Live Markets: The IPO window is wide open; that's good news for equity returns

NerdWallet

04/11/2021 17:19

* Indexes mixed; S&P, Nasdaq green; Dow red
    * Consumer disc biggest S&P sector gainer; financials down
most
    * STOXX up ~0.4%
    * Gold, crude, dollar up; bitcoin down
    * U.S. 10-year Treasury yield ~1.53%

    Nov 4 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com     
    
    
    THE IPO WINDOW IS WIDE OPEN; THAT'S GOOD NEWS FOR EQUITY
RETURNS (1300 EDT/1700 GMT)
    As IPO bankers scurry to price as many deals as possible
before year-end, Jessica Rabe, co-founder of DataTrek Research,
sees this cycle as a driver of long-term equity returns.
    Rabe points out that 2021 has been a record year for U.S.
IPO volume with more than 350 offerings, up 60 percent from last
year and a 5-year high, citing data from Crunchbase and
Renaissance Capital. And she notes that companies have raised
over $165 billion in proceeds so far, over double the amount
raised last year.
    She reiterates the importance of venture capital funding for
eventual exits into public equity markets.
    Without fresh, disruptive blood in the system, Rabe says,
U.S. stocks are limited to whatever more mature companies can
generate in terms of earnings growth. Getting novel business
models into public hands is the difference between 5-7 percent
long-run annual returns and +10 percent, she says.
    Rabe notes that more companies are expected to list soon,
including electric car maker Rivian  RIVN.O , business
communication platform Weave  WEAV.N  and fintech NerdWallet Inc
 NRDS.O .
     "Bottom line: The IPO window is wide open and should be for
the foreseeable future, especially with US equities continuing
to reach record highs," Rabe writes.
    In addition, while financials continue to have the lowest
valuations of any S&P 500 sector, she says, more innovative
financial platforms going public is encouraging.
    Indeed, NerdWallet's shares are soaring more than 60% on
Thursday in the personal finance firm's strong market debut.
 urn:newsml:reuters.com:*:nL4N2RV3LG
    Next week, Rivian, backed by both Amazon.com  AMZN.O  and
Ford Motor Co  F.N , looks to raise more than $8 billion in one
of this year's most hotly anticipated IPOs.  urn:newsml:reuters.com:*:nL1N2RS2GB
       
    (Lance Tupper)
    *****
    
    EUROPE’S FOURTH ALL-TIME HIGH: WHAT’S NEXT? (1221 EDT/1621
GMT)
    European equities hit a new record high for the fourth
straight session as worries about earlier-than-expected monetary
policy tightening by central banks faded.
    The Reserve Bank of Australia rejected market talk of an
early rate hike on Tuesday, driving bond yields down and
boosting risk sentiment across the board. It was followed by “a
patient” Federal Reserve on Wednesday and a Bank of England,
which kept rates on hold today.
    The European real estate stock index  .SX86P  is the best
performer on the Stoxx 600, while bank stocks  .SX7P  lost
around 2%, on a lower for longer rates scenario.
    Investors are wondering what will happen next as the Stoxx
600 is again in uncharted territory. 
    Some analysts seem to agree that the bullish mood could last
until year-end, with a possible increase in volatility. But 2022
will be more challenging, with central banks unwinding their
monetary stimulus amid supply chain disruptions and economic
growth uncertainties.
    
    (Stefano Rebaudo)
    *****    
    
    GLOBAL MARKET CAP DOUBLED SINCE COVID-19 CRASH (1155
EDT/1555 GMT)  
    The Fed pulling off a tantrum-free tapering announcement
definitely marks a new chapter in the COVID-19 policy response.
    All in all, it's fair to say that as far as global stock
markets are concerned, monetary and fiscal stimulus were pretty
effective to lift off markets after the pandemic crash.
    As you can see below, global market cap doubled to $69
trillion since March 2020. 
     
    
    (Marc Jones with Julien Ponthus) 
    *****
    
    
    THURSDAY DATA MAKES NICE WITH THE FED, WITH A FEW SURPRISES
(1105 EDT/1505 GMT) 
Data released on Thursday politely supported Fed Chair Jerome
Powell's remarks made a day earlier about the labor market
reaching the end of its long, rocky road to recovery sometime
around the middle of next year.    
    The number of U.S. workers filing first-time applications
for unemployment benefits dropped last week to the lowest level
since the moment before mandates to halt the emerging pandemic
plunged the economy into its steepest freefall in history.
    Jobless claims  USJOB=ECI  dipped 4.9% to 269,000, the
smallest number since March 2020, the calm before the COVID
storm that sent new unemployment applications sky-rocketing to a
head-spinning 6.149 million.  urn:newsml:reuters.com:*:nL1N2RU3D2
    With this, even with ongoing hobbled supply chains and labor
shortages, claims are now at the upper end of the range
associated with healthy labor market churn.
    While the report falls outside the survey period for the
Labor Department's hotly anticipated jobs report due tomorrow,
it has the appearance of a welcome return to pre-pandemic
'normal.'
    The 4-week moving average of jobless claims slipped to about
285,000, and ongoing claims  USJOBN=ECI  dropped more than
expected to 2.105 million.
    Still, that's high. For context, the number of Americans
collecting unemployment benefits for two weeks or more could
nearly populate the city of Houston. 
    And in a surreal sign of the times, U.S. companies are
ramping up mass layoffs despite the labor shortage as employers
are handing out big piles of pink slips to workers who refuse to
get vaccinated.
    Executive outplacement firm Challenger, Gray & Christmas
released its planned layoffs report for October  USCHAL=ECI ,
which showed pre-announced severance increased by 27.5% to
22,822. A whopping 22% of those layoffs were COVID jab
refuseniks.
    "We know companies are holding tight to their workers and
are in fact looking for workers," writes Andrew Challenger,
senior vice president at Challenger Gray. "However, we also know
that for many employers, a federal vaccine mandate from OSHA is
forthcoming, and for many government employees and contractors,
as well as for health care providers, mandates already exist.
This complicates hiring and retention efforts."
    Next, the busy Labor Department delivered the morning's
biggest surprises with its revised third-quarter labor costs and
productivity data.
    Labor cost growth  USLCP=ECI  shifted into high gear,
accelerating to an 8.3% quarterly annualized growth rate from
the prior quarter's 1% increase, coming in well above the 7%
analysts expected.  urn:newsml:reuters.com:*:nL1N2RU2I7
    And productivity  USPROP=ECI  reversed course, dropping an
even 5% after gaining 2.3% in the second quarter.
    "The biggest drop in productivity since 1981 is a
consequence of the Delta Covid hit to growth, and it tells us
nothing about the underlying trend," says Ian Shepherdson, chief
economist at Pantheon Macroeconomics. "We remain optimistic that
productivity growth will average 2%-plus over the next couple
years, at least."
    We'll have more opportunity to read the labor market tea
leaves when the October jobs report is released Friday, which is
expected to show a payrolls gain of 450,000 and an unemployment
rate inching down to 4.7%.
    So let's talk about the trade gap  USTBAL=ECI , which
widened by 11.1% in September to a record high $80.9 billion,
according to the Commerce Department.
    The move was driven by a sharp drop in demand for U.S.
exports even as domestic consumption pushed imports higher.
    "The September trade data supports our view that
supply-driven trade disruptions will persist well into 2022,"
says Mahir Rasheed, U.S. economist at Oxford Economics. "With US
consumption still firmly ahead of foreign demand, the trade
deficit is poised to remain historically elevated until supply
disruptions ease and faster vaccine diffusion mitigates health
risks from the pandemic."
    The closely-watched deficit in the value of goods exported
to and imported from China grew to $36.5 billion.
    Wall Street hates surprises, so the largely inline
macroeconomics of the day kept the S&P 500 and Nasdaq on course
for their sixth straight record closing highs.
    Financials  .SPSY  and healthcare  .SPXHC , however, helped
weight the Dow into the red.
    (Stephen Culp)
    *****
    
    WALL STREET OPENS WITH A 'MEH' (0950 EDT/1350 GMT) 
    Wall Street seemed reluctant to leave the starting gate
after the opening bell on Thursday, embarking on a session
wedged betwixt the week's most anticipated events - the
conclusion of the U.S. Federal Reserve's two-day monetary policy
meeting and the October employment report due on Friday.
    At present, the bellwether S&P 500 and the tech-laden Nasdaq
were setting a very tentative course for their sixth consecutive
record closing highs. The blue-chip Dow was most recently
slightly red, on course to snap its four-day winning streak.
    A swath of economic data released an hour before the bell
came in largely in line with expectations, with jobless claims
falling to a 19-month low and the trade gap widening more than
anticipated.
    Perhaps the biggest surprise was delivered by the Commerce
Department's third quarter labor cost growth
hotter-than-expected print, and the larger-than-anticipated drop
in productivity.
    Labor costs, in the form of wage growth, will be a closely
watched element of tomorrow's jobs report, as it's a solid
indicator regarding the Fed's "transitory" inflation assurances.
    On the earnings front, Moderna  MRNA.O  slashed its 2021
sales forecast for its COVID-19 jab as the drugmaker struggles
ramp up production of the vaccine.  urn:newsml:reuters.com:*:nL4N2RV2HR
    Corn flake maker Kellogg Co  K.N  warned its full-year
earnings could be affected by ongoing worker strikes at its
cereal plants.  urn:newsml:reuters.com:*:nL4N2RV2OE
    The third-quarter earnings season is nearing the final bend,
with roughly one-fifth of the companies in the S&P 500 yet to
report. Of those who have, about 81% have beaten consensus, and
analysts now see year-on-year third quarter earnings growth of
40.4%, up from the 29.4% seen at the first of the month,
according to Refinitiv I/B/E/S.
    Here is your opening snapshot:
    (Stephen Culp)
    *****
    
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 urn:newsml:reuters.com:*:nL8N2RV6J1

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Opener    https://tmsnrt.rs/3k3zIg0
Jobless claims    https://tmsnrt.rs/3o1nRAB
Challenger Gray    https://tmsnrt.rs/31liyUG
Labor costs and productivity    https://tmsnrt.rs/31vzaJD
Trade balance    https://tmsnrt.rs/3mLXqiA
Market cap double    https://tmsnrt.rs/3CPVfjN
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Lance Tupper is a Reuters market analyst. The views expressed
are his own)