Month: December 2021

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Hottest U.S. inflation rate in almost 40 years brings sigh of relief in some corners of financial markets

The hottest U.S. consumer inflation reading in almost 40 years is bringing a surprising sigh of relief in certain corners of the financial markets, where some were expecting a headline year-over-year number closer to 7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.

The relief was evident in investors’ appetite for U.S. Treasuries Friday morning after the government’s consumer price index report, which showed the headline year-on-year reading at 6.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} for November. While undoubtedly high, the reading dodged the 7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} level that a few saw as a risk, raising hope that inflation may be in the process of topping out.

Read: Traders see next U.S. CPI reading close to 7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} as volatile markets try to shake off omicron and Federal Reserve’s hawkish pivot

While the CPI print was high, “some folks on Wall Street were expecting an even higher number” and the core CPI number, which excludes volatile items, “was in line with expectations,” said Tim Holland, chief investment officer of Orion Advisor Solutions.

“The two points above have many thinking that we are close to, if not at, peak inflation,” Holland wrote in an e-mail to MarketWatch. “That strikes us as a reasonable view, which would point us towards lower inflation going forward, which would support / justify little to no movement in yields.”

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Fixed income tends to be the asset class that gets hit hardest by rising inflation, which erodes the fixed value of bonds. Ordinarily, investors would be selling off Treasuries in response to a higher inflation print, which would lead to higher yields. Instead, ongoing demand for U.S. government debt, whether domestically or from abroad, pushed bond prices higher and yields lower Friday, as investors turn their attention to next Wednesday’s policy update from the Federal Reserve.

On Friday, yields fell across the curve, with the exception of 1-month and 2-month bill rates. The 10-year yield
TMUBMUSD10Y,
1.478{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
slipped to around 1.45{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} and the 30-year
TMUBMUSD30Y,
1.872{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
dropped to 1.84{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, remaining near historically low levels.

Surprisingly, the 2-year yield, which reflects expectations for the near-term path of Fed policy, fell by the most, to around 0.64{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} which is still not far from the highest levels of the year. The move is counterintuitive because investors are expecting the Fed to proceed with a faster pace of tapering bond purchases, in order to have greater flexibility to hike interest rates sooner next year and combat inflation.

Meanwhile, equity investors brushed off the inflation print at first before all three U.S. stock benchmark indexes started giving up their earlier gains.

Gennadiy Goldberg, a senior US rates strategist for TD Securities, says the market pays less attention to the headline year-on-year figure than it does to the monthly numbers. “Yields are declining because month-over-month inflation didn’t come in as high as expected, and a lot of Fed tightening has already been priced in — with almost three rate hikes expected for 2022,” Goldberg said via phone.

“If you look at the long end and the pricing for rates in overnight-indexed swaps, the long-run terminal rate is just 1.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996},” below the 2.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} seen by Fed officials in September, he said. “That’s an indication that the market could be penciling in some policy error.”

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Business News for Thursday, Dec. 9, 2021

Employees at a Buffalo-area Starbucks store have voted to form a union, making it the only one of the nearly 9,000 company-owned stores in the United States to be organized and notching an important symbolic victory for labor at a time when workers across the country are expressing frustration with wages and working conditions.

The result, announced on Thursday by the National Labor Relations Board, represents a major challenge to the labor model at the giant coffee retailer, which has argued that its workers enjoy some of the best wages and benefits in the retail and restaurant industry and don’t need a union.

The union was leading in an election at another store, but by a margin smaller than the number of ballots the union was seeking to disqualify through challenges. The challenges must be resolved by the labor agency’s regional director in the coming days or weeks before there is a result. Workers at a third store voted against unionizing, according to the board, though a union lawyer contended that some ballots had been delivered to the agency and not counted.

“Although it’s a small number of workers, the result has huge symbolic importance and symbols are important when it comes to union organizing,” John Logan, a labor studies professor at San Francisco State University, said in an email. “Workers who want to form a union in the United States are forced to take a considerable amount of risk, and it helps if they can see others who have taken that risk and it has paid off.”

The unionized employees, who are joining Workers United, an affiliate of the giant Service Employees International Union, received inquiries throughout the campaign from Starbucks workers across the country who said they were paying close attention and were interested in unionizing as well.

“I don’t think it will stop in Buffalo, whatsoever,” Alexis Rizzo, a worker at one of the stores and a leader in the organizing campaign, said at a news conference after the vote.

Workers cited frustration over understaffing and insufficient training when they filed for union elections at the stores in late August, problems that have dogged the company for years but which appeared to worsen during the pandemic. Such problems are not unique to Starbucks and have been problems for workers across the restaurant and retail industries for many years.

“We continue on as we did today, yesterday and the day before that,” Rossann Williams, Starbucks’s president of retail for North America, said in a letter to employees after the vote. “The vote outcomes will not change our shared purpose or how we will show up for each other.”

The election occurred through mail ballots that were due Wednesday. In November, workers at three more Buffalo-area stores filed the paperwork needed to hold union elections, but it was unclear when votes would take place for those outlets.

Starbucks responded to the union campaign with a sense of urgency. Throughout the fall, out-of-town managers and executives — even Ms. Williams — converged on stores in Buffalo, where they questioned employees about operational challenges and assisted in menial tasks like cleaning bathrooms.

In a video of a meeting in September viewed by The New York Times, a district manager from Arizona told co-workers that the company had asked her to go to Buffalo to help “save it” from unionization.

Several workers who support the union said they found the presence of these officials intimidating and, at times, surreal. They also complained that Starbucks had temporarily closed certain stores in the area, which they found disruptive, and said Starbucks had excessively added staff in at least one of the three stores that held elections. The workers said this had diluted support for unionization at the store.

“As of today we’ve done it in spite of everything that the company has thrown at us and we all know it has been an extensive anti-union campaign by Starbucks corporate,” Michelle Eisen, a barista at the Buffalo location that unionized who also helped lead the campaign, said at the news conference.

Former National Labor Relations Board officials have said that these actions by the company could be interpreted as undermining the “laboratory conditions” that are supposed to prevail during union elections and that they could serve as grounds for throwing out a result. Workers involved in the union campaign and a union lawyer indicated that they might challenge the result at the store where workers voted down the union.

A regional director of the labor board recently overturned a union election at an Amazon warehouse in Alabama on similar grounds.

Starbucks has said that it dispatched out-of-town officials and temporarily closed stores to help solve staffing and training problems and to remodel stores to make them more efficient. The company said that it added staff to deal with an increase in the number of workers calling in sick and that it had taken such steps across the country since the spring, when coronavirus infection rates dropped and stores became busier.

Ms. Williams, the North America president, said in an interview on Wednesday from Buffalo that she did not feel that the run-up to the vote had been especially contentious and that she had spent much of her time there this fall listening to employees (partners, in the company’s words) and addressing “the conditions that partners had pointed out.”

The key issue at the store whose vote was unresolved, near the Buffalo airport, was whether several workers who cast ballots were actually employed at the store. The union argues that they were employed at another store in the area and worked at the airport store for only a short period of time. The company said they were eligible to vote under the labor board’s rules.

The outcome could be important for determining the union’s leverage when it seeks to negotiate a contract. Under the law, an employer is obligated to bargain with a union in good faith, but there is no requirement that it actually agree to a contract, and the consequences of failing to bargain in good faith are limited.

“The incentives to resist bargaining are significant for the employer,” said Kate Andrias, a labor law expert at Columbia Law School. “If workers are able to win a good contract, it sets a precedent.”

Professor Andrias said that the ability to win a contract in such situations often hinged on the amount of economic pressure the union can exert, and that having a second unionized store could help in this regard.

Ms. Eisen, the worker at the store that unionized, said at the news conference that the workers would like to “offer the olive branch to the company and say, ‘Let’s put this behind us.’” She added: “Now is the time, let’s get to the bargaining table as quickly as possible.”

Starbucks has faced other union campaigns over the years, including one in New York City in the 2000s and one in 2019 in Philadelphia, where it fired two employees involved in organizing, a move that a labor board judge found unlawful. The company appealed the ruling and a decision is still pending.

Neither of those campaigns succeeded, but workers are unionized at Starbucks stores owned by other companies that operate them under licensing agreements. And workers at a company-owned store in Canada recently unionized.

A handful of the company’s early stores in Seattle had a union and were represented by the United Food and Commercial Workers in the 1980s. The union was decertified.

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Wealth Enhancement Group Acquires Vivid Financial Management

Wealth Enhancement Group is acquiring Vivid Financial Management, a hybrid RIA based in central California with $674 million in client assets under management, the firm announced. The acquisition will push WEG’s AUM above $55 billion.

WEG CEO Jeff Dekko said the group was excited to work with the six-advisor practice “shoulder-to-shoulder” in the coming years, adding Vivid built a strong track record of planning-centered client service that brandished their reputation as a high-quality firm. In an interview with WealthManagement.com, Dekko also said the deal was indicative of WEG’s broader approach to acquisitions, and that the firm was not looking to buy firms everywhere solely for the sake of scale.

“National scale clearly matters, but we also believe local scale matters, because it creates a number of opportunities to create more team activity at a local level, and allows us to deliver business development and resources within that,” he said.

Vivid was founded in 2015, and includes three locations in Orcutt, Lompoc and Arroyo Grande, Calif. The firm was founded by Julie Darrah, Brad Boulton, Todd Woodland and Tim Miller, and its clientele includes executives, families and clients that range from physicians to dentists, educators and farmers. It offers an array of financial planning services, including tax, estate and insurance planning, as well as asset management services and retirement planning support.

With the addition of the three Vivid offices, the Minneapolis, Minn.-based WEG will now have seven outposts in California. According to Dekko, WEG began boosting its California presence in early June and July with acquisitions in the Los Angeles area (though the acquired firms had satellite offices in San Francisco). In considering how to broaden their Golden State reach, Dekko said they’d intended to mirror their approach in areas like the Northeast, where they set up shop in metro centers and branched out into the region like spokes on a wheel. Vivid became central to their California expansion, Dekko said.

“These folks came to us and they were just so good that we were ready to start that ‘spoke’ process,” he said.

WEG’s dealmaking has been prolific this year, with 16 in 2021 alone. In late September, the company announced its largest ever addition, acquiring QCI Asset Management, a 46-year-old independent RIA based in western New York, with $5.2 billion in total client assets (it was also WEG’s first acquisition in the region). The previous largest deal had been finalized earlier that same month, when WEG added the Charlotte, N.C.-based RIA Carroll Financial Associates, which had assets totaling about $4.7 billion. In August, the firm announced it was getting an investment from private equity firm Onex Corp., which became equal capital partners in WEG with TA Associates.

Dekko said WEG would likely announce more West Coast-based acquisitions soon, and also would continue its concentration on the Southeast. Helping direct the firm for the long-term was their belief that the number of transactions occurring among firms with an asset range of $500 million to $3 billion was likely to continue, but he expected at some point in the race for consolidation, aggregators would begin to consolidate themselves.

“I think that same thing is yet to come for us,” he said. “I think you’ll start to see it in 2022, and maybe 2023, you’ll start to see a little bit of that, maybe.”

Financial terms on the deal weren’t disclosed, but the deal will close on Dec. 31, with Darrah, Boulton and Miller all coming onboard as senior vice presidents and financial advisors at WEG.

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ITC announces first-ever Institutional Investors and Financial Analysts Day on 14 December; analysts expect major announcements

ITC Limited stocks were in news on Thursday after the company informed the exchanges about an analyst and investor day, scheduled on 14 December. The news has already created a lot of buzz, analysts opined.   

The event ‘ITC Institutional Investors and Financial Analysts Day 2021’ is scheduled for 14th December. The six-hour event is also its first-ever and will be held between 10:30 am and 5 pm, the company said in its filing to exchanges. 

See Zee Business Live TV Streaming Below:

Technical Analyst Sacchitanand Uttekar said that the news was a positive trigger for the stock today and the company is expected to announce something major, calling this event “unprecedented” for the ITC.  

Uttekar, who is DVP-Head-Technicals & Derivatives at Tradebulls Securities said that he expected ITC to announce a demerger of its businesses. If this happens it will augur well for the company and its different businesses. This will not only help in the value unlocking of its businesses but also propel the stock prices, significantly, he added. 

The company has business interests in sectors including Fast Moving Consumer Goods (FMCG), IT, packaging, hotels and agri-business.  

ITC also remains a preferred by for this analyst and he recommended this stock for target of Rs 275. The stock today ended Rs 234.80, up by almost 4.4 per cent or over Rs 9 from the Wednesday closing price. He had recommended this stock at levels around Rs 229.  

Also Read: Stocks to Buy: With 20{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} upside, ITC is ‘preferred buy’ for this technical analyst; know why?

The views were also endorsed by another analyst, Sandeep Jain. The Tradeswift Director called this a positive development for the company and investors. 

He said that he expected some announcements around the demerger of ITC’s businesses. The demerger will trigger value unlocking of its various businesses, he opined. 

Even the top management has indicated its concerns around valuation, Jain said adding that some positive news was likely in the offing. 

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It could be around bonus as well, he further said. Though the picture will get clear only after the analyst meet, he said.       

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)  

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Stock futures edge up as investors await inflation data

Stock futures opened higher Thursday evening as investors awaited a key inflation report ahead of the Federal Reserve’s final policy-setting meeting of the year next week. 

Contracts on the S&P 500 gained. Earlier, the blue-chip index closed out the regular session in the red after three consecutive days of gains, with concerns over Omicron beginning to ease as new developments suggested the variant may not cause as severe of infections as previously feared. The Nasdaq dropped 1.7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} during the regular trading day, but was still on track for a weekly return of nearly 2.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} after posting solid gains earlier this week. 

Investors on Friday are set to receive the Labor Department’s latest Consumer Price Index (CPI), which is expected to show another multi-decade high rate of inflation for November. Consensus economists are looking for the CPI to climb by 6.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in November over last year, or the fastest annual rate since the 1980s. And even excluding more volatile food and energy prices, the core CPI likely rose by 4.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} over last year, or the fastest rate in about three decades.  

“We think that inflation is still going to be pretty broad when we see tomorrow’s report,” Luke Tilley, Wilmington Trust chief economist, told Yahoo Finance Live on Thursday. “But what we’re looking for is a deceleration as we go forward over the course of 2022.”

“That doesn’t mean prices are going to go down, it’s just a question of, are they going to go up as much in 2022 as in 2021 without the kind of fiscal stimulus we’ve had this year? And we don’t think that that’s going to happen, because it won’t be as much of a push on the demand side,” he added. “And then on the supply side, we’re looking for the labor market to improve, more people returning to work, and of course the delivery and the ports to improve.”  

Other recent data have further underscored the present tightness on the supply side of the economy. Weekly U.S. jobless claims plunged more than expected to reach the lowest level since 1969 last week, coming in even below pre-pandemic levels. And U.S. job openings came in at more than 11 million for only the second time on record in October.  

“Wage increases are probably on the agenda for next year. That’s part of the broadening of inflationary pressures that we’ve already started to see come through in some of that CPI data,” Seema Shah, Principal Global Investors chief strategist, told Yahoo Finance Live on Thursday. “But I have to say that we’re not so worried because we’re starting to see other parts of the inflation picture actually starting to fade. So at the end of next year, 12 months from now, we’re not expecting the kind of 6-7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} CPI numbers that we may see tomorrow. We’re thinking more the 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} level for 12 months time.” 

Given the backdrop of elevated inflation, Federal Reserve officials have adopted more hawkish rhetoric about the monetary policy path forward. Some pundits suggested more rotation could occur in U.S. equity markets beneath the surface as investors price in expectations for tighter Fed policy to rein in inflation. The Federal Open Market Committee is slated to hold its final two-day monetary policy-setting meeting of the year next week. 

“If we go back to the bulk of the second half of 2020 and for much of this year, the pendulum of risk-on, risk-off in the market was really simply occurring just below the surface of the index, of the S&P 500 —meaning that when there was a risk-on rally, it was value and it was cyclicals,” Craig Fehr, principal and leader of investment strategy for Edward Jones, told Yahoo Finance Live on Thursday. “And when it was risk-off and the risk appetite was declining, it was tech that was the safe haven.”

“What we’re seeing is a transition now, particularly as the Fed is signaling a withdrawal of some of this excess liquidity and stimulus that’s been in place for quite some time,” he added. “The market isn’t going to run directly into high-valuation, perhaps tech names broadly like it has over the past year-and-a-half. I think we’re going to see more discernment.” 

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6:25 p.m. ET Thursday: Stock futures open higher 

Here were the main moves in markets in late trading on Thursday:

  • S&P 500 futures (ES=F): +6.5 points (+0.14{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 4,673.50

  • Dow futures (YM=F): +34 points (+0.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 35,787.00

  • Nasdaq futures (NQ=F): +25.25 points (+0.16{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 16,174.00

NEW YORK, NEW YORK - DECEMBER 08: Traders work on the floor of the New York Stock Exchange (NYSE) on December 08, 2021 in New York City. Following news from the pharmaceutical company Pfizer on the effectiveness of its vaccine against the Omicron COVID-19 variant, the Dow Jones Industrial Average rallied nearly 100 points in morning trading on Wednesday. (Photo by Spencer Platt/Getty Images)

NEW YORK, NEW YORK – DECEMBER 08: Traders work on the floor of the New York Stock Exchange (NYSE) on December 08, 2021 in New York City. Following news from the pharmaceutical company Pfizer on the effectiveness of its vaccine against the Omicron COVID-19 variant, the Dow Jones Industrial Average rallied nearly 100 points in morning trading on Wednesday. (Photo by Spencer Platt/Getty Images)

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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SEC chair Gensler seeks tougher SPAC disclosure, liability rules

Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), speaks during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington, D.C., U.S., on Tuesday, Sept. 14, 2021.

Bill Clark | Bloomberg | Getty Images

Securities and Exchange Commission Chairman Gary Gensler on Thursday floated several potential SPAC rules he hopes the regulator will consider as it works to oversee one of Wall Street’s up-and-coming ways to take companies public.

Among the ideas Gensler pitched were new rules around marketing practices, tougher disclosure requirements and liability obligations for SPAC “gatekeepers,” which could include sponsors, financial advisors and other bookkeepers.

Specifically, the SEC chief said he’d like to see new rules that compel SPACs to provide investors with more information about fees, expected equity dilution and conflicts, as well as better ways to access that information before an investment is made.

SPACs, or special-purpose acquisition companies, have been around for decades without much fanfare.

Also known as a blank-check company, a SPAC is a shell company that raises money and trades on public markets while looking to merge with a private company. Their eventual marriage will bring the private firm into the public marketplace, meaning that investors in the public SPAC will have an opportunity to own a piece of the still-private target.

The public push for new SPAC rules comes days after news broke that the SEC and other federal regulators are investigating a SPAC merger involving former President Trump’s fledgling media company.

The SPAC, called Digital World Acquisition Corp., disclosed in a filing earlier this week that regulators began asking for information about certain stock trades “that preceded the public announcement of the October 20, 2021 Merger Agreement” with Trump’s firm.

Gensler said Thursday that he is concerned by a disconnect between the amount of information that companies are required to provide through a traditional initial public offering versus the disclosures required from SPACs.

“Currently, I believe the investing public may not be getting like protections between traditional IPOs and SPACs,” the SEC chair said in remarks at the virtual Healthy Markets Association Conference. “Due to the various moving parts and SPACs’ two-step structure, I believe these vehicles may have additional conflicts inherent to their structure.”

Appointed by President Joe Biden earlier this year, Gensler said added rules clamping down on marketing prior to proper disclosure may also be needed to help anchor the value of the SPAC’s shares closer to the business’s actual worth.

Glitzy corporate presentation decks, hyped press releases and celebrity endorsements can balloon a SPAC’s equity well beyond a reasonable value long before proper disclosures are filed, Gensler said.

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In the past two years, SPACs have blossomed into a popular alternative to traditional initial public offerings and a way to invest in start-ups.

The allure of possibly finding the next Amazon or Apple, prior to a young company’s entrance to public markets, has drawn billions from Wall Street in 2021. SPACs have raised as much money as traditional IPOs this year thanks to the support of big banks and investment firms.

But Gensler and others worry that insufficient SPAC disclosures leave investors open to steep losses in the future.

While Gensler did not offer more specific details on the rules he wants to see from SEC staff, his speech reinforces Wall Street’s belief that his tenure will result in a hands-on approach and that the chairman will serve as a stricter “cop on the beat” toward Wall Street.

He said he wants the SEC to ensure SPAC directors, officers, sponsors and financial advisors aren’t misleading investors with inflated financial projections only to stiff them with a backlog of bills — or a mediocre business — after the merger is complete.

“In traditional IPOs, issuers usually work with investment banks,” he said. “Thus, a lot of people think the term ‘underwriters’ solely refers to investment banks.”

“There may be some who attempt to use SPACs as a way to arbitrage liability regimes,” Gensler continued. “Many gatekeepers carry out functionally the same role as they would in a traditional IPO but may not be performing the due diligence that we’ve come to expect.”

While some take-public SPACs have seen success on Wall Street — electric-vehicle maker Lucid Group or personal-finance company SoFi, for example — others have seen mixed trading among investors.

Some of the well-known public companies resulting from SPAC mergers include space-tourism firm Virgin Galactic and online real-estate company Opendoor. Both have seen their equity slide more than 30{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} this year.

The proprietary CNBC SPAC Post Deal Index, which is comprised of the largest SPACs that have already completed a SPAC merger within the last two years, is down more than 33{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in 2021.