On Wednesday, Jerome Powell announced the start of the tapering process by the Federal Reserve. The Fed will scale back open market purchases of fixed income instruments by $15 billion a month starting in November. Treasury purchases would be reduced by $10 billion a month and mortgage backed securities would be reduced by $5 billion a month. Mr. Powell went on to say that policy makers will not be raising rates anytime soon. Powell stated, “We don’t think it is a good time to raise interest rates because we want to see the labor market heal further.”
Powell’s tenure as Fed chairperson ends in February and the President of the United States stated on Tuesday that he would announce nominations for chair and other vacationers “fairly quickly” while at a ciliate summit in Glasgow, Scotland. The US equity markets reacted positively to the Fed’s announcement and the S&P 500, Dow Jones Industrial Average, Nasdaq 100 and Russell 2000 all closed at all time highs for the second straight day.
Source: Bloomberg, 11/03/2021
Source: Bloomberg, 11/02/2021
Source: Bloomberg, 11/02/2021
Senator Pat Toomey introduces the Investor Freedom Act of 2021 to preserve commission-free trading
On October 28, Senator Pat Toomey introduced a bill that would protect the practice known as payment for order flow. The bill would prohibit the Securities and Exchange Commission, FINRA and any national securities exchange to institute a ban on the practice of payment for order flow. Payment for Order Flow (PFOF) is a practice that assists brokerage firms like Alpaca and Robinhood to offer commission free trading on US equities. PFOF is a practice where wholesale market makers pay a rebate to brokers for their order flow.
Senator Toomey stated, “New innovations—such as zero commission trading and user-friendly mobile apps—have allowed more Americans to participate in the stock market than ever before. Such technologies have been made possible in part by payment for order flow. My legislation will stop the SEC from restricting investor freedom under the guise of investor protection by ensuring every day Americans continue to have access to and choices in the stock market.”
Source: Financial Advisor IQ, Nov. 3, 2021
Source: Financial Advisor IQ, Nov. 1, 2021
Source: Markets Insider, Oct. 19, 2021
Source: U.S. Senate Committee on Banking, Housing & Urban Affairs, Oct. 28, 2021
Crude to $120 by June 2022, according to Bank of America
Bank of America issued a research report this week and called for Brent crude to hit $120 a barrel by mid 2022. Bank of America believes that a surge in gasoline demand will increase along with demand for jet fuel. This, combined with reduced refining capacity and lower investment into new production the past few years, will cause the price of Brent to increase. Last week, Goldman Sachs issued a report and stated they expected that Brent crude would hit $110 a barrel in 2022 as demand returned to pre pandemic levels as supply was still constrained. It is expected that OPEC+ brought an additional 400,000 barrels of oil into the global market on Thursday of this week - in line with a previously announced monthly increase of 400,000 barrels a day.
Source: Oilprice.com, Nov. 1, 2021
Source: Times of India, Oct. 27, 2021
Source: Bloomberg, Nov. 1, 2021
Zillow to lay off 25% of its workforce and close home flipping business
Zillow shares were down more than 10% on Tuesday after the company announced earnings, losing 95 cents a share for the quarter vs an expected profit of 16 cents a share from analysts. Its results were dragged down by a business that was established to buy homes from people in a simple and quick process. This process was supposed to be quicker and simpler for sellers to sell houses. Zillow would then do light repairs and market the house and then resell or rent the property. According to estimates, the company bought 8,000 homes in the third quarter of 2021. Those homes are now being listed for sale less than the price that Zillow acquired the properties for. Zillow has reportedly stopped making new offers on homes though the rest of the year and will close on homes that are under contract. Recently, the company tweaked an algorithm to make more aggressive bids on homes and announced that it would lay off 25% of its workforce.
Source: CNBC, Nov. 2, 2021
Source: Bloomberg, Nov. 1, 2021
Source: Vice, Nov. 2, 2021
Booking Holdings (BKNG) reported earnings and upgraded by Jefferies
Booking Holdings stated that an increase in Covid-19 vaccination in some markets helped spur a rebound in leisure travel before the delta variant set in. Booking said that gross bookings by customers increased 77% from a year earlier to $23.7 billion. This compared with analysts expirations for gross bookings to come in at $21.6 billion. Revenue was up 77% as well. Earnings per share (EPS) were $37.70 a share in the third quarter vs expectations of $32.23 a share. The US has announced that it will lift restrictions on vaccinated foreigners entering the country starting on November 8th. This policy change is expected to lead to an increase in demand for accommodations, flights and restaurants. Booking Holdings receives over 90% of its revenue from outside of the United States.
After the company's earnings announcement, Jefferies raised the target price of Booking Holdings to $2,900 from $2,850 and stated the recovering travel is accelerating and that Booking Holdings is a solid value play in travel.
Source: Bloomberg, Nov. 3, 2021
Source: StreetInsider, Nov. 1, 2021
About the Writer
My name is Allen Spence and I have been working in the retail brokerage industry for over 16 years. I joined Alpaca in March of 2021 as a Brokerage Operations Consultant. Before joining Alpaca I have worked in a retail branch environment, call center for active traders, and spent over seven and a half years as the team lead on an equity trading desk for a large regional broker dealer. I’m excited to be at Alpaca helping bring the markets to investors worldwide. I live in Florida and enjoy traveling and spending time with my family.
Alpaca is a globally distributed financial technology company that is democratizing global access to financial markets starting with our API-first stock brokerage. Alpaca offers commission-free stock trading via API, a suite of developer APIs for brokerages, advisors, and startups, as well as a market data API.
Securities brokerage services are provided by Alpaca Securities LLC (“Alpaca”), member FINRA/SIPC, a wholly-owned subsidiary of AlpacaDB, Inc. Technology and services are offered by AlpacaDB, Inc.
This article is solely for informational purposes only. Alpaca does not recommend any specific investments or investment strategies. Investments in securities involve the risk of losses and past performance does not guarantee future results. Before investing you should carefully consider your investment objectives, time horizon, and overall risk tolerance as well as the information stated in the product offering prospectuses.