber-attacks; historic growth rate sustainability; downgrade of our credit ratings; damages to our reputation; challenges in international markets; failure or interruption of our information technology systems; origin and raw material costs of suppliers; disruption in our supply chain; impact of tariffs; anticipated impact of new accounting standards; and business interruptions. Certain of these risks and uncertainties are discussed in more detail in the "Risk Factors" section contained in Item 1A under Part 1 of the Company's Annual Report on Form 10-K for the year ended August 29, 2020, and these Risk Factors should be read carefully. Forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those contemplated by such forward-looking statements, and events described above and in the "Risk Factors" could materially and adversely affect our business. However, it should be understood that it is not possible to identify or predict all such risks and other factors that could affect these forward-looking statements. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Contact Information:Financial: Brian Campbell at (901) 495-7005, brian.campbell@autozone.comMedia: David McKinney at (901) 495-7951, david.mckinney@autozone.com     AutoZone's 4th Quarter Highlights - Fiscal 2021   Condensed Consolidated Statements of Operations 4th Quarter, FY2021 (in thousands, except per share data)     GAAP Results     16 Weeks Ended   16 Weeks Ended     August 28, 2021   August 29, 2020(2)           Net sales   $ 4,913,484     $ 4,545,968   Cost of sales     2,345,646       2,132,993   Gross profit     2,567,838       2,412,975   Operating, SG&A expenses     1,523,808       1,394,930   Operating profit (EBIT)     1,044,030       1,018,045   Interest expense, net     58,119       65,638   Income before taxes     985,911       952,407   Income taxes(1)     200,140       211,950   Net income   $ 785,771     $ 740,457   Net income per share:           Basic   $ 36.72     $ 31.67     Diluted   $ 35.72     $ 30.93   Weighted average shares outstanding:           Basic     21,400       23,383     Diluted     22,000       23,942                 (1)The sixteen weeks ended August 28, 2021 and the comparable prior year period include $21.2M and $3.3M in tax benefits from stock option exercises, respectively (2)The sixteen weeks ended August 29, 2020 was negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $10.7M (pre-tax)     Fiscal Year 2021         (in thousands, except per share data)                 GAAP Results         52 Weeks Ended   52 Weeks Ended         August 28, 2021(2)   August 29, 2020(2)               Net sales   $ 14,629,585     $ 12,631,967   Cost of sales     6,911,800       5,861,214   Gross profit     7,717,785       6,770,753   Operating, SG&A expenses     4,773,258       4,353,074   Operating profit (EBIT)     2,944,527       2,417,679   Interest expense, net     195,337       201,165   Income before taxes     2,749,190       2,216,514   Income taxes(1)     578,876       483,542   Net income   $ 2,170,314     $ 1,732,972   Net income per share:           Basic   $ 97.60     $ 73.62     Diluted   $ 95.19     $ 71.93   Weighted average shares outstanding:           Basic     22,237       23,540     Diluted     22,799       24,093      (1)The 52 weeks ended August 28, 2021 and the comparable prior year period include $56.4M and $20.9M in tax benefits from stock option exercises, respectively (2)The 52 weeks ended August 28, 2021 and the comparable prior year period were negatively impacted by pandemic related expenses, including Emergency Time-Off of approximately $43.0M (pre-tax) and $83.9M (pre-tax), respectively     Selected Balance Sheet Information         (in thousands)                 August 28, 2021   August 29, 2020               Cash and cash equivalents   $ 1,171,335     $ 1,750,815   Merchandise inventories     4,639,813       4,473,282   Current assets     6,415,303       6,811,872   Property and equipment, net     4,856,891       4,509,221   Operating lease right-of-use assets     2,718,712       2,581,677   Total assets     14,516,199       14,423,872   Accounts payable     6,013,924       5,156,324   Current liabilities     7,369,754       6,283,091   Operating lease liabilities, less current portion     2,632,842       2,501,560   Total debt     5,269,820       5,513,371   Stockholders' deficit     (1,797,536 )     (877,977 ) Working capital     (954,451 )     528,781                 AutoZone's 4th Quarter Highlights - Fiscal 2021                                     Condensed Consolidated Statements of Operations                                         Adjusted Debt / EBITDAR                 (in thousands, except adjusted debt to EBITDAR ratio)   Trailing 4 Quarters                   August 28, 2021   August 29, 2020         Net income    $ 2,170,314     $ 1,732,972           Add:  Interest expense     195,337       201,165                     Income tax expense     578,876       483,542           EBIT       2,944,527       2,417,679                             .....»»

Category: earningsSource: benzingaSep 21st, 2021

From the Editor-in-Chief: Are you ready for Florida"s minimum wage hike?

This week's cover story looks at how Florida's wage increase could impact local businesses......»»

Category: topSource: bizjournalsFeb 11th, 2021

Input Cost Inflation Turns Things Sour for These Food Stocks

Food companies such as Conagra (CAG), Kellogg (K), The J.M. Smucker (SJM) and TreeHouse Foods (THS) are seeing escalated input costs. Most companies are battling higher ingredients, transportation and packaging costs. Companies in the food space are grappling with cost inflation to a great extent – particularly pertaining to inputs. Inflationary pressure is affecting companies at all ends – be it ingredients or commodities; packaging; freight and transport; as well as labor. To top it, costs associated with COVID-19 as well as higher consumer marketing and innovation costs have been eating into margins of a number of food players. For now, input cost inflation tops the list of concerns for companies in the food industry. In fact, a vast number of players in their last earnings call cautioned about inflated cost scenario in the near term.A Closer Look at Input Cost InflationCosts of certain key ingredients such as edible oils, proteins, soybean, flour, vegetables, dairy items, egg and animal feed among others have been rising over the past few months. Consequently, food companies are bearing the brunt of the increased cost of ingredients. These include ready-to-eat cereal and convenience foods company Kellogg Company K, packaged bakery products producer and marketer Flowers Foods, Inc. FLO, frozen potato products company Lamb Weston Holdings, Inc. LW, and manufacturer, marketer, and distributor of spices, seasoning mixes, condiments, and other flavorful products McCormick & Company, Incorporated MKC.Apart from agricultural ingredients, input costs have been getting a major upward push from packaging costs, which are likely to remain high. This can be accounted to higher cost of materials like cardboard, aluminum and resin, to name a few. Additionally, companies are incurring increased cost of labor and transport – stemming from a tight labor market as well as supply-chain bottlenecks. A number of food companies expect the pandemic-included supply-chain volatility to linger for a while.Clearly, input cost inflation has turned things sour for several companies in the Zacks Food – Miscellaneous industry, which is currently ranked #177 and is placed among the bottom 30% of more than 250 Zacks industries.Will Pricing Efforts Really Help?The looming cost pressure has prompted food companies to undertake aggressive pricing actions. Passing on the elevated input cost pressure to consumers by raising product prices is quite common among companies looking to protect margins. Apart from this, many companies in the food space are focused on undertaking productivity, saving and revenue management initiatives to mitigate the cost challenges.While most companies spoke about resorting to stringent pricing policies in their last earnings call, the benefits from these actions are likely to take time to realize. In fact, several companies particularly stated that they don’t expect cost headwinds to be fully offset by their pricing initiatives in the near term. Consequently, a chunk of companies included cost inflation in their bottom-line guidance for the current fiscal year. A lot of them also trimmed their views as they anticipate cost inflation to continue playing spoilsport in the near term. Image Source: Zacks Investment Research Food Stocks Battered by Cost InflationConagra Brands, Inc. CAG lowered its adjusted operating margin and earnings guidance for fiscal 2022, when it reported fourth-quarter fiscal 2021 results. Adjusted operating margin in fiscal 2022 is now anticipated to be nearly 16% and adjusted earnings per share (EPS) is likely to be about $2.50, down from adjusted operating margin of 18-19% and adjusted EPS of $2.63-$2.73 expected earlier. Increased cost inflation prompted this consumer packaged goods food company to trim its guidance. Management expects cost inflation of nearly 9% in fiscal 2022. Although Conagra is focused on undertaking relevant saving and pricing efforts to combat this inflation, the timing and gains from these initiatives are likely to be more skewed toward the second half of fiscal 2022. These actions are unlikely to completely offset input cost woes in fiscal 2022. The first quarter of fiscal 2022 is, in fact, likely to be the lowest-margin quarter in the fiscal. Shares of this Zacks Rank #3 (Hold) company have dropped 5.1% in the past three months compared with the industry’s decline of 5.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Zacks #3 Ranked Kellogg is encountering disruptions related to a tight supply of materials, freight and labor as well as the associated cost inflation. Apart from this, costs related to COVID-19 and mix shift toward emerging markets weighed on its second-quarter 2021 gross margin. Management on its earnings call stated that it expects industry-wide supply-chain headwinds as well as elevated cost inflation in the second half of 2021. It expects gross margin to be more under pressure in the second half of 2021 than the first due to the prevailing operating and cost landscape. Kellogg expects gross margin in 2021 to lag the 2019 levels. Despite raising its organic sales guidance, management reiterated the operating profit and bottom-line guidance for 2021. Adjusted operating profit is still expected to decline roughly 1-2% at cc. Adjusted EPS (at cc) is envisioned in the range of down 2% to up 1%. Shares of Kellogg climbed a marginal 0.6% over the past three months.The J. M. Smucker Company SJM announced a guidance cut for fiscal 2022 when it released first-quarter results. This branded food and beverage company is encountering key commodity cost inflation along with supply-chain volatility surrounding the availability of labor and transportation. The J.M. Smucker, on its first-quarter earnings call, stated that it expects to encounter escalated raw material and logistic costs. Management expects supply-chain disruptions and cost inflation to persist through the rest of fiscal 2022. Cost inflation is now expected to have a high-single digit impact on cost of goods sold. For fiscal 2022, management now expects gross profit margin to be 36%, down from 37-37.5% expected earlier. Adjusted EPS for fiscal 2022 is now envisioned in the range of $8.25-$8.65, down from $8.70-$9.10 projected before. Owing to cost inflation and the timing of pricing actions, management expects EPS to decline in the second and third quarter of fiscal 2022. The Zacks Rank #4 (Sell) stock has lost 5.5% in the past three months.TreeHouse Foods, Inc. THS also curtailed its 2021 earnings guidance when it reported second-quarter results. Management, on its earnings call, said that it expects a further increase in commodity, freight, and packaging costs. The manufacturer and distributer of private label packaged foods and beverages predicts additional cost inflation of $40 million in 2021, which is unlikely to be countered by pricing. Adjusted earnings from continuing operations are expected to be $2.00-$2.50 per share for 2021, down from the previously-guided range of $2.80-$3.20 per share. For the third quarter of 2021, management expects adjusted EPS from continuing operations of 45-60 cents. In third-quarter 2020, the metric came in at 71 cents per share. The Zacks Rank #5 (Strong Sell) stock has declined 15.1% over the past three months. More Stock News: This Is Bigger than the iPhone! It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.Click here for the 4 trades >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CONAGRA BRANDS (CAG): Free Stock Analysis Report The J. M. Smucker Company (SJM): Free Stock Analysis Report Kellogg Company (K): Free Stock Analysis Report McCormick & Company, Incorporated (MKC): Free Stock Analysis Report Flowers Foods, Inc. (FLO): Free Stock Analysis Report TreeHouse Foods, Inc. (THS): Free Stock Analysis Report Lamb Weston Holdings Inc. (LW): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacks50 min. ago

FOMC Pushes Gold Prices Down

Brace yourselves, gold bulls, as the Fed clears the way for tapering and shifts interest rate liftoff to 2022. You’ve been warned. Q2 2021 hedge fund letters, conferences and more FOMC’s Newest Statement Yesterday (September 22, 2021), the FOMC published its newest statement on monetary policy. There are just a few alterations in the publication, […] Brace yourselves, gold bulls, as the Fed clears the way for tapering and shifts interest rate liftoff to 2022. You’ve been warned. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2021 hedge fund letters, conferences and more FOMC's Newest Statement Yesterday (September 22, 2021), the FOMC published its newest statement on monetary policy. There are just a few alterations in the publication, which mainly reflect changes in the economic environment. The Fed noted that the sectors most adversely affected by the pandemic “have improved in recent months, but the rise in COVID-19 cases has slowed their recovery”, while inflation “is elevated” (last time, the Fed wrote that “inflation has risen”). However, the most important change is, of course, the signal about a slowdown in the pace of asset purchases. The Fed acknowledged the economy’s progress towards the goals of price stability and maximum employment, and said that tapering of quantitative easing could soon be warranted: Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted. Although this is not a revolution in the Fed’s thinking and it’s not a surprise for the markets, the move is hawkish. The statement shows that the US central bank is determined to begin tapering soon despite the weak non-farm payrolls in August. The Fed didn’t provide any date, but investors could expect an announcement in October or November and effective implementation by the end of this year. Thus, the statement is negative for the gold prices. However, the silver lining is that the FOMC decided to write “moderation” instead of simply “tapering”. For me, this particular phrasing sounds softer, which gives some hope that tapering will be very gradual. So, the Fed’s monetary policy would remain accommodative for quite a long time. September Dot-Plot and Gold Now, let’s move on to the Fed’s newest economic projections that accompanied the statement. As the table below shows, the FOMC expects slower GDP growth, higher unemployment rate and higher inflation this year compared to its June’s forecasts. To be more precise, the FOMC expects that the GDP will jump 5.9% in 2021, compared to the 7% rise expected in June. It’s still an impressive surge but significantly slower than it was expected just three months ago. So, it seems that the Fed has taken the negative impact of the spread of the Delta variant of the coronavirus into account. Similarly, the unemployment rate is forecasted to decrease to 4.8% instead of to 4.5% expected in the previous projections. Meanwhile, the US central bank has also increased its inflation outlook. The FOMC members believe now that the PCE inflation will jump 4.2% this year, compared to 3.4% seen in December. The core PCE inflation is also expected to rise faster, i.e., 3.7%, versus 3% projected previously. So, the Fed expects a slowdown in the GDP growth combined with acceleration in inflation, which sounds stagflationary at the margin. These forecasts, when analyzed alone, should be positive for gold prices. However, the US central bank also updated its forecast for the interest rates. And I don’t have good news. In the latest edition of the Fundamental Gold Report (September 16, 2021), I warned readers of hawkish changes in the expected path of the federal funds rate. Given the increase in inflation since June and all the employment progress the economy made, the upcoming dot-plots could be hawkish and send gold prices lower. You have been warned. And, indeed, according to the fresh dot plot, the FOMC considers one interest rate hike next year as appropriate at the moment. On top of that, the Fed sees three additional 25-basis points increases in 2023, and three more in 2024 (and more hikes later in the future). So, instead of two hikes in 2023, we have one upward move as soon as in 2022 and three more in the following year. It means that the curve of the expected federal funds rate has become much steeper, which could make gold struggle. Implications for Gold What do the latest FOMC statement and dot-plot imply for the gold market? Well, the Fed cleared the way to taper its asset purchase program and signaled that the first interest rate hike could occur sooner than expected. Not surprisingly, the price of gold declined in response to the shift in the timeline of the interest rates liftoff, in line with my expectations. When it comes to the future, I believe that when the dust settles, gold may find some short-term relief. However, my guess is that gold will struggle until the Fed’s tightening cycle is well underway. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care Updated on Sep 23, 2021, 10:26 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalk2 hr. 33 min. ago

The owner of a Texas taco restaurant that closed down in the labor shortage says larger companies poached his staff with $5,000 pay rises

Taco Crush had just three kitchen staff left when it closed, its owner told Insider. He said job applicants didn't show up for interviews. Some restaurants have raised prices, slashed hours, and limited services because of the labor shortage. Damien Eagers/PA Images via Getty Images A Texas taco restaurant shut because it couldn't find enough staff in the labor shortage, its owner said. Staff were poached by bigger companies and job applicants didn't show up for interviews, he said. Restaurant staff have been leaving the industry in search of better wages and benefits. See more stories on Insider's business page. A taco restaurant in Texas closed down after being left with just three kitchen workers, its owner told Insider.Paul Horton, the owner of Taco Crush in McKinney, about 30 miles north of Dallas, said that larger companies had poached some of his staff by offering much higher wages, or benefits."I know we lost half a dozen that were offered an extra $5,000 a year to go somewhere else," he said."Or even just benefits - being a small, independent business, I can't compete with wages on bigger companies, let alone offer them any kind of benefits," he added. He didn't name the bigger companies that he said poached his staff.When asked what he paid staff, Horton said it was a "reasonable wage," without elaborating.Restaurant staff have been leaving the industry in search of better wages, benefits, and working conditions, causing some restaurants to raise prices, slash hours, limit services, or close for good. The US labor shortage has hit other industries, too, with some business owners blaming a lack of desire to work. Workers, meanwhile, say they don't need to take low-paying jobs in such a competitive labor market.Horton said that some of his new hires would drop out within a couple of weeks of starting. Each new hire meant more training - as a result, the food quality dropped because the trainees sometimes made mistakes, he said.Horton said that it became "literally not safe or viable to keep maintaining operations" after he lost all but three of his kitchen employees.Horton said that when he started drawing up a schedule, he realized these employees would each have to work 80- or 90-hour weeks, and that even then, service would be slow."At a minimum just to cover the shifts, we needed six, but to operate effectively and efficiently, we needed eight or nine people," he said.Horton said that he'd spent thousands of dollars advertising on job boards such as Indeed, but that only around 10% of job applicants replied to him after he tried to arrange an interview.Of those who he scheduled interviews with, only between 5% and 10% turned up, he said. Other restaurants have also said that some applicants weren't coming to interviews."You can't be choosy anymore," Horton said. "You're basically hiring anyone that would show up."An Oregon McDonald's is calling on 14-year-olds to apply for jobs, while a restaurant manager in Virginia said she hired people with bad attitudes because she was so desperate for staff.Do you own or manage a restaurant that's struggling to find staff? Or are you a hospitality worker who quit your job - or the industry - over pay, benefits, or working conditions? Contact this reporter at gdean@insider.com.Expanded Coverage Module: what-is-the-labor-shortage-and-how-long-will-it-last.....»»

Category: topSource: businessinsider9 hr. 17 min. ago

5 Smaller Beaten-Down Stocks with Strong Growth Potential

Not all share price dips make sense. So when other indications are positive, we can use any dips to accumulate shares. We like to think that the markets behave rationally. And they perhaps do, over the longer term. But there are many small things that happen day to day, that have an outsized impact on investor confidence.A case in point is the probable fall of Evergrande, the big Chinese real estate company that got ahead of itself with $300 billion in debt as it sought to expand to around 1,300 projects across 280 Chinese cities, as well as wealth management, electric cars, and food and drink manufacturing. The company is set to make interest payments of $84 million on Thursday, but there are real concerns that it won’t be able to pay, since a severe cash crunch already has it paying its wealth management customers with property.Okay, now why should that scare investors in the U.S. you might ask. The answer could be in the same supply chains that we have been talking about the past few months, as well as increases/decreases in demand and supply and the related impact on prices that inevitably follow when any big event that disrupts the equilibrium. Credit and financial markets are also somewhat interlinked, so there could be some concerns related to that.And then of course, there are the Chinese stocks, the largest of which appear to have been impacted by the news. Investors able to handle more risk may consider Chinese stocks, although the SEC continues to discourage these investments, not least because they’re not really holdings in the companies themselves, but really a share in their holding companies under a VIE arrangement, which further adds to risk.But honestly, Evergrande is a Chinese internal matter, and it does not appear at the moment to be impacting the U.S. in any material way.The FOMC meeting could also be weighing on sentiments, especially as regards the tapering of the $120 billion-a-month pace of asset purchases and subsequent interest rate hikes. The tapering will precede any interest rate hike but could be delayed given the rate at which delta is spreading. And going by past indications, we are probably looking at a couple of 25 basis point hikes by the end of 2023, not before. So the upcoming meeting is very likely to be uneventful, or at the most a confirmation of already-known facts. But we’ll have to see if there’s any change of tone.In the meantime, we can make the most of this volatility by buying some good shares cheap-Korn Ferry International KFYKorn Ferry International is one of the world’s largest recruitment firms filling positions in the middle to executive management levels of public and private companies, middle-market and emerging growth companies as well as governmental and not-for-profit organizations. It operates on a retainer basis.The stock is clearly poised for near-term appreciation given its Zacks #1 (Strong Buy) rank and Momentum Score of A. The fact that it belongs to the Staffing Firms industry (top 19%), is a supportive factor. As economies open up around the world, staffing demand is picking up. This along with the labor crunch in the U.S. makes this segment a great reopening bet.So the 3.4% price decline in the past week is nothing but an opportunity to grab some shares cheap. And considering the fact that they’re trading at a 14.22X P/E multiple, which is below the S&P’s 20.94X and their own median over the past year of 19.78X, the shares are certainly cheap.What’s more, the 2021 earnings estimate for KFY moved up from $4.12 to $5.10, an increase of 23.8% in the last 30 days. The 2022 estimate went from $4.60 to $4.89 (up 6.3%) while the current quarter estimate increased 38 cents (38.4%) in the last 30 days. That’s more reason to buy KFY at $71.28 a share.Nikon Corp. NINOYNikon manufactures and sells a broad range of products including imaging products (33% revenue share), precision lithography equipment for front-end semiconductor manufacturing for FPD, LCD and LOLED applications (41% share), medical instruments (14%) and other industrial metrology (12%).The Zacks Rank #2 (Buy) stock has a Momentum Score of A, indicating near-term upside potential. It also belongs to the Electronics - Manufacturing Machinery industry, which is currently placed in the top 28% of Zacks-classified industries. The U.S. manufacturing segment is extremely strong at the moment, as seen from recent government-released data, which is positive for all players.Nikon’s numbers further bear out this thesis: the 2021 estimate is up 12 cents (24.0%) in the last 30 days while the 2022 estimate is up 6 cents (9.5%). The current quarter estimate is up 4 cents (40%).Despite these strengths, the shares lost 4.3% of their value in past week and now trade at a 0.95X P/S, which is between the median value of 0.77X and the high of 0.97X. The S&P is way above at 4.80X.So at $12.07, they are really worth buying.Peabody Energy Corp. BTUPeabody Energy serves metallurgical and thermal coal customers primarily in Arizona, Colorado, New Mexico, Wyoming, Illinois, Indiana and Australia. It has an eye on sustainable mining and clean coal technologies.The Zacks Rank #2 stock has a Momentum Score of A. It belongs to the Coal industry (top 48% of Zacks-ranked industries). The ongoing strength in the steel industry is also driving demand for and prices of metallurgical coal, which is required to make coking coal used in the blast furnaces of steel producers.The company’s shares sank 19.0% over the past week and currently trade at a P/S ratio of 0.51X, which is between the median of 0.13X and high of 0.70X over the past year and well below the S&P 500’s 4.80X.So this looks like a very good time to capture the growth these shares represent: its 2021 estimate went from a loss of -$0.55 a share to a profit of $0.77 a share within the last 30 days. What’s more, the estimate for 2022 also moved from -$0.16 to $0.72 while the current-quarter estimate went from 45 cents to 72 cents.The shares cost just $13.98 each.Citi Trends, Inc. CTRNCiti Trends is a leading value-priced retailer of urban fashion apparel and accessories, as well as a limited assortment of home décor items targeted at fashion conscious African-American men, women and children.It belongs to the Retail - Apparel and Shoes industry, which is in the top 18% of Zacks-classified industries. The industry is about to enter what promises to be a very strong selling season, although the delta variant could push back some of the reopening spend.   But analysts appear highly optimistic about the company’s growth: its 2021 estimate is up from $5.00 to $6.50 (a 30% increase) in the last 30 days. The 2022 estimate is up $1.35 (23.5%). The estimate for the current quarter is up 10 cents (45.5%).The Zacks Rank #1 stock has a Momentum Score of A. After the 5.2% price slide over the past week, it is trading at $72.09, or a 10.48X P/E multiple, below the 17.20X median level since it started trading in January.Tillys, Inc. TLYSTilly's is a web-based specialty retailer in the action sports category selling clothing, shoes and accessories for men, women and children. It belongs, like CTRN, to the Retail - Apparel and Shoes industry.Its #1 rank and Momentum Score of A are indicative of upside in the near term. But despite the 39-cent (29.8%) increase in its 2021 estimate, 21-cent (17.4%) increase in its 2022 estimate and 10 cent (43.5%) increase in the current-quarter estimate in the last 30 days, the shares actually dropped 3.2% in the past week.TLYS shares currently trade at a P/S of 0.58X, which is close to their median value of 0.57X over the past year. So, at $14.20 a piece, they’re definitely worth buying.One-Month Price PerformanceImage Source: Zacks Investment Research Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report KornFerry International (KFY): Free Stock Analysis Report Peabody Energy Corporation (BTU): Free Stock Analysis Report Citi Trends, Inc. (CTRN): Get Free Report Tillys, Inc. (TLYS): Free Stock Analysis Report Nikon Corp. (NINOY): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 22nd, 2021

5 ETF Areas for Investors to Consider Amid the September Slump

Amid the market uncertainty, we have highlighted some ETF areas that can be good investment options for market participants to combat the September chaos. Wall Street is witnessing a tough time in the historically weak month of September. The Dow Jones Industrial Average has fallen 4%, whereas the S&P 500 has lost 3.7% in the month. Not just the reputation of the month, there are other factors like uncertainty surrounding the Fed’s decision, several weak economic data releases, concerns about rising COVID-19 cases and the approaching winter season, a large chunk of unvaccinated population, possibilities of high corporate tax rates, China property market concerns along with inflation pressure that have been keeping investors on the edge.Investors are waiting for the minutes from the Fed’s two-day policy meeting that began on Sep 21. They are concerned about the Fed’s chances of tapering the fiscal stimulus support, which includes the $120 billion a month bond-buying program. Several economic data releases are also weighing on investors’ minds.Amid the market uncertainty, we have highlighted some ETF areas that can be good investment options for market participants amid the September chaos:Healthcare ETFsThe pandemic has triggered a race to introduce vaccines and treatment options, opening up investing opportunities in the healthcare sector. Moreover, the space has been gaining increasing attention lately, largely due to the resurgence in COVID-19 infections due to the Delta variant. This has made investors jittery, compelling them to shift toward defensive investments.Considering the current market situation, investors can consider The Health Care Select Sector SPDR Fund XLV, Vanguard Health Care ETF VHT, iShares U.S. Healthcare ETF IYH and Fidelity MSCI Health Care Index ETF (FHLC).Retail ETFsThe latest retail sales data has pleasantly surprised investors. The metric rose 0.7% sequentially in August 2021 against market expectations of a 0.8% decline, per a CNBC article. Online retail sales rose 5.3% last month after declining 4.6% in July, per a Reuters article. There was a rise in sales at clothing stores as well as building material and furniture in the previous month. Encouragingly, the core retail sales rebounded 2.5% in August from a downwardly revised drop of 1.9% in July, according to the Reuters article. Importantly, the metric highlights the spending component of GDP.Going on, market analysts expect impressive retail sales in 2021 along with a strong holiday season. The strength in consumer sentiment can be the major driving force as they are believed to be prepared to splurge this holiday season after facing strict restrictions for more than a year and have gathered enough resources.Considering the strong trends, investors may park their money in the following retail ETFs to tap the sales boom -- SPDR S&P Retail ETF XRT, Amplify Online Retail ETF IBUY, VanEck Retail ETF RTH and ProShares Online Retail ETF (ONLN) (read: ETFs to Win & Lose as Delta Variant Cases Surge).Housing ETFsThe U.S. housing sector saw a bright spot with strength in housing demand and declining lumber prices. However, headwinds like increasing construction costs and continued material supply-chain worries along with rising home prices remain. These factors took a toll on builder confidence, which declined for three months. Per the monthly National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder sentiment for the newly-built single-family homes rose a point to 76 in September from 75 in August, 80 in July, 81 in June and 30 in April (the lowest since June 2012). The reading looks strong as any number above 50 signals at improving confidence.Against such a backdrop, here are a few housing ETFs like iShares U.S. Home Construction ETF ITB, SPDR S&P Homebuilders ETF XHB, Invesco Dynamic Building & Construction ETF (PKB) and Hoya Capital Housing ETF (HOMZ) (read: Forget Bubble Fear: Bet on Housing ETFs).Dividend ETFsDividend aristocrats are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. Moreover, dividend aristocrat funds provide investors with dividend growth opportunities in comparison to other products in the space but might not necessarily have the highest yields.‘Dividend aristocrats’ or ‘dividend growers’ are mostly deemed to be the smartest way to deal with market turmoil. Notably, the inclination toward dividend investing has been rising due to easing monetary policy on the global front, and market uncertainty triggered by the pandemic and deceleration in global growth.These products also form a strong portfolio, with a higher scope of capital appreciation as against simple dividend-paying stocks or those with high yields. As a result, these products deliver a nice combination of annual dividend growth and capital-appreciation opportunities and are mostly good for risk adverse long-term investors.Against this backdrop, let’s take a look at some ETFs that investors can consider like Vanguard Dividend Appreciation ETF VIG, SPDR S&P Dividend ETF SDY, iShares Select Dividend ETF DVY and ProShares S&P 500 Dividend Aristocrats ETF (NOBL) (read: Tax Hike Worries Drive Last Week's Inflows: 5 Hot ETFs).Low Volatility ETFsDemand for funds with “low volatility” or “minimum volatility” generally increases during tumultuous times. These seemingly-safe products usually do not surge in bull market conditions but offer more protection than the unpredictable ones. Providing more stable cash flow than the overall market, these funds are less cyclical in nature. Here are some options --  iShares Edge MSCI Min Vol USA ETF USMV, Invesco S&P 500 Low Volatility ETF SPLV, iShares Edge MSCI EAFE Minimum Volatility ETF EFAV, iShares Edge MSCI Min Vol Global ETF (ACWV), Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) (read: Growth Concerns to Drive Demand for Low-Volatility ETFs). Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Health Care Select Sector SPDR ETF (XLV): ETF Research Reports iShares U.S. Healthcare ETF (IYH): ETF Research Reports Vanguard Health Care ETF (VHT): ETF Research Reports SPDR S&P Homebuilders ETF (XHB): ETF Research Reports SPDR S&P Retail ETF (XRT): ETF Research Reports VanEck Retail ETF (RTH): ETF Research Reports iShares U.S. Home Construction ETF (ITB): ETF Research Reports SPDR S&P Dividend ETF (SDY): ETF Research Reports Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports iShares Select Dividend ETF (DVY): ETF Research Reports iShares MSCI USA Min Vol Factor ETF (USMV): ETF Research Reports iShares MSCI EAFE Min Vol Factor ETF (EFAV): ETF Research Reports Amplify Online Retail ETF (IBUY): ETF Research Reports Invesco S&P 500 Low Volatility ETF (SPLV): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 22nd, 2021

Cracker Barrel (CBRL) Stock Down as Q4 Earnings Lag Estimates

Cracker Barrel's (CBRL) fourth-quarter fiscal 2021 results are affected by staffing challenges, resurgence of coronavirus cases and commodity inflation. Cracker Barrel Old Country Store, Inc. CBRL reported fourth-quarter fiscal 2021 results (ended Jul 30, 2021), with earnings and revenues missing the Zacks Consensus Estimate. However, the top and the bottom line increased on a year-over-year basis.Following the results, the company’s shares fell 2.7% during trading hours on Sep 21. Negative investor sentiments were witnessed as management stated issues related to staffing, commodity and wage inflation as well as the resurgence of coronavirus cases.However, the company cited relief on account of solid performances by its off-premise model, retail business and the Maple Street Biscuit Company concept. Going forward, the company anticipates the momentum in recovery to continue on the back of its cost-saving initiatives, introduction of a new dinner menu along with the continued roll-out of beer and wine to its stores.Earnings & RevenuesDuring the fiscal fourth quarter, adjusted earnings per share (EPS) of $2.25 missed the Zacks Consensus Estimate of $2.42. In the prior year quarter, the company reported an adjusted loss per share of 85 cents.Cracker Barrel Old Country Store, Inc. Price, Consensus and EPS Surprise  Cracker Barrel Old Country Store, Inc. price-consensus-eps-surprise-chart | Cracker Barrel Old Country Store, Inc. Quote During the quarter, revenues of $784.4 million missed the consensus mark of $791 million by 0.9%. The figure increased 58.4% on a year-over-year basis. The company benefited from average weekly sales volumes improvement courtesy of increase in dine-in traffic, retained off-premise volumes and robust retail performance. The company’s average weekly Dine-in sales volumes increased to nearly $59,000 per week in July from approximately $54,000 per week in April.Comps DetailsComparable store restaurant sales declined 6.8% in the reported quarter from the levels recorded in the same period in fiscal 2019. Comparable store restaurant sales surged 53.5% year over year. Moreover, comparable retail sales increased 18.2% and 74.8% from the levels reported in the same period in 2019 and 2020, respectively.    During the fiscal fourth quarter, comparable store off-premise sales soared 108.6% from 2019 levels.Operating HighlightsDuring the fiscal fourth quarter, cost of goods sold (exclusive of depreciation and rent) declined 40 basis points (bps) year over year to 30.1%. General and administrative expenses contracted 360 bps year over year to 4.7%.Adjusted operating income in the fiscal fourth quarter totaled $65.9 million, up from ($20) million in the prior-year quarter. Adjusted operating margin came in at 8.4%. Margin benefited from better-than-expected sales performance, particularly in the company’s retail business.Balance SheetAs of Jul 30, 2021, cash and cash equivalents were $144.6 million, down from $437 million as on Jul 31, 2020.Inventory at the end of the fiscal fourth quarter amounted to $138.3 million, down from $139.1 million at the end of fourth-quarter fiscal 2020.Long-term debt amounted to $327.3 million at the end of the quarter, down from $910 million at the end of the prior-year quarter.Net cash provided by operating activities was $301.9 million in the fiscal 2021 compared with $161 million recorded a year ago.The company announced a hike in its quarterly dividend payout. The company raised its quarterly dividend by 30%, which indicates its intention to utilize free cash for boosting shareholders’ returns. The company raised quarterly dividend to $1.30 per share (or $5.20 annually) from the previous payout of $1.00 (or $4.00 annually). The hiked dividend will be payable on Nov 9, 2021, to shareholders of record as of Oct 22, 2021. Further, the management approved share repurchases of up to $100 million.Fiscal 2021 HighlightsFiscal 2021 adjusted EPS came in at $5.14 compared with $2.04 reported in the previous year.Total revenues in fiscal 2021 came in at $2,821.4 million compared with $ 2,522.8 million in fiscal 2020.GAAP operating income in fiscal 2021 totaled $366.7 million (or 13% of total revenues) compared with $103.6 million (or 4.1%) in the prior fiscal year.Store UpdatesAs of Jul 30, 2021, the company had 664 Cracker Barrel units and 37 Maple units, making it a total of 701 company-owned units under operation.Fiscal 2022 OutlookOwing to the uncertainty revolving around the COVID-19 pandemic as well as the current operating and staffing environment, the company is not providing any customary annual guidance. The company stated concerns regarding the nationwide increase in infections as it could negatively impact the guest visitation patterns as well as the availability of its employees. The company expects first-quarter fiscal 2022 sales to be negatively impacted by the same.For fiscal 2022, the company anticipates capital expenditures of approximately $120 million. Also, it expects commodity and wage inflation in the mid-to-high single digits. Meanwhile, effective tax rate for 2022 is anticipated at approximately 18%.Coming to store openings, the company expects to open three new Cracker Barrel locations and 15 new Maple Street Biscuit locations in fiscal 2022.Zacks RankCracker Barrel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Peer ReleasesBJ's Restaurants, Inc. BJRI reported second-quarter fiscal 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Both the metrics increased year over year. The company’s adjusted EPS of 26 cents beat the Zacks Consensus Estimate of 16 cents. In the prior-year quarter, the company had reported an adjusted loss of 99 cents per share. Quarterly revenues of $290.3 million surpassed the consensus estimate of $285 million. The top line also rallied 126.7% year over year. The upside can be primarily attributed to the lifting of capacity and social-distancing restrictions, thereby resulting in enhanced dining room capacity.McDonald's Corporation MCD reported second-quarter 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Both the metrics increased year over year. The company reported an adjusted EPS of $2.37, which surpassed the Zacks Consensus Estimate of $2.12. The bottom line surged 259.1% year over year. Quarterly revenues of $5,887.9 million beat the Zacks Consensus Estimate of $5,629 million. The figure rose 56.5% year over year. The top line benefited from increase in global comparable sales.Starbucks Corporation SBUX reported solid third-quarter fiscal 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Both the metrics increased year over year. The company reported an adjusted EPS of $1.01, which beat the Zacks Consensus Estimate of 77 cents. In the prior-year quarter, the company had reported an adjusted loss per share of 46 cents. Quarterly revenues of $7,496.5 million missed the Zacks Consensus Estimate of $7,243 million. The top line increased 77.6% from the year-ago quarter’s levels. The uptick was driven by growth in comparable store sales. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cracker Barrel Old Country Store, Inc. (CBRL): Free Stock Analysis Report BJs Restaurants, Inc. (BJRI): Free Stock Analysis Report Starbucks Corporation (SBUX): Free Stock Analysis Report McDonalds Corporation (MCD): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 22nd, 2021

Forget The Taper: All Hell Will Break Loose If The Fed"s 2022 Dots Signal 1 Rate Hike

Forget The Taper: All Hell Will Break Loose If The Fed's 2022 Dots Signal 1 Rate Hike For all the concerns about the Fed's tapering, the real news - and potential surprise - in today's FOMC announcement will be the dot plot. First, let's address the upcoming tapering where we mostly know where we stand. As we noted yesterday, at the conclusion of today's 2-day meeting, the FOMC is likely to provide the promised "advance notice" that tapering is coming, paving the way to announce the start of tapering at its November meeting, a move which was hinted in a recent trial balloon by the WSJ. Addressing this topic, Goldman recently said that the bank's standing forecast is that the FOMC will taper at a pace of $15bn per meeting, split between $10bn in UST and $5bn in MBS, ending in September 2022, although one possible alternative is for the Fed to accelerate the pace of tapering and cut each month instead of each meeting, thereby concluding its bond buying by next July. As Goldman's David Mericle wrote, "while the start date now appears set, the pace of tapering is an open question.Our standing forecast is that the FOMC will taper at a pace of $15bn per meeting, split between $10bn in UST and $5bn in MBS, ending in September 2022. But a number of FOMC participants have called instead for a faster pace that would end by mid-2022, and we now see $15bn per meeting vs. $15bn per month as a close call." Should the Fed react to the surging inflation and eventually announce a once-per-month taper, the QE over the next few months will look like this (market reaction notwithstanding, and it is very likely that should stocks tumble the Fed will be forced to put its tapering on hold or even reverse it and launch a brand new QE as Ray Dalio recently hinted). In terms of messaging, Goldman expects that the September FOMC statement will include language similar to that used in July 2017 to foreshadow the start of balance sheet normalization at the next meeting. For example, it might say something along the lines of: "The Committee expects to begin reducing the pace of its asset purchases relatively soon, provided that the economy evolves broadly as anticipated." Separately, Goldman does not expect the FOMC to reveal the pace this week, though the minutes to the September meeting might eventually provide a clue. We will skip over the Fed's economic projections (we discussed these in depth yesterday here), while providing an amusing interlued from UBS chief economist Paul Donovan... The Federal Reserve meets, and Fed Chair Powell (who is not an economist) will offer some comments on the economy. The fabled dot plot of individual FOMC members’ interest rate projections will also be updated—the sole purpose of this release is to increase confusion and misunderstanding in financial markets. ... and instead focus on the dots starting with a benign take, which once again comes from Goldman. Here, the bank warns that the dots are a close call because a single participant could tip the balance upward relative to the bank's forecasts, which are shown in Exhibit 6. Specifically, for 2022, only two participants would have to add a hike for the median to show a half-hike and three for the median to show a full hike. Still, the reason why Goldman does not see the 2022 dots relaying a half or full hike is that most of the potential marginal voters who could swing the balance are Governors at the Fed Board, and they are likely to join Chair Powell in submitting a no-hike baseline. After all, as Mericle notes, "it would be surprising if Powell showed a hike next year just weeks after his dovish speech at Jackson Hole reiterated his view that inflation pressures are likely to be transitory." In light of the above, Goldman expects the median dot to show no hikes in 2022, 2 hikes in 2023, and 3 hikes in 2024, anticipating that a quarterly pace of tightening back toward the neutral rate will be appropriate if everything goes well. While this would put the dots well above market pricing, Goldman does not expect much of a market reaction because the dots are a "modal forecast" corresponding to an economic baseline in which most participants will assume that the conditions for tightening will be met. In other words, the market will know that 2023 and 2024 are meaningless, but 2022 - which is closest - does matter. Indeed, Goldman's rates strategists recently showed that markets have tended to put little weight on the Fed’s three year ahead dots in the past. Before signing off, Goldman does warn that if it is wrong, the most likely surprise will be a hawkish one: The risks to our expectations for the September meeting are tilted in a hawkish direction.  Some Fed officials have expressed greater concern about inflation recently, reflecting stronger wage pressures, increases in some short-term measures of inflation expectations, and the possibility that supply chain disruptions could last well into next year.   The two most consequential hawkish risks would be if the FOMC reveals next week that it intends to taper at a faster pace or if the 2022 median dot shows a hike.  Surveys of our clients suggest that the majority of investors do not view either of these as the base case, meaning that either would be hawkish surprises to current market expectations.  The Fed leadership has historically preferred to avoid delivering hawkish surprises at FOMC meetings to the extent that it can, preferring the information to be priced in advance.  While the dots are sometimes out of the leadership’s control, in this case we think it can probably prevent either of these two potential hawkish surprises from materializing this week. But while Goldman does not see the 2022 dot moving higher, others are less sanguine. One among them is Standard Chartered's Steven Englander who agrees with Goldman on the taper, writing that "a November tapering decision will likely be signaled at the 22 September FOMC but without details on the pace of tapering or the path of subsequent policy rates hikes, except by inference." Here, however, Englander breaks with Goldman and agrees with us that the dots will be the focus of the market, the impact tempered by the relative market unimportance of Q4-2021 inflation and activity data releases compared to H1-2022 data releases. Cutting to the punchline, Englander thinks "the dots will suggest a more hawkish lean than is now priced in" and in a surprisingly hawkish forecast expects seven FOMC participants to indicate two 25bps hikes in 2022 – five a single hike and six no hikes. This would leave the median dot indicating a single 2022 hike, "but with a hawkish lean given so many participants pointing to two hikes."There is a risk that the hawkish 2022 skew could be even more pronounced, but we do not think the 2022 dots will show a two-hike median. We estimate that about 18bps is priced by end-2022, somewhat low given what we expect In a slightly different take from Standard Chartered's Steven Englander, he expects the dots will signal one 2022 hike (vs no hikes according to Goldman), and two added hikes in both 2023 and 2024. Specifically, he expects seven FOMC participants to indicate two 25bps hikes in 2022 – five a single hike and six no hikes. The would translate into the median dot representing a single 2022 hike, "but with a hawkish lean given so many participants pointing to two hikes" with Englander warning that "there is a risk that the hawkish 2022 skew could be even more pronounced, but we do not think the 2022 dots will show a two-hike median. We estimate that about 18bps is priced by end-2022, somewhat low given what we expect." Looking into the outer years, Englander expects the dots to point to another two hikes in each of 2023 and 2024, adding that "Neither hawks nor doves want to give an indication that aggressive policy moves may be needed – doves because they don’t want to augment any downside growth risks and hawks because they don’t want premature pricing of policy tightening to derail markets. Inflation and growth data will speak in H1-2022, and there is no point in gratuitously unsettling markets far in advance of the decisive data." Englander also takes a look at the FOMC composition in 2022, writing that "the 2022 regional Fed presidents who vote on FOMC are all pretty hawkish – Bullard, George, Mester and Rosengren. On the board, Waller is emerging as a hawk and even Vice Chair Clarida has begun to acknowledge inflation risks. The reliable doves are Powell, Williams, Brainard and Bowman. It is likely that a hawkish Quarles will be replaced because of his unpopularity on regulatory issues with Democrats, and one Board seat is unoccupied. But President Biden would have to appoint unambiguous doves to guarantee even a 50-50 split." Why does this matter? Well, it will matter most when there is ambiguity on the need to act: "Hawkish FOMC voters may read an intermediate outcome, say 2.7% core PCE, as signalling a need to act, while doves might wish to give inflation more time to dissipate on its own. It is possible that the FOMC could split 7-5 or 6-6, or even that Fed Chair Powell could be outvoted. This is a very unusual situation for the FOMC, where dissents have been isolated in recent decades. The Chair being in the minority has not happened since the 1980s. We think the FOMC will look hard for ways to avoid such difficult outcomes." Englander is not the only one expecting a hawkish risk: as Nomura's Charlie McElligott writes, "we see upside risk to the September “dot plot.” And while he thinks the median 2022 policy rate forecast will stay at the effective lower bound (ELB), he agrees with Goldman that the bar for a half or full hike is low. He also predicts that 2023 will continue to show two rate hikes, while 2024 – a new addition in September – will show an additional two hikes, similar to Englander, although he cautions that "concerns over inflation could result in more than four forecasted cumulative hikes by end-2024." What does this mean for stocks? Well, according to McElligott, whose note we discussed in detail earlier, the market is poised for a sharp move in either direction, but would need a “hawkish surprise”—particularly out of the ‘dot plot’, which would "drive some much-needed Rate Vol / upper left movement, via a UST selloff (today’s 133-00 TY straddle currently implying 4.65bps of yield move…so would need to see a larger magnitude selloff to indicate surprise vs mkt expectations)." And, as McElligott concludes, "IF…big IF…we got a “hawkish surprise” Fed, one should look at those duration-proxy “Secular Growth” Equities as the area again most at risk, and where we see a LOT of market interest in downside protection in said QQQ / ARKK / Unprofitable Tech proxies." Skew still remains “extreme” for sure, but in signs of a potential “pivot” off the worst of the extremes, we did at least finally see it soften yesterday—1m 25d Put Call Skew flattened by 50bps in SPX, while QQQ Skew flattened by ~ 30bps But no doubt, there is still “energy” there to overshoot in either direction with some very real accelerant flows remaining on account of Dealer options positioning: currently we see SPX / SPY Dealers short ~$9.2B of $Gamma (6.6%ile, flips positive above 4411) while $Delta remains negative at -$139.1B (11.2%ile, flips positive above 4400); similar for QQQ, with REALLY negative $Gamma at -$709.6mm (1.3%ile, flips up at 375.02) and negative $Delta at -$16.5B (2.7%ile, flips positive above $373.85) TL/DR: all hell could break loose if the Fed shocks the market hawkishly, and the median 2022 dot shows 1 rate hike. Tyler Durden Wed, 09/22/2021 - 12:05.....»»

Category: blogSource: zerohedgeSep 22nd, 2021

Futures Bounce On Evergrande Reprieve With Fed Looming

Futures Bounce On Evergrande Reprieve With Fed Looming Despite today's looming hawkish FOMC meeting in which Powell is widely expected to unveil that tapering is set to begin as soon as November and where the Fed's dot plot may signal one rate hike in 2022, futures climbed as investor concerns over China's Evergrande eased after the property developer negotiated a domestic bond payment deal. Commodities rallied while the dollar was steady. Contracts on the S&P 500 and Nasdaq 100 flipped from losses to gains as China’s central bank boosted liquidity when it injected a gross 120BN in yuan, the most since January... ... and investors mulled a vaguely-worded statement from the troubled developer about an interest payment.  S&P 500 E-minis were up 23.0 points, or 0.53%, at 7:30 a.m. ET. Dow E-minis were up 199 points, or 0.60%, and Nasdaq 100 E-minis were up 44.00 points, or 0.29%. Among individual stocks, Fedex fell 5.8% after the delivery company cut its profit outlook on higher costs and stalled growth in shipments. Morgan Stanley says it sees the company’s 1Q issues getting “tougher from here.” Commodity-linked oil and metal stocks led gains in premarket trade, while a slight rise in Treasury yields supported major banks. However, most sectors were nursing steep losses in recent sessions. Here are some of the biggest U.S. movers: Adobe (ADBE US) down 3.1% after 3Q update disappointed the high expectations of investors, though the broader picture still looks solid, Morgan Stanley said in a note Freeport McMoRan (FCX US), Cleveland- Cliffs (CLF US), Alcoa (AA US) and U.S. Steel (X US) up 2%-3% premarket, following the path of global peers as iron ore prices in China rallied Aethlon Medical (AEMD US) and Exela Technologies (XELAU US) advance along with other retail traders’ favorites in the U.S. premarket session. Aethlon jumps 21%; Exela up 8.3% Other so-called meme stocks also rise: ContextLogic +1%; Clover Health +0.9%; Naked Brand +0.9%; AMC +0.5% ReWalk Robotics slumps 18% in U.S. premarket trading, a day after nearly doubling in value Stitch Fix (SFIX US) rises 15.7% in light volume after the personal styling company’s 4Q profit and sales blew past analysts’ expectations Hyatt Hotels (H US) seen opening lower after the company launches a seven-million-share stock offering Summit Therapeutics (SMMT US) shares fell as much as 17% in Tuesday extended trading after it said the FDA doesn’t agree with the change to the primary endpoint that has been implemented in the ongoing Phase III Ri-CoDIFy studies when combining the studies Marin Software (MRIN US) surged more than 75% Tuesday postmarket after signing a new revenue-sharing agreement with Google to develop its enterprise technology platforms and software products The S&P 500 had fallen for 10 of the past 12 sessions since hitting a record high, as fears of an Evergrande default exacerbated seasonally weak trends and saw investors pull out of stocks trading at lofty valuations. The Nasdaq fell the least among its peers in recent sessions, as investors pivoted back into big technology names that had proven resilient through the pandemic. Focus now turns to the Fed's decision, due at 2 p.m. ET where officials are expected to signal a start to scaling down monthly bond purchases (see our preview here).  The Fed meeting comes after a period of market volatility stoked by Evergrande’s woes. China’s wider property-sector curbs are also feeding into concerns about a slowdown in the economic recovery from the pandemic. “Chair Jerome Powell could hint at the tapering approaching shortly,” said Sébastien Barbé, a strategist at Credit Agricole CIB. “However, given the current uncertainty factors (China property market, Covid, pace of global slowdown), the Fed should remain cautious when it comes to withdrawing liquidity support.” Meanwhile, confirming what Ray Dalio said that the taper will just bring more QE, Governing Council member Madis Muller said the  European Central Bank may boost its regular asset purchases once the pandemic-era emergency stimulus comes to an end. “Dovish signals could unwind some of the greenback’s gains while offering relief to stock markets,” Han Tan, chief market analyst at Exinity Group, wrote in emailed comments. A “hawkish shift would jolt markets, potentially pushing Treasury yields and the dollar past the upper bound of recent ranges, while gold and equities would sell off hunting down the next levels of support.” China avoided a major selloff as trading resumed following a holiday, after the country’s central bank boosted its injection of short-term cash into the financial system. MSCI’s Asia-Pacific index declined for a third day, dragged lower by Japan. Stocks were also higher in Europe. Basic resources - which bounced from a seven month low - and energy were among the leading gainers in the Stoxx Europe 600 index as commodity prices steadied after Beijing moved to contain fears of a spiraling debt crisis. Entain Plc rose more than 7%, extending Tuesday’s gain as it confirmed it received a takeover proposal from DraftKings Inc. Peer Flutter Entertainment Plc climbed after settling a legal dispute.  Here are some of the biggest European movers today: Entain shares jump as much as 11% after DraftKings Inc. offered to acquire the U.K. gambling company for about $22.4 billion. Vivendi rises as much as 3.1% in Paris, after Tuesday’s spinoff of Universal Music Group. Legrand climbs as much as 2.1% after Exane BNP Paribas upgrades to outperform and raises PT to a Street-high of EU135. Orpea shares falls as much as 2.9%, after delivering 1H results that Jefferies (buy) says were a “touch” below consensus. Bechtle slides as much as 5.1% after Metzler downgrades to hold from buy, saying persistent supply chain problems seem to be weighing on growth. Sopra Steria drops as much as 4.1% after Stifel initiates coverage with a sell, citing caution on company’s M&A strategy Despite the Evergrande announcement, Asian stocks headed for their longest losing streak in more than a month amid continued China-related concerns, with traders also eying policy decisions from major central banks. The MSCI Asia Pacific Index dropped as much as 0.7% in its third day of declines, with TSMC and Keyence the biggest drags. China’s CSI 300 tumbled as much as 1.9% as the local market reopened following a two-day holiday. However, the gauge came off lows after an Evergrande unit said it will make a bond interest payment and as China’s central bank boosted liquidity.  Taiwan’s equity benchmark led losses in Asia on Wednesday, dragged by TSMC after a two-day holiday, while markets in Hong Kong and South Korea were closed. Key stock gauges in Australia, Indonesia and Vietnam rose “A liquidity injection from the People’s Bank of China accompanied the Evergrande announcement, which only served to bolster sentiment further,” according to DailyFX’s Thomas Westwater and Daniel Dubrovsky. “For now, it appears that market-wide contagion risk linked to a potential Evergrande collapse is off the table.” Japanese equities fell for a second day amid global concern over China’s real-estate sector, as the Bank of Japan held its key stimulus tools in place while flagging pressures on the economy. Electronics makers were the biggest drag on the Topix, which declined 1%. Daikin and Fanuc were the largest contributors to a 0.7% loss in the Nikkei 225. The BOJ had been expected to maintain its policy levers ahead of next week’s key ruling party election. Traders are keenly awaiting the Federal Reserve’s decision due later for clues on the U.S. central banks plan for tapering stimulus. “Markets for some time have been convinced that the BOJ has reached the end of the line on normalization and will remain in a holding pattern on policy until at least April 2023 when Governor Kuroda is scheduled to leave,” UOB economist Alvin Liew wrote in a note. “Attention for the BOJ will now likely shift to dealing with the long-term climate change issues.” In the despotic lockdown regime that is Australia, the S&P/ASX 200 index rose 0.3% to close at 7,296.90, reversing an early decline in a rally led by mining and energy stocks. Banks closed lower for the fourth day in a row. Champion Iron was among the top performers after it was upgraded at Citi. IAG was among the worst performers after an earthquake caused damage to buildings in Melbourne. In New Zealand, the S&P/NZX 50 index rose 0.3% to 13,215.80 In FX, commodity currencies rallied as concerns about China Evergrande Group’s debt troubles eased as China’s central bank boosted liquidity and investors reviewed a statement from the troubled developer about an interest payment. Overnight implied volatility on the pound climbed to the highest since March ahead of Bank of England’s meeting on Thursday. The British pound weakened after Business Secretary Kwasi Kwarteng warnedthat people should prepare for longer-term high energy prices amid a natural-gas shortage that sent power costs soaring. Several U.K. power firms have stopped taking in new clients as small energy suppliers struggle to meet their previous commitments to sell supplies at lower prices. Overnight volatility in the euro rises above 10% for the first time since July ahead of the Federal Reserve’s monetary policy decision announcement. The Aussie jumped as much as 0.5% as iron-ore prices rebounded. Spot surged through option-related selling at 0.7240 before topping out near 0.7265 strikes expiring Wednesday, according to Asia- based FX traders.  Elsewhere, the yen weakened and commodity-linked currencies such as the Australian dollar pushed higher. In rates, the dollar weakened against most of its Group-of-10 peers. Treasury futures were under modest pressure in early U.S. trading, leaving yields cheaper by ~1.5bp from belly to long-end of the curve. The 10-year yield was at ~1.336% steepening the 2s10s curve by ~1bp as the front-end was little changed. Improved risk appetite weighed; with stock futures have recovering much of Tuesday’s losses as Evergrande concerns subside. Focal point for Wednesday’s session is FOMC rate decision at 2pm ET.   FOMC is expected to suggest it will start scaling back asset purchases later this year, while its quarterly summary of economic projections reveals policy makers’ expectations for the fed funds target in coming years in the dot-plot update; eurodollar positions have emerged recently that anticipate a hawkish shift Bitcoin dropped briefly below $40,000 for the first time since August amid rising criticism from regulators, before rallying as the mood in global markets improved. In commodities, Iron ore halted its collapse and metals steadied. Oil advanced for a second day. Bitcoin slid below $40,000 for the first time since early August before rebounding back above $42,000.   To the day ahead now, and the main highlight will be the aforementioned Federal Reserve decision and Chair Powell’s subsequent press conference. Otherwise on the data side, we’ll get US existing home sales for August, and the European Commission’s advance consumer confidence reading for the Euro Area in September. Market Snapshot S&P 500 futures up 0.4% to 4,362.25 STOXX Europe 600 up 0.5% to 461.19 MXAP down 0.7% to 199.29 MXAPJ down 0.4% to 638.39 Nikkei down 0.7% to 29,639.40 Topix down 1.0% to 2,043.55 Hang Seng Index up 0.5% to 24,221.54 Shanghai Composite up 0.4% to 3,628.49 Sensex little changed at 59,046.84 Australia S&P/ASX 200 up 0.3% to 7,296.94 Kospi up 0.3% to 3,140.51 Brent Futures up 1.5% to $75.47/bbl Gold spot up 0.0% to $1,775.15 U.S. Dollar Index little changed at 93.26 German 10Y yield rose 0.6 bps to -0.319% Euro little changed at $1.1725 Top Overnight News from Bloomberg What would it take to knock the U.S. recovery off course and send Federal Reserve policy makers back to the drawing board? Not much — and there are plenty of candidates to deliver the blow The European Central Bank will discuss boosting its regular asset purchases once the pandemic-era emergency stimulus comes to an end, but any such increase is uncertain, Governing Council member Madis Muller said Investors seeking hints about how Beijing plans to deal with China Evergrande Group’s debt crisis are training their cross hairs on the central bank’s liquidity management A quick look at global markets courtesy of Newsquawk Asian equity markets traded mixed as caution lingered ahead of upcoming risk events including the FOMC, with participants also digesting the latest Evergrande developments and China’s return to the market from the Mid-Autumn Festival. ASX 200 (+0.3%) was positive with the index led higher by the energy sector after a rebound in oil prices and as tech also outperformed, but with gains capped by weakness in the largest-weighted financials sector including Westpac which was forced to scrap the sale of its Pacific businesses after failing to secure regulatory approval. Nikkei 225 (-0.7%) was subdued amid the lack of fireworks from the BoJ announcement to keep policy settings unchanged and ahead of the upcoming holiday closure with the index only briefly supported by favourable currency outflows. Shanghai Comp. (+0.4%) was initially pressured on return from the long-weekend and with Hong Kong markets closed, but pared losses with risk appetite supported by news that Evergrande’s main unit Hengda Real Estate will make coupon payments due tomorrow, although other sources noted this is referring to the onshore bond payments valued around USD 36mln and that there was no mention of the offshore bond payments valued at USD 83.5mln which are also due tomorrow. Meanwhile, the PBoC facilitated liquidity through a CNY 120bln injection and provided no surprises in keeping its 1-year and 5-year Loan Prime Rates unchanged for the 17th consecutive month at 3.85% and 4.65%, respectively. Finally, 10yr JGBs were flat amid the absence of any major surprises from the BoJ policy announcement and following the choppy trade in T-notes which were briefly pressured in a knee-jerk reaction to the news that Evergrande’s unit will satisfy its coupon obligations tomorrow, but then faded most of the losses as cautiousness prevailed. Top Asian News Gold Steady as Traders Await Outcome of Fed Policy Meeting Evergrande Filing on Yuan Bond Interest Leaves Analysts Guessing Singapore Category E COE Price Rises to Highest Since April 2014 Asian Stocks Fall for Third Day as Focus Turns to Central Banks European equities (Stoxx 600 +0.5%) trade on a firmer footing in the wake of an encouraging APAC handover. Focus overnight was on the return of Chinese participants from the Mid-Autumn Festival and news that Evergrande’s main unit, Hengda Real Estate will make coupon payments due tomorrow; however, we await indication as to whether they will meet Thursday’s offshore payment deadline as well. Furthermore, the PBoC facilitated liquidity through a CNY 120bln injection whilst keeping its 1-year and 5-year Loan Prime Rates unchanged (as expected). Note, despite gaining yesterday and today, thus far, the Stoxx 600 is still lower to the tune of 0.7% on the week. Stateside, futures are also trading on a firmer footing ahead of today’s FOMC policy announcement, at which, market participants will be eyeing any clues for when the taper will begin and digesting the latest dot plot forecasts. Furthermore, the US House voted to pass the bill to fund the government through to December 3rd and suspend the debt limit to end-2022, although this will likely be blocked by Senate Republicans. Back to Europe, sectors are mostly firmer with outperformance in Basic Resources and Oil & Gas amid upside in the metals and energy complex. Elsewhere, Travel & Leisure is faring well amid further upside in Entain (+6.1%) with the Co. noting it rejected an earlier approach from DraftKings at GBP 25/shr with the new offer standing at GBP 28/shr. Additionally for the sector, Flutter Entertainment (+4.1%) are trading higher after settling the legal dispute between the Co. and Commonwealth of Kentucky. Elsewhere, in terms of deal flow, Iliad announced that it is to acquire UPC Poland for around USD 1.8bln. Top European News Energy Cost Spike Gets on EU Ministers’ Green Deal Agenda Travel Startup HomeToGo Gains in Frankfurt Debut After SPAC Deal London Stock Exchange to Shut Down CurveGlobal Exchange EU Banks Expected to Add Capital for Climate Risk, EBA Says In FX, trade remains volatile as this week’s deluge of global Central Bank policy meetings continues to unfold amidst fluctuations in broad risk sentiment from relatively pronounced aversion at various stages to a measured and cautious pick-up in appetite more recently. Hence, the tide is currently turning in favour of activity, cyclical and commodity currencies, albeit tentatively in the run up to the Fed, with the Kiwi and Aussie trying to regroup on the 0.7000 handle and 0.7350 axis against their US counterpart, and the latter also striving to shrug off negative domestic impulses like a further decline below zero in Westpac’s leading index and an earthquake near Melbourne. Next up for Nzd/Usd and Aud/Usd, beyond the FOMC, trade data and preliminary PMIs respectively. DXY/CHF/EUR/CAD - Notwithstanding the overall improvement in market tone noted above, or another major change in mood and direction, the Dollar index appears to have found a base just ahead of 93.000 and ceiling a similar distance away from 93.500, as it meanders inside those extremes awaiting US existing home sales that are scheduled for release before the main Fed events (policy statement, SEP and post-meeting press conference from chair Powell). Indeed, the Franc, Euro and Loonie have all recoiled into tighter bands vs the Greenback, between 0.9250-26, 1.1739-17 and 1.2831-1.2770, but with the former still retaining an underlying bid more evident in the Eur/Chf cross that is consolidating under 1.0850 and will undoubtedly be acknowledged by the SNB tomorrow. Meanwhile, Eur/Usd has hardly reacted to latest ECB commentary from Muller underpinning that the APP is likely to be boosted once the PEPP envelope is closed, though Usd/Cad is eyeing a firm rebound in oil prices in conjunction with hefty option expiry interest at the 1.2750 strike (1.8 bn) that may prevent the headline pair from revisiting w-t-d lows not far beneath the half round number. GBP/JPY - The major laggards, as Sterling slips slightly further beneath 1.3650 against the Buck to a fresh weekly low and Eur/Gbp rebounds from circa 0.8574 to top 0.8600 on FOMC day and T-1 to super BoE Thursday. Elsewhere, the Yen has lost momentum after peaking around 109.12 and still not garnering sufficient impetus to test 109.00 via an unchanged BoJ in terms of all policy settings and guidance, as Governor Kuroda trotted out the no hesitation to loosen the reins if required line for the umpteenth time. However, Usd/Jpy is holding around 109.61 and some distance from 1.1 bn option expiries rolling off between 109.85-110.00 at the NY cut. SCANDI/EM - Brent’s revival to Usd 75.50+/brl from sub-Usd 73.50 only yesterday has given the Nok another fillip pending confirmation of a Norges Bank hike tomorrow, while the Zar has regained some poise with the aid of firmer than forecast SA headline and core CPI alongside a degree of retracement following Wednesday’s breakdown of talks on a pay deal for engineering workers that prompted the union to call a strike from early October. Similarly, the Cnh and Cny by default have regrouped amidst reports that the CCP is finalising details to restructure Evergrande into 3 separate entities under a plan that will see the Chinese Government take control. In commodities, WTI and Brent are firmer this morning though once again fresh newsflow for the complex has been relatively slim and largely consisting of gas-related commentary; as such, the benchmarks are taking their cue from the broader risk tone (see equity section). The improvement in sentiment today has brought WTI and Brent back in proximity to being unchanged on the week so far as a whole; however, the complex will be dictated directly by the EIA weekly inventory first and then indirectly, but perhaps more pertinently, by today’s FOMC. On the weekly inventories, last nights private release was a larger than expected draw for the headline and distillate components, though the Cushing draw was beneath expectations; for today, consensus is a headline draw pf 2.44mln. Moving to metals where the return of China has seen a resurgence for base metals with LME copper posting upside of nearly 3.0%, for instance. Albeit there is no fresh newsflow for the complex as such, so it remains to be seen how lasting this resurgence will be. Finally, spot gold and silver are firmer but with the magnitude once again favouring silver over the yellow metal. US Event Calendar 10am: Aug. Existing Home Sales MoM, est. -1.7%, prior 2.0% 2pm: Sept. FOMC Rate Decision (Lower Boun, est. 0%, prior 0% DB's Jim Reid concludes the overnight wrap All eyes firmly on China this morning as it reopens following a 2-day holiday. As expected the indices there have opened lower but the scale of the declines are being softened by the PBoC increasing its short term cash injections into the economy. They’ve added a net CNY 90bn into the system. On Evergrande, we’ve also seen some positive headlines as the property developers’ main unit Hengda Real Estate Group has said that it will make coupon payment for an onshore bond tomorrow. However, the exchange filing said that the interest payment “has been resolved via negotiations with bondholders off the clearing house”. This is all a bit vague and doesn’t mention the dollar bond at this stage. Meanwhile, Bloomberg has reported that Chinese authorities have begun to lay the groundwork for a potential restructuring that could be one of the country’s biggest, assembling accounting and legal experts to examine the finances of the group. All this follows news from Bloomberg yesterday that Evergrande missed interest payments that had been due on Monday to at least two banks. In terms of markets the CSI (-1.11%), Shanghai Comp (-0.29%) and Shenzhen Comp (-0.53%) are all lower but have pared back deeper losses from the open. We did a flash poll in the CoTD yesterday (link here) and after over 700 responses in a couple of hours we found only 8% who we thought Evergrande would still be impacting financial markets significantly in a month’s time. 24% thought it would be slightly impacting. The other 68% thought limited or no impact. So the world is relatively relaxed about contagion risk for now. The bigger risk might be the knock on impact of weaker Chinese growth. So that’s one to watch even if you’re sanguine on the systemic threat. Craig Nicol in my credit team did a good note yesterday (link here) looking at the contagion risk to the broader HY market. I thought he summed it up nicely as to why we all need to care one way or another in saying that “Evergrande is the largest corporate, in the largest sector, of the second largest economy in the world”. For context AT&T is the largest corporate borrower in the US market and VW the largest in Europe. Turning back to other Asian markets now and the Nikkei (-0.65%) is down but the Hang Seng (+0.51%) and Asx (+0.58%) are up. South Korean markets continue to remain closed for a holiday. Elsewhere, yields on 10y USTs are trading flattish while futures on the S&P 500 are up +0.10% and those on the Stoxx 50 are up +0.21%. Crude oil prices are also up c.+1% this morning. In other news, the Bank of Japan policy announcement overnight was a non-event as the central bank maintained its yield curve target while keeping the policy rate and asset purchases plan unchanged. The central bank also unveiled more details of its green lending program and said that it would immediately start accepting applications and would begin making the loans in December. The relatively calm Asian session follows a stabilisation in markets yesterday following their rout on Monday as investors looked forward to the outcome of the Fed’s meeting later today. That said, it was hardly a resounding performance, with the S&P 500 unable to hold on to its intraday gains and ending just worse than unchanged after the -1.70% decline the previous day as investors remained vigilant as to the array of risks that continue to pile up on the horizon. One of these is in US politics and legislators seem no closer to resolving the various issues surrounding a potential government shutdown at the end of the month, along with a potential debt ceiling crisis in October, which is another flashing alert on the dashboard for investors that’s further contributing to weaker sentiment right now. Looking ahead now, today’s main highlight will be the latest Federal Reserve decision along with Chair Powell’s subsequent press conference, with the policy decision out at 19:00 London time. Markets have been on edge for any clues about when the Fed might begin to taper asset purchases, but concern about tapering actually being announced at this meeting has dissipated over recent weeks, particularly after the most recent nonfarm payrolls in August came in at just +235k, and the monthly CPI print also came in beneath consensus expectations for the first time since November. In terms of what to expect, our US economists write in their preview (link here) that they see the statement adopting Chair Powell’s language that a reduction in the pace of asset purchases is appropriate “this year”, so long as the economy remains on track. They see Powell maintaining optionality about the exact timing of that announcement, but they think that the message will effectively be that the bar to pushing the announcement beyond November is relatively high in the absence of any material downside surprises. This meeting also sees the release of the FOMC’s latest economic projections and the dot plot, where they expect there’ll be an upward drift in the dots that raises the number of rate hikes in 2023 to 3, followed by another 3 increases in 2024. Back to yesterday, and as mentioned US equity markets fell for a second straight day after being unable to hold on to earlier gains, with the S&P 500 slightly lower (-0.08%). High-growth industries outperformed with biotech (+0.38%) and semiconductors (+0.18%) leading the NASDAQ (+0.22%) slightly higher, however the Dow Jones (-0.15%) also struggled. Europe saw a much stronger performance though as much of the US decline came after Europe had closed. The STOXX 600 gained +1.00% to erase most of Monday’s losses, with almost every sector in the index ending the day in positive territory. With risk sentiment improving for much of the day yesterday, US Treasuries sold off slightly and by the close of trade yields on 10yr Treasuries were up +1.2bps to 1.3226%, thanks to a +1.8bps increase in real yields. However, sovereign bonds in Europe told a different story as yields on 10yr bunds (-0.3bps), OATs (-0.3bps) and BTPs (-1.9bps) moved lower. Other safe havens including gold (+0.59%) and silver (+1.02%) also benefited, but this wasn’t reflected across commodities more broadly, with Bloomberg’s Commodity Spot Index (-0.30%) losing ground for a 4th consecutive session. Democratic Party leaders plan to vote on the Senate-approved $500bn bipartisan infrastructure bill next Monday, even with no resolution to the $3.5tr budget reconciliation measure that encompasses the remainder of the Biden Administration’s economic agenda. Democrats continue to work on the reconciliation measure but have turned their attention to the debt ceiling and government funding bills.Congress has fewer than two weeks before the current budget expires – on Oct 1 – to fund the government and raise the debt ceiling. Republicans yesterday noted that the Democrats could raise the ceiling on their own through the reconciliation process, with many saying that they would not be offering their support to any funding bill. Democrats continue to push for a bipartisan bill to raise the debt ceiling, pointing to their votes during the Trump administration. If Democrats are forced to tie the debt ceiling and funding bills to budget reconciliation, it could limit how much of the $3.5 trillion bill survives the last minute negotiations between progressives and moderates. More to come over the next 10 days. Staying on the US, there was an important announcement in President Biden’s speech at the UN General Assembly, as he said that he would work with Congress to double US funding to poorer nations to deal with climate change. That comes as UK Prime Minister Johnson (with the UK hosting the COP26 summit in less than 6 weeks’ time) has been lobbying other world leaders to find the $100bn per year that developed economies pledged by 2020 to support developing countries as they reduce their emissions and deal with climate change. In Germany, there are just 4 days to go now until the federal election, and a Forsa poll out yesterday showed a slight narrowing in the race, with the centre-left SPD remaining on 25%, but the CDU/CSU gained a point on last week to 22%, which puts them within the +/- 2.5 point margin of error. That narrowing has been seen in Politico’s Poll of Polls as well, with the race having tightened from a 5-point SPD lead over the CDU/CSU last week to a 3-point one now. Turning to the pandemic, Johnson & Johnson reported that their booster shot given 8 weeks after the first offered 100% protection against severe disease, 94% protection against symptomatic Covid in the US, and 75% against symptomatic Covid globally. Speaking of boosters, Bloomberg reported that the FDA was expected to decide as soon as today on a recommendation for Pfizer’s booster vaccine. That follows an FDA advisory panel rejecting a booster for all adults last Friday, restricting the recommendation to those over-65 and other high-risk categories. Staying with the US and vaccines, President Biden announced that the US was ordering 500mn doses of the Pfizer vaccine to be exported to the rest of the world. On the data front, there were some strong US housing releases for August, with housing starts up by an annualised 1.615m (vs. 1.55m expected), and building permits up by 1.728m (vs. 1.6m expected). Separately, the OECD released their Interim Economic Outlook, which saw them upgrade their inflation expectations for the G20 this year to +3.7% (up +0.2ppts from May) and for 2022 to +3.9% (up +0.5ppts from May). Their global growth forecast saw little change at +5.7% in 2021 (down a tenth) and +4.5% for 2022 (up a tenth). To the day ahead now, and the main highlight will be the aforementioned Federal Reserve decision and Chair Powell’s subsequent press conference. Otherwise on the data side, we’ll get US existing home sales for August, and the European Commission’s advance consumer confidence reading for the Euro Area in September. Tyler Durden Wed, 09/22/2021 - 08:05.....»»

Category: blogSource: zerohedgeSep 22nd, 2021

FedEx Tumbles After Missing Earnings, Guiding Lower On Soaring Labor, Transportation Costs

FedEx Tumbles After Missing Earnings, Guiding Lower On Soaring Labor, Transportation Costs Three weeks ago we warned that with banks such as Morgan Stanley and BofA warning that margin contraction is about to hit US companies, we were going to see a bevy of earnings warnings. If MS and BofA are right on slumping consumer demand and margin contraction we should start seeing Q3 earnings warnings in the next 2 weeks. — zerohedge (@zerohedge) August 30, 2021 Moments ago we got a vivid example of this, when Fedex tumbled after hours after it reported that not only did it miss Q1 earnings - just hours after announcing it was raising prices at the fastest pace in decades - but also slashed guidance, warning about sharply higher labor costs and operating expenses. For its just completed fiscal first quarter, the company reported: Adjusted EPS $4.37 vs. $4.87 y/y, missing consensus estimates $4.92 and also missing the lowest forecast of the range from $4.60 to $5.90 Adjusted operating margin - just as we said - of only 6.8%, down sharply from 8.50% a year ago, and missing the estimate of 8.52% Revenue of $22.0 billion, up +14% y/y, beating the estimate of $21.88 billion but clearly not enough to offset the margin compression. The 2022 full-year forecast was more troubling, with the company now expecting adjusted EPS of only $19.75 to $21.00, below the consensus estimate of $21.03 . Commenting on its disappointing results, Fedex said that first quarter operating results were negatively affected by an estimated $450 million year over year increase in costs due to a constrained labor market which impacted labor availability, resulting in network inefficiencies, higher wage rates, and increased purchased transportation expenses. And while commercial ground and U.S. domestic express package volume increased year over year, the company warned that continued supply chain disruptions have slowed U.S. domestic parcel demand compared to the company’s earlier forecast. The story was the same for both Express, Ground and Freight segments: FedEx Express operating results declined due to higher operating expenses, largely driven by staffing challenges and COVID-19-related air network impacts. Results were also negatively impacted by a decline in U.S. average daily freight pounds due to a surge in charter flights a year ago. These factors were partially offset by higher revenue per package and growth in FedEx International Priority and U.S. domestic express packages. FedEx Ground first quarter operating results declined primarily due to higher labor costs and network inefficiencies due to inadequate staffing, which negatively affected year-over-year results by an estimated $320 million. Operating results were also negatively impacted by higher expansion-related costs. These costs were partially offset by higher revenue per package and growth in commercial packages. FedEx Freight first quarter operating results improved primarily due to the continued focus on revenue quality and cost management. FedEx Freight reported a record operating margin of 17.3% for the quarter, with average daily shipments growing 12% and revenue per shipment increasing 11%. The company also reiterated that it was jamming through massive prices increases, and that effective January 3, 2022, FedEx Express, FedEx Ground and FedEx Home Delivery shipping rates will increase by an average of 5.9%, while FedEx Freight rates will increase by an average of 5.9% to 7.9%. Additionally, effective November 1, 2021, a fuel surcharge increase will be applied to FedEx Express (U.S. domestic package and freight services), FedEx Ground and FedEx Freight shipments. In retrospect, and in light of the big profit and margin miss, FDX should have passed its price increase far sooner. Looking ahead, and even when factoring in the new price increases, FedEx said it was reducing its earnings outlook to reflect first quarter results, which were lower than the company’s June forecast. "As conditions during the first quarter were more challenging than anticipated and are now expected to extend longer, the revised FedEx outlook also reflects management’s updated expectations for the remainder of the fiscal year:" Earnings per diluted share of $18.25 to $19.50 before the MTM retirement plan accounting adjustments, compared to the prior forecast of $18.90 to $19.90 per diluted share; Earnings per diluted share of $19.75 to $21.00 before the MTM retirement plan accounting adjustments and excluding estimated TNT Express integration expenses and costs associated with business realignment activities, compared to the prior forecast of $20.50 to $21.50 per diluted share; ETR of approximately 24% prior to the MTM retirement plan accounting adjustments; and Capital spending of $7.2 billion. These forecasts assume continued growth in U.S. industrial production and global trade, a gradual improvement in labor availability beginning in the second half of fiscal 2022, no additional COVID-19-related business restrictions, and current fuel price expectations. FedEx’s ETR and earnings per share forecasts are based on current law and related regulations and guidance. CFO Michael C. Lenz said that “our results for the first quarter reflect higher operating costs we are incurring during this uncertain and challenging operating environment." Like central bankers, Lenz is hopeful that the distortions created in the labor market by the BIden admin will be transitory: "While we expect these conditions to continue near-term, we expect a gradual improvement in labor availability combined with our proactive revenue management actions to mitigate the ongoing impact of these headwinds on our results and position us for earnings growth in fiscal 2022.” Alas, the market does not seem to agree, and FDX stock was sharply lower after hours reflecting what is now a far more challenging environment where fading stimmies have given way to soaring input prices, labor costs and wholesale margin compression.       Tyler Durden Tue, 09/21/2021 - 16:29.....»»

Category: blogSource: zerohedgeSep 21st, 2021

AOC says ending federal unemployment benefits was "based on fantasy, not data"

Federal unemployment benefits ended this month, but millions of Americans that were cut off aren't flocking back to work. AOC blames childcare costs. Rep. Alexandria Ocasio-Cortez, D-N.Y., speaks with reporters, Thursday, June 17, 2021, as she arrives on Capitol Hill in Washington. AP Photo/Jacquelyn Martin Rep. Alexandria Ocasio-Cortez tweeted that letting federal unemployment expire was based on fantasy - not data. Research on ending benefits early continually showed little impact on job growth and employment. Ocasio-Cortez has introduced legislation to extend benefits through February 2022. See more stories on Insider's business page. Rep. Alexandria Ocasio-Cortez is shaking her head at employers who are flabbergasted people haven't flocked back to work after federal unemployment benefits expired in early September."You can't force people to work a job that doesn't pay enough to live," she said in a tweet. She was writing in response to a Bloomberg article by Katia Dmitrieva and Olivia Rockeman that said employers are "baffled" as applications don't roll in, even with the benefits gone. When federal unemployment benefits meant to expand and enhance the social safety net for Americans who lost their jobs during the pandemic expired on Labor Day, millions of incomes were drastically slashed. Gig workers and freelancers were particularly impacted, as they were newly eligible for benefits during the pandemic under the Pandemic Unemployment Assistance (PUA) program. That program made up the greatest share of federal unemployment distributed in 2020, and advocates have seized on its widespread adoption as an argument to permanently expand eligibility to a wider variety of workers. In the week ending August 28 - right before benefits ended - more than five million Americans had continued claims for PUA.While the end of benefits like PUA was ostensibly meant to get Americans back to work, that doesn't seem to have happened yet. But why? Ocasio-Cortez tweeted "this isn't hard," asking what's the point in working a minimum-wage - or even $15 an hour - job if childcare costs as much as someone gets paid? "Letting PUA expire was based on fantasy, not data. We must restore it," she said.-Alexandria Ocasio-Cortez (@AOC) September 20, 2021Prior to the September 6 expiration of all federal unemployment benefits, 26 states opted out of benefits early. In those states that cut off UI early - only one of which is led by a Democrat - several officials referenced the need to get people back to work and plug up labor shortages.However, research has continually shown that cutting those benefits off early had little impact on job growth and employment - but it did deliver a big economic blow to the states that opted out. One analysis by researchers at University of Massachusetts Amherst, Harvard University, Columbia University, and University of Toronto found that consumer spending in those early cut-off states fell by $2 billion.Ocasio-Cortez has been at the forefront of the small group of lawmakers pushing for an extension. In August, she told Insider's Joseph Zeballos-Roig that the "Biden administration has indicated they have almost no willingness to extend the pandemic unemployment assistance program," but that progressives were "looking into" legislative action. In an interview with the Washington Post, Ocasio-Cortez said that she had been pushing the administration for months - alongside others in the Congressional Progressive Caucus - to extend the benefits.Last week, Ocasio-Cortez introduced the "Extend Unemployment Assistance Act of 2021," which would extend benefits through February 1, 2022 - and would pay out benefits retroactive to their September expiration."We can't let pandemic unemployment assistance lapse when we're still recovering from the cost effects of the pandemic," Ocasio-Cortez tweeted.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderSep 21st, 2021

NVR Stock Displays Solid Run, Outruns Industry & S&P 500

NVR is riding on steady U.S. housing market fundamentals and strategic business model. NVR, Inc. NVR has been gaining on robust demand for new homes at lower mortgage rates, strong backlog and a rising work-from-home trend in the United States. Moreover, the company’s disciplined business model, and focus on maximizing liquidity and minimizing risks are likely to generate more returns for shareholders in the long term.So far this year, shares of NVR have gained 24.3% compared with the Zacks Building Products - Home Builders industry’s and the S&P 500’S rally of 18.4% and 20.5%, respectively. Notably, earnings estimates for 2021 have moved up 8.7% over the past 60 days, depicting analysts’ optimism regarding its bottom-line growth potential. This positive trend signifies analysts’ bullish sentiments and justifies the company’s Zacks Rank #2 (Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.It also has a solid earnings surprise history. NVR’s earnings surpassed the Zacks Consensus Estimate in the trailing 14 quarters.Image Source: Zacks Investment ResearchKey Factors Driving GrowthRobust Backlog and Order Growth: For the last few quarters, NVR has been observing strong order growth mainly backed by record-low mortgage rates along with declining material prices. Also, demand for affordable housing has been driving order growth. During second-quarter 2021, average sale price for these orders rose 20% from the prior-year quarter to $440,200. Quarter-end backlog — on a unit and dollar basis — rose 19% and 35% from the year-ago quarter to 12,627 units and $5.41 billion, respectively. Cancellation rate was 8% for the second quarter of 2021 compared with 16% in the year-ago period. Also, settlements increased 32% year over year to 5,685 units. Significant recovery in the housing market, which started in May 2020, continued through second-quarter 2021.Strategic Business Model: NVR’s main business is selling and building quality homes, and acquiring finished building lots, without the risk of owning and developing land in a cyclical industry. This business strategy is in sharp contrast to that of the other homebuilders.The lot acquisition strategy helps the company avoid financial requirements and risks associated with direct land ownership and land development. This strategy allows it to gain efficiencies and competitive edge over its peers. Lots controlled by the company at the end of second-quarter 2021 increased 11.9% to 114,100 from 102,000 at the end of second-quarter 2020. These solid business fundamentals will continue to drive earnings in amid the impact of the Delta variant of coronavirus that might eat into margins in the upcoming period. Resilient Housing industry: The U.S. housing industry is likely to retain its positive momentum on low mortgage rates, which stayed below 3% for the majority of 2021. Per Freddie Mac’s latest Primary Mortgage Market Survey, the average U.S. 30-year fixed-rate mortgage for the week ended Sep 16 declined 2 basis points (bps) to 2.86% from a week ago. Also, the 15-year fixed-rate mortgage for the week averaged 2.12%, down 7 bps from the prior week, while the five-year adjustable-rate mortgage rose 9 bps to 2.51%.Overall, the U.S. housing market seems to be back on track, defying headwinds like low inventory levels, tight lending conditions, and broad-based economic as well as public health risks associated with the pandemic. Since the onset of the pandemic, housing demand is on the rise as people have been looking for new homes in lower-density markets, including small metro areas, rural markets and large metro exurbs, seeking larger homes to work from.Higher ROE: NVR’s superior return on equity (ROE) is also indicative of its growth potential. The company’s ROE currently stands at 37.4%. This compares favorably with ROE of 16.8% for the industry it belongs to. This indicates efficiency in using its shareholders’ funds and NVR’s ability to generate profit with minimum capital usage.3 Other Building Products - Home Builders Stocks Worth BuyingA few other stocks in the same industry which warrant a look include Century Communities, Inc. CCS, Tri Pointe Homes, Inc. TPH and Persimmon Plc PSMMY, each carrying a Zacks Rank #2.Century Communities, Tri Pointe and Persimmon’s earnings for 2021 are expected to rise 115.9%, 66.8% and 25%, respectively. Breakout Biotech Stocks with Triple-Digit Profit Potential The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases. Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.See these 7 breakthrough stocks now>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Century Communities, Inc. (CCS): Free Stock Analysis Report NVR, Inc. (NVR): Free Stock Analysis Report Tri Pointe Homes Inc. (TPH): Free Stock Analysis Report Persimmon Plc (PSMMY): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 21st, 2021

Strong Jobs Report Sends All Major Indices to New Highs

Strong Jobs Report Sends All Major Indices to New Highs A strong jobs report gave investors a fantastic start to the long Fourth of July weekend, as each of the major indices finished Friday’s session at new closing highs. And yes, that also includes the Dow! We’ve been thinking about the Government Employment situation report all week… and it was well worth the wait. The economy added 850,000 jobs last month, which jumped past expectations in the low 700Ks and was more than 200K better than the previous month. Even though the print blew past Wall Street forecasts (unlike the May number), a lot of people are still calling this a ‘goldilocks’ report. It obviously shows an economy that’s rapidly getting back on its feet after an unprecedented interruption, but market watchers apparently feel that it’s not enough to force the Fed to accelerate a rate hike. The end result on Friday was the S&P reporting its seventh straight record close by gaining 0.75% to 4352.34. The NASDAQ is also back at a new high with a rise of 0.81% (or nearly 117 points) to 14,639.33. That’s the tech-heavy index’s first milestone since this past Tuesday. The Dow hadn’t seen a closing high since all the way back on May 7… until today that is. The index jumped 0.44% (or about 152 points) to a new record at 34,786.35. For the week, the NASDAQ led the way with a 1.9% advance as tech remains the pride of the market. The S&P is really close with a 1.7% advance after setting records for seven straight sessions, while the Dow participated with a 1% advance over the five days. Today’s report certainly attracted the lion’s share of attention this week, but we should remember that it’s actually the third positive jobs report in as many days. The ADP employment report on Wednesday easily beat expectations by adding 692K jobs in June, while the jobless claims report yesterday slipped back below 400K and surpassed expectations at 364K. Add some other positive economic data, a strong earnings season (with a new one about to begin), a rapid vaccine rollout and a Fed that’s still being super supportive amid a ‘transitory’ rise in inflation; and its no wonder that the first half totals were so epic with hope for more in the second half. Before we go celebrate Independence Day, let’s go over those first half results again... because they deserve to be repeated! The S&P soared 14.4%, the Dow jumped 12.7% and the NASDAQ rose 12.5%. After such amazing performances, the editors are now wondering when the pullback will come. And they’re actually pretty excited because it gives them a chance to buy at more attractive prices. But let’s think about that next week and enjoy our nation’s birthday… Today's Portfolio Highlights:    TAZR Trader: Before the Fourth of July weekend begins, Kevin has a couple of buys for the portfolio, First of all, he picked up Chinese e-commerce giant Alibaba (BABA), which is down today after China proposes rules to punish illegal e-commerce pricing. The editor calls this “a minor slap on the wrist for BABA”, which the company will undoubtedly obey to stay out of trouble. Therefore, its an opportunity. The service also added Penn National Gaming (PENN), a $12 billion gaming enterprise that’s seeing sales snap back as the pandemic loses its grip. The company pre-announced strong preliminary Q2 results late last month, which bodes well for the report coming in August. Kevin added each with 5% allocations. Read the full write-up for more on these buys, including a look at what the analysts are saying. Headline Trader: "Large-cap equities got a euphoric push into the long Independence Day weekend. This morning's robust June employment report exceeded expectations while wage growth remained muted, driving a fresh wave of bullish sentiment into equities and bonds alike. "We had a trifecta of record closes from all three of the large-cap indexes and marked the S&P 500?s 7th consecutive all-time high (the longest streak since last August). All the momentum is to the upside, but I am becoming increasingly nervous about the overbought territory that both the S&P 500 and Nasdaq 100 closed at today. "My outlook remains bullish for the 2nd half of 2021, but a market pullback may be necessary. As I have said in prior commentaries, there is a record level of sideline cash ($5.5 trillion in the money markets) just waiting to buy the dip." -- Dan Laboe Counterstrike: "Goldilocks and the dead bears. Are there any shorts left? "The S&P hit a record high for the 7th day in a row. This is the first time that happened since 1997. "We continue to be in an astonishing bull market, but the opportunity feels limited at these heights. Let’s take it slow into earnings and look to manage the portfolio and raise some cash." -- Jeremy Mullin Have a Happy 4th of July! Jim Giaquinto Recommendations from Zacks' Private Portfolios: Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>  Zacks Investment Research.....»»

Category: topSource: zacksSep 21st, 2021

Bank of America to hike minimum wage to $25 per hour by 2025

Bank of America Corp. is hiking its minimum wage to $25 per hour by 2025, CEO Brian Moynihan announced in a TV interview. He views it as a way to share success with employees and their communities......»»

Category: topSource: bizjournalsMay 18th, 2021

Chipotle will quickly raise prices to offset wage hike, says Stephens

See the rest of the story here. Theflyonthewall.com provides the latest financial news as it breaks. Known as a leader in market intelligence, The Fl.....»»

Category: blogSource: theflyonthewallMay 10th, 2021

Chipotle will raise prices if a $15 minimum wage passes. Here"s how much more a burrito could cost.

Chipotle's CFO said hiking its current hourly wages would require the compan.....»»

Category: topSource: businessinsiderApr 22nd, 2021

How Democrats could ditch the GOP and increase the minimum wage on their own

The $15 minimum wage hike didn't make it into Biden's party-line stimulus law, but Berkeley economists have proposed a way to include it in a new one. Senate Ma.....»»

Category: worldSource: nytMar 25th, 2021