Closing Stock Market SummaryThe stock market fell sharply on Tuesday, as risk sentiment was first pressured by the Omicron variant and then by commentary from Fed Chair Powell about inflation and monetary policy. The S&P 500 (-1.9%), Dow Jones Industrial Average (-1.9%), and Russell 2000 (-1.9%) each declined 1.9% while the Nasdaq Composite lost 1.6%.
All 11 S&P 500 sectors closed lower with losses ranging from 1.0% (information technology) to 3.0% (communication services). The relative outperformance of the tech sector was due to a 3% gain in Apple (AAPL 165.30, +5.06, +3.2%) amid some defensive positioning, which was further evident in a nine-basis-point decline in the 10-yr yield (1.44%).
The session started modestly lower reportedly after Moderna's (MRNA 352.43, -16.08, -4.4%) CEO told the Financial Times that he expects current vaccines to be materially less effective against the Omicron variant. Notwithstanding similar comments he made to CNBC yesterday, and reports suggesting that vaccines are likely to protect against severe disease, the uncertainty upset the market.
The real weakness, however, came after Fed Chair Powell said it's time to retire the word "transitory" when describing inflation and that it's appropriate to discuss at the next policy meeting about wrapping up the taper more quickly. Mr. Powell testified on the Coronavirus and CARES Act before the Senate Banking Committee.
Investors were caught off guard because there was a thought that the Omicron variant would presumably encourage the Fed to be more patient with tapering. Instead, the Fed chair suggested he was more concerned about tailoring policy to keep inflation pressures in check.
Of course, a speedier taper plan means the Fed could hike rates sooner than previously expected. The CME FedWatch Tool increased the probabilities for a rate hike in May 2022 (44.4%) and June 2022 (69.2%) to levels seen last week.
The fed-funds-sensitive 2-yr yield went from 0.43% to 0.56% during Fed Chair Powell's Q&A session. It eventually settled unchanged at 0.52%. The U.S. Dollar Index fell 0.5% to 95.85. WTI crude futures dropped 5.3%, or $3.70, to $66.14/bbl. The CBOE Volatility Index (27.19, +4.23, +18.4%) jumped above 27.00.
Reviewing Tuesday's economic data:
- The Conference Board's Consumer Confidence Index dropped to 109.5 in November (consensus 111.0) from a downwardly revised 111.6 (from 113.8) in October. That is the lowest reading since February 2021.
- The key takeaway from the report is that concerns about rising prices and the Delta variant were the drivers of the decline in confidence. With the omicron variant now on the scene and not part of the equation for the November report, one has reason to think that consumer confidence will continue to skew to the cautious side of things.
- The Chicago PMI dropped to 61.8 in November ( consensus 67.0) from 68.4 in October.
- The FHFA Housing Price Index increased 0.9% m/m in September following an unrevised 1.0% increase in August. The S&P Case-Shiller Home Price Index increased 19.1% yr/yr in September (consensus 19.3%) following a revised 19.6% (from 19.7%) increase in August.
Looking ahead to Wednesday, investors will receive the ISM Manufacturing Index for November, Construction Spending for October, the ADP Employment Change report for November, the Fed's Beige Book for December, the weekly MBA Mortgage Applications Index, and the final IHS Markit Manufacturing PMI for November.
- S&P 500 +21.6% YTD
- Nasdaq Composite +20.6% YTD
- Dow Jones Industrial Average +12.7% YTD
- Russell 2000 +11.4% YTD
After Hours Summary: AMBA +13.6%, BOX +7.3%, ZS +4.6% up sharply on earnings; CRM -6.1%, HPE -3% fall on earnings; MRK +1.5% higher as FDA advisory panel narrowly endorses oral pillAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: AMBA +13.6%, BOX +7.3%, ZS +4.6%, NTAP +1.1%, GFS +0.4%
Companies trading higher in after hours in reaction to news: BBW +17.7% (declares special dividend of $1.25/sh; authorizes $25 mln share repurchase program), BHG +2.3% (expects NeueHealth unbit to generate $2 bln in revs in 2022 with meaningful contribution from external payor relationships), MEIP +1.5% (stock offering), MRK +1.5% (FDA advisory panel narrowly endorses oral pill, according to CNBC), RTX +1.3% (awarded $450 mln Navy contract), GAN +1.1% (approves $5 mln share repurchase authorization), TTCF +0.9% (names new COO), MA +0.8% (authorizes $8 bln share repurchase program and increases dividend), T +0.4% (CEO provides update; says wireless delivered best-ever EBITDA in Q3), WNC +0.2% (releases new light-duty home delivery truck; secures over $10 mln initial order), CVE +0.2% (to sell Husky retail fuels network and Wembley assets for nearly $660 mln)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: EMKR -12.5%, BIRD -6.6%, CRM -6.1% (also promotes Bret Taylor to co-CEO), AIP -5%, HPE -3%
Companies trading lower in after hours in reaction to news: CTIC -22.2% (FDA extends review period for pacritinib NDA), LAC -7.4% (convertible notes offering), IMGN -5.5% (stock offering), SRG -0.8% (stock offering)
Pandemic Delivery Boom Fuels Demand for ‘Last Mile’ Space
Retailers are paying more to access logistics properties that serve as final stops for packages bound for doorsteps
Industrial properties in general have enjoyed strong rent growth and record-low vacancies during the pandemic. An increase in online shopping has furthered the trend, creating greater demand for warehouses to hold ordered items.
Retailers especially covet space near highly populated areas where online orders can be loaded onto trucks and vans for local delivery to their final destinations. Retailers face a scarcity of final-stage warehouses near major cities; and as more companies promise same-day or even two-hour arrivals, such space is rising in demand and value.
More than half of U.S. industrial leasing in the third quarter involved users looking for space of less than 100,000 square feet, often a mark of a last-mile facility, according to a report from real-estate firm Jones Lang LaSalle Inc.
Other signs point to greater last-mile interest in major metro areas. While there has been a 15% increase in the hiring of light-truck drivers in the U.S. since 2019, the four boroughs of New York City outside Manhattan have seen a 24% increase over the same period, according to industry data analyzed by JLL. The real-estate firm said that reflected strong last-mile demand in prime urban cores.
Overall, industrial rents in the third quarter were up 7.1% from a year earlier while vacancy rates dropped to a new low of 4.3%, according to JLL. In areas like Los Angeles and New Jersey, industrial vacancy rates are below 2%.
“Space in our markets is effectively sold out,” said Thomas Olinger, chief financial officer of large industrial landlord Prologis, during an October earnings call. Prologis owns warehouses in most major U.S. markets, including New York, Los Angeles, and Houston.
In their rush to meet the growing demand for last-mile space, developers face challenges. For one, much of the eligible land for industrial projects near cities is being converted to other uses, such as residential apartments or hotels. And as warehouses move closer to residential areas, a public backlash against the presence of delivery infrastructure has arisen.
”The customers want to have things delivered to home,” said Craig Meyer, president of JLL’s industrial brokerage division for the Americas. “The flip side is they don’t want trucks driving up and down the residential streets all day long emitting diesel fumes.”
Still, builders are finding creative ways to add last-mile space near city centers.
In Seattle, industrial developer Ryan Companies—whose tenants include manufacturers like Polaris Inc. and retailers like Whole Foods—is building a last-mile facility one mile south of downtown along with investor GTIS Partners. Because of space constraints, the project entails building vertically—up to four floors—to more easily fit into an urban environment. The company hopes to lease the space to as many as four companies needing a local hub for daily delivery.
“The pandemic advanced us 10 years in the e-commerce business model,” said Bret Jordan, president of the northwest region for Ryan Companies. “So really, we’re trying to respond to conditions that we were expecting to show up in 2030.”
GSK poaches key vaccine executive from Pfizer
Philip Dormitzer’s role in developments included helping to forge a partnership with BioNTech
GlaxoSmithKline has poached a key vaccine executive from Pfizer, as the UK drugmaker makes a big bet on the future of mRNA technology.
Philip Dormitzer will this week join GSK as global head of vaccines research and development, leaving the company where he played an important role in the development of Pfizer’s Covid-19 vaccine, including helping to forge the partnership with BioNTech.
He led the US drugmaker’s viral vaccines portfolio, including its work on an mRNA vaccine for influenza with BioNTech, and oversaw its vaccine candidate for respiratory syncytial virus, which will compete with a shot GSK is developing. Pfizer did not respond to a request for comment.
Hal Barron, GSK’s chief scientific officer, said he was “delighted” to welcome Dormitzer with his “significant experience” in mRNA and other technologies, saying the hiring was key to ensuring GSK remained a leader in vaccines.
“The importance of vaccines has never been clearer, and the pace of technological innovation has rarely been greater,” he said.
GSK has lagged behind in the race for a Covid jab. Instead of designing its own, it offered an “adjuvant” to boost the efficacy of a range of other vaccines, including one developed by French drugmaker Sanofi. But after a setback in an earlier trial, Sanofi and GSK still have not produced phase 3 results for their vaccine candidate.
The UK drugmaker is investing heavily in mRNA technology, including partnering German biotech CureVac on its second-generation Covid shot.
Dame Emma Walmsley, GSK’s chief executive, has faced questions about her lack of scientific expertise as she tries to revitalise the company’s drug pipeline. Activist investors Elliott Management and Bluebird Capital Partners have taken stakes to push for faster change at the group, ahead of the spin-off of its consumer health business planned for next year.
Dormitzer will help bolster GSK’s top scientific team and show the company is committed to innovating in vaccines. Several senior vaccine executives have left GSK this year to join smaller companies, including Amin Khan, who went to GreenLight Biosciences, Emmanuel Hanon, who joined Viome, and Amir Reichman, who now leads BiondVax Pharmaceuticals.
Roger Connor, president of global vaccines at GSK, told the Financial Times that the pandemic had helped prove the value of mRNA technology.
“We are investing significantly behind this, we have 200 scientists working on mRNA, and that doesn’t include the CureVac scientists, [and] we’re building mRNA vaccine manufacturing capacity,” he said.
Facebook owner Meta ordered by UK regulator to sell Giphy
Watchdog says decision is meant to protect social media users and promote competition in digital advertising
The UK competition regulator has told Meta, formerly known as Facebook, to sell online image platform Giphy, the first time the watchdog has demanded the unwinding of a completed Big Tech deal.
Regulators were expected to reverse the deal in a move that is seen as an escalation of their assault on Big Tech, the Financial Times reported on Monday. Giphy will now be sold to an “approved buyer”, the CMA said.
The $315m deal, had it gone ahead, would have put the US tech group in a position to “increase its already significant market power in relation to other social media platforms”, the Competition and Markets Authority said in a statement on Tuesday.
The CMA since June last year has been investigating the merger, which brought together the largest provider of gifs in the UK with the biggest player in social media and digital display advertising. The watchdog said its competition concerns could only be resolved by the sale of Giphy in its entirety, despite solutions put forward by Meta.
Meta said it was “reviewing the decision and considering all options, including appeal”.
Stuart McIntosh, chair of the CMA inquiry panel, said: “By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising.”
Meta could have choked off rivals’ access to gifs, which is short for the graphics interchange format and refers to short takes of looping animation, and driven more traffic to its own site, the watchdog said on Tuesday. Meta accounts for 73 per cent of user time spent on social media in the UK. The CMA argued that Meta could also have demanded more data from rivals such as TikTok in return for gifs.
The CMA said the deal would have reduced competition in the £7bn UK display advertising market, despite Giphy having no presence or plans in that sector. The regulator said nearly half of the market is controlled by Facebook.
Giphy had in the past allowed companies in the US to promote their brands through gifs, and the CMA said it could have expanded into the UK — something the company has denied.
Lawyers said the ruling was evidence of a more aggressive stance by the regulator and could affect merging companies that do not currently compete in the UK market.
Peter Broadhurst, a competition partner at law firm Crowell & Moring, said there could be “challenges going forward for companies trying to do deals where the parties don’t actually compete but could do in the future”.
The CMA’s move comes as part of a global drive to stop large tech platforms buying rivals before they become too big and a threat to their businesses, in deals known as killer acquisitions.
According to data from law firm Linklaters, slightly under 70 per cent of deals that head into “phase 2” investigations in the UK now end in mortality, either because they are abandoned, blocked or unwound, up from 30 per cent between 2014 and 2017.
EU regulators are dusting off old tools to see if they can legally claim jurisdiction over deals where the target has no revenues in the union but where there are concerns that a merger could undermine competition and hurt innovation.
Under proposed tech rules in Brussels, acquisitions that previously were more difficult to detect or block will be under more intense scrutiny following concerns that Facebook’s takeovers of Instagram and WhatsApp should not have been cleared.
Zara owner Inditex completes ‘generational’ management overhaul
Shares slide as retailer appoints founder’s daughter as chair and names new chief executive
Inditex, the world’s biggest clothing retailer, has named the 37-year-old daughter of its founder as its new chair, in a move that was intended to resolve doubts over the succession but prompted a share sell-off.
Shares in the Zara owner, whose market capitalisation of €88bn is the largest of any Spanish company, were down 5 per cent by lunchtime trade in Madrid.
Marta Ortega, the daughter of Amancio Ortega, the 85-year-old who controls roughly 60 per cent of Inditex’s shares and is Spain’s richest man, will take over as chair on April 1.
She has worked for the group for 15 years, in particular on Zara’s brand image, an area Inditex said she would continue to oversee.
“The doubts [about the succession] that existed don’t exist any more,” said a person close to the company. “We now know what is going to be in place afterwards.”
But Tuesday’s announcement took markets by surprise, although the group said it marked the completion of a “generational handover process” that began in 2011, when Pablo Isla, the outgoing executive chair, replaced Amancio Ortega himself.
“One of Amancio Ortega’s great successes is that he professionalised the company and reduced the role of the family,” said Lorenzo Bernaldo de Quirós, president of Freemarket, a Madrid-based consultancy. “This is a backward step.”
The company said that, unlike Isla, Marta Ortega would not be executive chair, and that Inditex would be adopting a more “Anglo-Saxon” corporate governance model.
Instead, the leading executive role will be taken by Oscar García Maceiras, general counsel and secretary of the Inditex board, who will take over immediately as chief executive.
In a press conference, he said that, rather than the personnel changes marking any shift in strategy, he would seek to “continue, deepen and develop” Inditex’s business model — which involves producing up to 65,000 new designs a year and a formidable logistical organisation that delivers the latest clothes to its stores at least twice a week.
The group will also set up a new management committee made up of longstanding executives.
“Making this transition a reality is the culmination of my commitment to Inditex and to Amancio Ortega,” said Isla, who will remain in post until March 31.
“We are doing this now because it is an optimal moment,” he added at the press conference. “We are very solid, we have a well-defined strategy, fantastic teams in every area . . . Obviously we have been preparing this transition for some time, in a discreet way, as we generally do things in Inditex.”
Marta Ortega said that she had “lived and breathed this company since my childhood . . . I have always said that I would dedicate my life to building upon my parents’ legacy.”
Inditex whose more than 6,600 outlets include the Massimo Dutti, Pull&Bear and Stradivarius brands, has rebounded from the pandemic, particularly by stepping up its online sales, which are closely integrated with its bricks and mortar operation.
Its most recent quarterly revenues surpassed 2019 records, at nearly €7bn.
Sales in local currencies between August 1 and September 9 were 22 per cent higher than the corresponding period in 2020 and 9 per cent higher than the equivalent period in 2019, it said in an update in September.
Early premarket gappers
- Gapping up:
- ATHX +27.5%, VXX +10.4%, MEIP +8.2%, ADEX +5.5%, OM +5.1%, MYPS +4.2%, KRYS +3.4%, HELE +2.6%, NVAX +1.7%, TIGR +1.5%, PFE +1.4%, DVAX +1.4%, GBDC +1.4%, CXP +1.3%, EXAS +1.1%, GDX +0.8%, GLD +0.6%
- Gapping down:
- JKS -9.3%, ARRY -9%, LIZI -8.7%, ARCE -7.6%, BNTX -7%, BZUN -5.7%, MRNA -4.9%, INTU -3.6%, FENC -3.3%, XLE -2.3%, XLF -2.1%, OIH -2%, USO -1.9%, IWM -1.5%, UNH -1.2%, DIA -1.1%, MOMO -1%, SPY -0.9%, SMH -0.7%, QQQ -0.5%
Moschino in The Sims to bikini armour — how games and fashion are colliding
This week The Fashion Awards launched a gaming category, the latest step in a deepening relationship between the two worlds
On Monday, The Fashion Awards inaugurated a new category in their glitzy ceremony at London’s Royal Albert Hall. The nominees for the Fashion Award for Metaverse Design were all player-creators from the online gaming platform Roblox. Their entries were judged by a panel of fashion experts including supermodel Karlie Kloss. For those who couldn’t attend in person, a virtual recreation of the venue was created in Roblox, where the award was presented by Gucci’s creative director Alessandro Michele in digital avatar form. Naturally, some Gucci-branded digital items were also available for purchase.
If it sounds like a publicity stunt, that’s because it was — there was much use of techland’s new favourite buzzword “metaverse”, and only creators from a single game were represented. But this should not detract from the genuine ingenuity of these young creators. This is only the latest chapter in the fashion world’s love affair with gaming, which has been deepening rapidly in the past five years.
At this point, there are hardly any fashion houses that have not made a play. Marc Jacobs and Valentino designed outfits for Animal Crossing, Moschino put its quirky garments in The Sims, while Burberry, Dior, Guerlain and Hermès have all made interactive mobile games. Some have gone a step further: Balenciaga debuted its Fall 2021 collection in a beautiful walking simulator game and in September was the first luxury fashion house to partner with Fortnite, while Louis Vuitton has created clothes for League of Legends and featured Final Fantasy characters in ad campaigns.
There are several reasons why fashion is suddenly so interested in games. First, designers have identified that they are an emerging social space for millions and so represent an attractive channel to advertise to younger consumers. Second, the virtual item market is lucrative, a financial end in itself. But also there is something deeper: fashion gurus have come to understand that games are the new frontier of self-expression for digital natives. They want to be there to define and monetise this emerging space.
While all of this is recent, games have been obsessed with fashion since the beginning. For as long as there have been human characters in games, developers have used their clothing to tell you about who these people are. Fashion is a shorthand to immerse players in the game’s fiction, whether that is a historical period or high fantasy. It is particularly important for the protagonist, the player’s representative in the game. Developers want players to feel not just embodied in their skin, but also in their clothing.
Since they don’t have to go to the trouble of actually making garments or obeying the laws of physics, games have given us dazzling fashions that can stay in players’ minds long after the game ends. These range from the sartorial surrealism of the Final Fantasy series, an infusion of Japanese design, art nouveau and cyberpunk aesthetics, to the smart streetwear of the inkling characters in Splatoon and the many impeccable outfits donned by stealthy assassin Agent 47 in Hitman. One of the most memorable is the eccentric garb of librarian witch Bayonetta, who wears gun-heels and a form-fitting jumpsuit made partly of her own magical hair.
Gaming clothing can be ludicrously impractical (why does Final Fantasy VII’s Cloud wear armour over only one shoulder?), but this is often part of its charm. Unfortunately, these ideas can also play into the pervading objectification of women in games, which gave rise to the famously illogical “bikini armour” — chainmail that covers none of the body’s most vulnerable parts.
Many games allow you to choose your characters’ clothing for yourself, whether by selecting armour or simply making cosmetic adjustments. Players often spend hours customising their characters in The Sims and Cyberpunk. In online games, fashion decisions take on more significance because our avatars are how we are represented to the online world. So rare costumes or “skins” in online games can be traded at high prices — digital goods trading platform DMarket estimates that the virtual skin market is worth $40bn a year.
Within wider culture, games and fashion have a lot in common. They have both endured social stigma, been deemed a superficial interest and a waste of time or money, but have clawed their way to becoming respected art forms. Games and clothing both trade in ideas of agency, aspiration and power. They whisper the same seductive promise — offering the tools to redefine yourself, whether by becoming somebody different or simply more deeply yourself.
Moschino in The Sims to bikini armour — how games and fashion are colliding
This week The Fashion Awards launched a gaming category, the latest step in a deepening relationship between the two worlds
On Monday, The Fashion Awards inaugurated a new category in their glitzy ceremony at London’s Royal Albert Hall. The nominees for the Fashion Award for Metaverse Design were all player-creators from the online gaming platform Roblox. Their entries were judged by a panel of fashion experts including supermodel Karlie Kloss. For those who couldn’t attend in person, a virtual recreation of the venue was created in Roblox, where the award was presented by Gucci’s creative director Alessandro Michele in digital avatar form. Naturally, some Gucci-branded digital items were also available for purchase.
If it sounds like a publicity stunt, that’s because it was — there was much use of techland’s new favourite buzzword “metaverse”, and only creators from a single game were represented. But this should not detract from the genuine ingenuity of these young creators. This is only the latest chapter in the fashion world’s love affair with gaming, which has been deepening rapidly in the past five years.
At this point, there are hardly any fashion houses that have not made a play. Marc Jacobs and Valentino designed outfits for Animal Crossing, Moschino put its quirky garments in The Sims, while Burberry, Dior, Guerlain and Hermès have all made interactive mobile games. Some have gone a step further: Balenciaga debuted its Fall 2021 collection in a beautiful walking simulator game and in September was the first luxury fashion house to partner with Fortnite, while Louis Vuitton has created clothes for League of Legends and featured Final Fantasy characters in ad campaigns.
There are several reasons why fashion is suddenly so interested in games. First, designers have identified that they are an emerging social space for millions and so represent an attractive channel to advertise to younger consumers. Second, the virtual item market is lucrative, a financial end in itself. But also there is something deeper: fashion gurus have come to understand that games are the new frontier of self-expression for digital natives. They want to be there to define and monetise this emerging space.
While all of this is recent, games have been obsessed with fashion since the beginning. For as long as there have been human characters in games, developers have used their clothing to tell you about who these people are. Fashion is a shorthand to immerse players in the game’s fiction, whether that is a historical period or high fantasy. It is particularly important for the protagonist, the player’s representative in the game. Developers want players to feel not just embodied in their skin, but also in their clothing.
Since they don’t have to go to the trouble of actually making garments or obeying the laws of physics, games have given us dazzling fashions that can stay in players’ minds long after the game ends. These range from the sartorial surrealism of the Final Fantasy series, an infusion of Japanese design, art nouveau and cyberpunk aesthetics, to the smart streetwear of the inkling characters in Splatoon and the many impeccable outfits donned by stealthy assassin Agent 47 in Hitman. One of the most memorable is the eccentric garb of librarian witch Bayonetta, who wears gun-heels and a form-fitting jumpsuit made partly of her own magical hair.
Gaming clothing can be ludicrously impractical (why does Final Fantasy VII’s Cloud wear armour over only one shoulder?), but this is often part of its charm. Unfortunately, these ideas can also play into the pervading objectification of women in games, which gave rise to the famously illogical “bikini armour” — chainmail that covers none of the body’s most vulnerable parts.
Many games allow you to choose your characters’ clothing for yourself, whether by selecting armour or simply making cosmetic adjustments. Players often spend hours customising their characters in The Sims and Cyberpunk. In online games, fashion decisions take on more significance because our avatars are how we are represented to the online world. So rare costumes or “skins” in online games can be traded at high prices — digital goods trading platform DMarket estimates that the virtual skin market is worth $40bn a year.
Within wider culture, games and fashion have a lot in common. They have both endured social stigma, been deemed a superficial interest and a waste of time or money, but have clawed their way to becoming respected art forms. Games and clothing both trade in ideas of agency, aspiration and power. They whisper the same seductive promise — offering the tools to redefine yourself, whether by becoming somebody different or simply more deeply yourself.