Tuesday Morning Reads
- Digital Money
- Raised a Record $32 Billion Globally So Far in 2021
- Rising Prices, Once Seen as Temporary
- This Year’s Thanksgiving Feast Will Wallop the Wallet
- Mr. Market Agrees Inflation Isn’t a Blip
- No End in Sight
- Facebook’s Algorithms
- Tesla Value Tops $1 Trillion
- World’s Richest Person
- Jeff Bezos’ Rocket Company
- Lacks Oomph
- Gaming Brand FaZe Clan to Go Public
Tesla (TSLA) received membership to an exclusive stock market club on Monday as its market capitalization topped $1T. Shares surged 13% to $1,025, marking its biggest one-day advance since March 9, while the momentum came only one session after the stock breached $900. The catalyst behind the yesterday's advance was a deal with Hertz (OTCPK:HTZZ), which placed an order for 100K Model 3 sedans to rent in major U.S. markets and parts of Europe.
Bigger picture: The contract will bring in a reported $4.2B for Tesla, making it the largest-ever purchase of electric vehicles. The cars are slated for delivery within the next 14 months, according to Bloomberg, and customers will have access to Tesla's network of superchargers. Hertz has even hired Tom Brady, the seven-time Super Bowl-winning quarterback, to star in ads showcasing the new Teslas.
Wedbush's Dan Ives says the new deal is the "tipping point" for Tesla and welcomed the "watershed moment" of passing the $1T market cap. He also points to several advantages the company holds over latecomers to the industry, including the "battery technology moat, the supply moat... and then you look at just the brand and the cache that Musk has built." "We've never viewed Tesla as an automotive company," added Ives. "We've viewed it as a disruptive technology company," highlighting his firm's $1,500 bull-case price target.
Thought bubble: Tesla only builds around 500K cars per year - out of the 90M that are built worldwide - but it's still worth more than the next nine automakers combined. That's why many have compared its valuation to a technology company, similar to the way Apple (AAPL) is a tech giant that manufactures phones. While Tesla does have new revenue models that could demand a premium, like a subscription for full-self driving mode, there can also be meme forces at play for a company that is beloved by traders across the investing landscape. "Wild $T1mes!" Elon Musk exclaimed in an overnight tweet. (264 comments)
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Facebook's (FB) public relations problem is not going away, if anything, it's getting worse. Hundreds of documents that whistleblower Frances Haugen leaked to the Wall Street Journal and Congress have now been seen in redacted form by other journalists. Stories discuss internal fury and dissent over the website's policies, as well as troubles over moderation, violence and radicalization, and failed efforts to curb abuse on its platform.
Zuckerberg responds: While large organizations should be scrutinized and criticism makes Facebook better, this is a "coordinated effort to use leaked documents to paint a false picture of our company." Questions raised by the stories about Facebook's interfaces with users' mental health and the health of the country's politics are not really about the business, he adds, but about balancing competing positions in society. As for whether the company is spurring political differences, "polarization started rising in the U.S. before I was born... The reality is if social media is not the main driver of these issues, then it probably can't fix them by itself either."
Another reveal was the company's struggle with growth, particularly on Instagram and Facebook. It has had a hard time attracting teens and younger adults, and has been dealt a setback in terms of engagement. "Most perceive Facebook as a place for people in their 40s and 50s," according to a presentation made to Chief Product Officer Chris Cox. "Teen acquisition is low and regressing further. They often have to get past irrelevant content to get to what matters."
Don't forget earnings! Revenues missed expectations for the first time since Q3 2018, but profits beat consensus, and the company added $50B in share repurchase authorizations. That sent shares up 1.5% in AH trading on Monday, though there could be some trouble ahead. Facebook said it's facing tough competition from the likes of Snapchat (SNAP) and TikTok (BDNCE), while Q4 revenues would be hit by Apple's (AAPL) privacy changes, which allows users to block tracking from advertisers. (68 comments)
Stocks have gotten another shot in the arm in recent weeks due to a strong start to the Q3 earnings season (though the bond market continues to flash concerns about economic growth). So far, a quarter of S&P 500 companies have reported earnings, with 84% of them coming in better-than-expected, according to Refinitiv. Investors are now setting their eyes on the Q3 results of technology stocks, which have a weighting of nearly 30% in the S&P 500.
Another day, another record: The S&P 500 and Dow Jones Industrial Average closed at fresh highs on Monday, and futures are pointing higher ahead of the open: DJIA +0.3%; S&P 500 +0.4%; Nasdaq +0.7%.
On the earnings calendar today are high-profile names like Alphabet (GOOG, GOOGL) and Microsoft (MSFT), as well as AMD (AMD), Twitter (TWTR), Chubb (CB) and Robinhood (HOOD). Besides tech, there are also some traditional names due out with reports. Among them: General Electric (GE), 3M (MMM), Novartis (NVS), Eli Lilly (LLY), UPS (UPS), Visa (V), JetBlue (JBLU) and Lockheed Martin (LMT).
Analyst commentary: "Earnings season is off to another great start, but now the big test is will the big tech names step up?" said Ryan Detrick, chief financial strategist at LPL Financial. "With stocks at all-time highs, the bar is indeed quite high and tech will need to impress to help justify stocks at current levels." Disappointing results last week from Snap (SNAP) could also be a "canary in the coal mine for the rest of the tech sector," cautioned Michael Hewson, chief markets analyst at CMC Markets.
The American Trucking Associations (ATA) is set to meet today with White House officials at the Office of Management and Budget (OMB) for discussions on President Biden's vaccine mandate. The order, which would require businesses with 100 or more employees to ensure they are vaccinated against COVID or tested weekly for the virus, is estimated to cover two-thirds of the private sector. The Occupational Safety and Health Administration delivered its final rule to the OMB on Oct. 12, and the mandate is expected to take effect soon after the agency completes its review.
What they're saying: The ATA is warning that many drivers will likely quit rather than get vaccinated, further disrupting the supply chain at a time when the industry is short 80K drivers. Specifically, the association estimates that 37% of drivers could be lost through retirements, resignations and workers switching to smaller companies not covered by the requirements. Others, like Goldman Sachs, feel the mandate would actually boost employment by reducing COVID transmission and mitigating health risks.
Over the past few weeks, the Office of Management and Budget held dozens of meetings with labor unions, industry lobbyists and private individuals as the Biden administration conducts its final review. Today's meeting at the White House will include dentists, staffing companies and realtors, among others. The Retail Industry Leaders Association has already cautioned that the mandate could trigger staffing problems ahead of the holiday season, while the National Retail Federation and U.S. Chamber of Commerce are asking to delay its implementation until January at the earliest.
Statistics: 30% of unvaccinated workers said they would leave their jobs rather than comply with a jab or testing mandate, according to vaccine data analysis firm KFF. Another 56% said they would get tested weekly, while 12% said they would get the shot. The industry concerns come after a record 4.3M workers quit their jobs in August, the highest turnover in 20 years.
In Asia, Japan +1.8%. Hong Kong -0.4%. China -0.3%. India +0.6%.
In Europe, at midday, London +0.6%. Paris +0.6%. Frankfurt +1%.
Futures at 6:20, Dow +0.3%. S&P +0.4%. Nasdaq +0.7%. Crude -0.5% at $83.35. Gold -0.2% at $1803.70. Bitcoin +0.3% at $62868.
Ten-year Treasury Yield unchanged at 1.63%
Today's Economic Calendar
8.55 Redbook Chain Store Sales
9:00 S&P CoreLogic Case-Shiller Home Price Index
9:00 FHFA House Price Index
10:00 New Home Sales
10:00 Consumer Confidence
10:00 Richmond Fed Mfg.
1:00 PM Results of $60B, 2-Year Note Auction
1:00 PM Money Supply
What else is happening...
Natural gas surges 12%, lifting producers' shares to YTD highs.