Pre-market stock: US economy moving through delta
That was the view of Ian Shepherdson, chief economist at Pantheon Macroeconomics, after looking at US retail sales data for August.
“We see only very modest evidence that the spread of the delta variable is having an impact on demand,” Veronica Clark and Andrew Hollenhurst of Citi said in a note to clients.
Another indication: There were 332,000 initial jobless claims in the US last week. That’s only a slight increase from the previous week, when claims reached a low epidemic level.
The four-week moving average has now fallen to 335,800 claims, its best level in the Covid-19 era, according to Jim Reed of Deutsche Bank.
On the Radar: In August, spending at restaurants was flat on a monthly basis. Grocery spending also rose 1.8%, indicating that Americans are choosing to eat more at home again.
Nor can we forget the contradictory US jobs report for August, when only 235K jobs were added. Restaurants and bars recorded a loss of 42,000 jobs.
The big picture: The data is promising, but it’s also messy. Price increases due to inflation can contribute to higher retail sales, blurring the picture. In addition, there is a significant element of uncertainty about the economic trajectory with the arrival of cooler weather. The Federal Reserve, which meets next week, has no easy task to chart the path forward.
For now, many choose to look on the bright side. New variables may affect economic recovery, but they may be much less harmful than they were early in the pandemic, as vaccines help consumers feel more confident and allow governments to avoid reimposing strict rules.
“You’ll notice more resilience with each wave,” Jeffrey Sachs, head of investment strategy for Europe, Middle East and Africa at private Citibank, predicted earlier this week.
Wall Street is unfazed by a possible “Lehman moment” in China
The collapse of Lehman Brothers 13 years ago this week showed how the collapse of one company can send shock waves around the world.
Now, more than a decade later, US policymakers and investors are watching closely as a massive real estate developer thousands of miles away teeters on the brink of default, my CNN Business colleague Matt Egan reports.
Catch-up: The risk is that the collapse of Evergrande, a Chinese real estate company with a staggering $300 billion in debt, could set off a chain reaction that spreads abroad.
“Some fear the evergrande crash will have systemic risks on par with the impact of the Lehman Brothers crash on the US stock market,” Ed Yardeni, head of Yardeni Research, wrote in a note to clients on Thursday.
Like Lehman in its heyday, Evergrande is huge. It is one of the largest companies in the world by revenue, and employs about 200,000 people.
But for now, investors are confident that the authorities in Beijing will use their extensive control over the Chinese economy to limit the damage. So far, there is no evidence of infection spreading in US markets.
“I don’t think the collapse of Evergrande, and the financial problems of Chinese real estate companies more broadly, will reflect on the US economy,” Mark Zandi, chief economist at Moody’s Analytics, told CNN Business.
“We think the narrative of ‘Lehman’s China moment’ is very broad,” Simon McAdam, chief global economist at Capital Economics, wrote in a note Thursday. Even the chaotic meltdown of Evergrande would have “little global impact beyond some of the market disruption,” McAdam said.
However, only time will tell how systemically important the company really is — and what Beijing might do to cushion the blow.
These were the most important IPOs of this week
The companies that debuted on the US public market this week are generating tons of hype, capitalizing on investor enthusiasm for new stocks in industries ranging from software to sportswear.
The highlights: ForgeRock, a San Francisco-based company that makes identity verification software, raised $275 million through the sale of its stock. Its shares also enjoyed significant growth on the first day of trading on the New York Stock Exchange, jumping 46% on Thursday.
Shares in Swiss sportswear brand On, backed by tennis star Roger Federer, have risen 56% above the company’s initial public offering price since Wednesday.
Thoughtworks, a technology consulting firm, saw its Nasdaq stock rise nearly 50% in its first two days of trading.
Bloomberg calculates that US stock market IPOs — excluding Special Purpose Acquisition Companies, or SPACS — raised nearly $4.4 billion this week.
A step back: Initial public offerings have had mixed returns this year. The Renaissance IPO exchange-traded fund, which tracks the largest newly listed public companies in the United States, is up just 7.3 percent since the start of the year, compared to a 19.1 percent rise in the S&P 500. Its top holdings include Snowflake, Palantir and Datadog. and Coinbase.
But new stocks have started to do better in recent months. Renaissance IPO ETFs rose 4.6% in the third quarter, versus a 4.1% increase in the S&P 500.
Also today: University of Michigan survey of consumer confidence posts at 10 a.m. ET.
Coming next week: The Federal Reserve holds a policy meeting as investors scrutinize the central bank’s next steps.