Finance

Check out the companies making headlines before the bell:
Constellation Brands (STZ) – The maker of beer and wine reported adjusted quarterly earnings of $2.38 per share, missing the $2.77 consensus estimate, although revenue did beat Wall Street forecasts and Constellation increased its full-year earnings outlook. Shares fell 2.2% in the premarket.

Acuity Brands (AYI) – The maker of lighting and building management systems reported an adjusted quarterly profit of $3.27 per share, beating the consensus estimate of $2.85, with revenue topping forecasts as well. The earnings beat came amid what the company terms a “challenging” environment that included higher labor, materials and freight costs.
Palantir Technologies (PLTR) – Palantir surged 8.1% in the premarket following news that it won an $823 million Army contract to provide its Gotham platform, an operating system designed to optimize defense decision-making.
Norwegian Cruise Line (NCLH) – Norwegian CEO Frank Del Rio told CNBC’s Closing Bell that the company would have its full fleet in operation by April for the first time since the pandemic began. He said 75% of ships should be sailing by the end of this year. Norwegian shares fell 1.7% in premarket trading.
Seagate Technology (STX) – The disk drive maker’s shares slid 3.3% in the premarket after Morgan Stanley downgraded the stock to “equal weight” from “overweight,” citing deteriorating industry data including rising inventory levels and a drop in corporate spending plans.
General Motors (GM) – The automaker’s shares will be on watch today as GM holds its investor day, set to highlight its plans for electric vehicle growth.

Southwest Gas (SWX) – Southwest Gas struck a deal to buy Questar Pipelines from Dominion Energy (D) for $1.975 billion in cash and assumed debt. Investor Carl Icahn, who holds a 4.9% stake in Southwest Gas, had sent a letter to the company objecting to such a deal when reports of it first surfaced earlier this week. Icahn said the deal would be a huge mistake and diminish shareholder value. Southwest Gas fell 1.7% in premarket action.
Facebook (FB) – Facebook CEO Mark Zuckerberg responded to accusations from whistleblower Frances Haugen, saying the company does not prioritize profits over safety. Zuckerberg published a blog post addressing the accusations following Haugen’s testimony before a Senate panel Tuesday. Shares shed 1.3% in the premarket.
Manchester United (MANU) – Manchester United announced a 9.5 million share offering by the Glazer family, which controls the soccer club. Manchester United will not receive any proceeds from the sale. The stock tumbled 9.4% in premarket action.
HSBC Holdings (HSBC) – HSBC was upgraded to “buy” from “neutral” at UBS, which points to an attractive valuation and optimistic 2022 expectations for the bank’s financial performance. The stock added 2.3% in the premarket.

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An unprecedented trend appears to be underway between the booming energy sector and the turbulent stock market.
Over the past ten trading days, the Bespoke Investment Group’s Paul Hickey finds energy has never performed this well while the S&P 500 is trading lower.

“The energy sector is up close to 17% and the S&P 500 is down,” the independent research firm’s co-founder told CNBC’s “Trading Nation” on Tuesday. “This is an unheard of situation that we’re in.”
He highlights the relationship in a special chart with data going back to 1990.

Arrows pointing outwards

Arrows pointing outwards

“You have a big disparity where one end of the rubber band is stretched way to the left and the other is stretched way to the right,” he noted. “When you’ve seen that happen, you tend to see a reversion to the mean.”

He also mentions the Energy Select Sector SPDR Fund is up 3% in three of the last four trading days. It’s a longer-term bullish trend, according to Hickey, that has happened only a few times in about the last two decades.
“Following prior periods of similar strength in XLE, the sector has seen short-term profit-taking, but a year later it was higher all five times,” Hickey wrote to investors this week. “Performance of the broader equity market following similar surges in the Energy sector was uniformly weak in the short-term, but uniformly positive six and twelve months later.”
On Tuesday, the XLE rose 0.58% to close at $55.04, and is up more than 13% over the past month.
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Stock futures inched higher in overnight trading after the market rebounded Tuesday from a tech-led sell-off the day prior.
Futures on the Dow Jones Industrial Average gained 50 points, or 0.15%. S&P 500 futures ticked up 0.1% and Nasdaq 100 futures added 0.1%.

The market saw a broad rally during Tuesday’s regular session with nine out of 11 S&P 500 sectors closing positive. The Dow gained 312 points, or 0.92%. The S&P 500 rose 1.05% and the Nasdaq Composite rallied 1.25%. 
Mega-cap tech stocks closed higher Tuesday after being knocked down the prior trading session. Facebook stayed in focus following a lengthy outage and claims by a whistleblower that the company knows it’s harming people.
The financial sector finished Tuesday as the best performing segment of the S&P 500, up 1.78%. Other sectors geared toward a recovering economy also saw shares rise. Energy names gained as oil prices climbed. Cruise, airline and retail stocks also advanced.

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A better-than-expected manufacturing reading Tuesday aided optimism about the economic recovery. The Institute for Supply Management’s services purchasing managers’ index report for September rose to 61.9 from 61.7 in August, 0.2 points better than expected.
“Investors lean into risk on the back of another strong business sentiment survey that may suggest that the Delta-driven growth slowdown of late summer is already a thing of the past,” Goldman Sachs’ Chris Hussey said in a note Tuesday.

Denim retailer Levi Strauss and alcoholic beverage corporation Constellation Brands are set to report quarterly earnings Wednesday.
The ADP private payrolls report for September is set to be released Wednesday. Also on the labor market front, the closely watched nonfarm payrolls report for September is slated for release Friday.

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Chicago Fed President Charles Evans told CNBC on Tuesday that the current spate of inflation won’t last and ultimately will fall below the central bank’s target.
Inflation has been at 3.6% year over year in the past couple of months, the highest since the early 1990s, according to the Fed’s preferred gauge.

The current spate of inflation won’t last and ultimately will fall below the Federal Reserve’s target, Chicago Fed President Charles Evans said Tuesday.
While inflation by some measures is running at a 30-year high, Evans told CNBC the supply chain bottlenecks and other issues will subside and price pressures will fade.

“I’m comfortable in thinking that these are elevated prices, that they will be coming down as supply bottlenecks are addressed,” he told CNBC’s Steve Liesman during a “Squawk Box” interview. “I think it could be longer than we were expecting, absolutely, there’s no doubt about it. But I think the continuing increase in these prices is unlikely.”
Inflation has been at 3.6% year over year in the past couple of months, the highest since the early 1990s, according to the Fed’s preferred gauge. Other measures, such as the consumer price index, have inflation running even hotter.
Evans acknowledged that the trend is putting pressure on the economy.
“That definitely is a challenge for households and businesses. I mean, it cuts into income, wages. So that’s a problem. We’re definitely monitoring that,” he said. “It’s really not a monetary policy issue, it’s an infrastructure supply issue at the moment. So I think inflation will be coming down, and I think once it’s come down, we’re still going to be in a low interest rate … world.”
Nevertheless, the Fed broadly has indicated that it has met the inflation part of its mandate, with the level running well above the 2% goal. Consequently, the central bank is expected to begin slowly pulling back on the unprecedented support it has provided during the pandemic, starting with a tapering of monthly asset purchases.

However, interest rate increases are not expected to being until at least the end of 2022, according to current Federal Open Market Committee projections. Market pricing sees the first hike coming either in November or December of next year, according to the CME’s FedWatch tool.
While Evans said he is on board with the tapering, he said the Fed soon will be facing the familiar change of keeping inflation elevated to healthy levels, and likely will have to keep rates low.
“It’s just putting challenges on getting monetary policy to produce sustainable inflation at and above 2% so that we can average 2% over time,” he said.

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Seen through a store window, a Nike employee stands in the entryway of the Nike SoHo store in New York City.
Drew Angerer | Getty Images

Check out the companies making headlines in midday trading.
Facebook, Amazon, Apple, Alphabet – Shares of major technology companies led Tuesday’s market rebound. Facebook shares rose 2% following a 5% slide on Monday due to a whistleblower’s claims and a site outage. Amazon rose nearly 1%, while Apple advanced more than 1%. Alphabet added over 1.8%.

Southwest Gas Holdings — The energy company jumped 6.5% after activist investor Carl Icahn, who has a significant stake in it, wrote a letter to the company pushing it to drop a potential acquisition of Dominion Energy’s Questar Pipeline and focus on improving its stock’s performance, The Wall Street Journal reported.
Marathon Oil — Shares of the exploration and production company advanced more than 3.5% on the heels of climbing oil and natural gas prices. Occidental and Devon Energy also gained 3%, while Halliburton and Hess added more than 1%. EOG Resources increased slightly. West Texas Intermediate crude futures, the U.S. oil benchmark, broke above $79 per barrel on Tuesday for the first time since November 2014.
PepsiCo — Shares of PepsiCo gained nearly 1% after the food and beverage corporation reported better-than-expected third-quarter earnings despite higher supply chain costs. Pepsi Co reported earnings of $1.79 per share on revenue of $20.19 billion. Analysts projected earnings of $1.73 per share on revenue of $19.39 billion, according to Refinitiv. The company also raised its full-year forecast.
Nike, Under Armour — The athletic retail stocks each added about 1.5% after Wedbush began coverage of both with an outperform rating. The bank called the companies “long-term structural winners.” They’re both poised to benefit in the long term, though the firm expects they’ll be affected by some short-term volatility.
Netflix — Shares of Netflix gained more than 5% after Cowen reiterated its outperform rating on the streaming giant. The firm’s recurring U.S. survey found Netflix continues to lead in content among other services.

DocuSign — Shares of the e-signature company jumped almost 4% after Wedbush Securities analyst Daniel Ives named the stock one of his team’s top tech stocks to buy with the sector’s multi-year rally being far from over.
Charles Schwab — The brokerage firm saw its stock rise 3.6% after Atlantic Equities initiated coverage of it as overweight, calling it inexpensive and highlighting the recent “shift to focus on asset-gathering,” which creates “far more sustainable and compounding revenue streams.”
Bank stocks — Bank stocks climbed higher as the 10-year Treasury yield topped 1.5%. Goldman Sachs gained nearly 3%, while Bank of America and Wells Fargo added more than 2%. Banks tend to benefit from rising interest rates because they allow for higher margins and profits.
 — CNBC’s Hannah Miao, Yun Li and Pippa Stevens contributed reporting

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Carl Icahn on Tuesday announced a sizeable stake in Southwest Gas.
The activist investor is pushing the Las Vegas-based utility company to drop its rumored acquisition of natural gas company Questar Pipeline.

Carl Icahn speaking at Delivering Alpha in New York on Sept. 13, 2016.
David A. Grogan | CNBC

Carl Icahn on Tuesday announced a sizeable stake in Southwest Gas, and the activist investor is pushing the Las Vegas-based utility company to drop its rumored acquisition of natural gas company Questar Pipeline.
“During the past few years, management of SWX has made a number of egregious errors at the expense of shareholders. However, the purchase of Questar you are currently being rumored to make at the price you are willing to pay will make all past errors pale in comparison,” Icahn wrote in a letter to Southwest’s board of directors made public Tuesday. “The purchase will result in serious diminution of shareholder value.”

Shares of Southwest climbed more than 7% in afternoon trading Tuesday. In his letter, Icahn added the gas company didn’t respond to his inquiry on this matter.

Loading chart…

Southwest didn’t immediately respond to CNBC’s request for comment.
Icahn’s letter came after Reuters reported that Southwest is in advanced talks to buy Questar, Dominion Energy’s transportation and storage business.
Warren Buffett’s Berkshire Hathaway was going after Questar last year, but the deal was terminated in July due to “ongoing uncertainty associated with achieving clearance from the Federal Trade Commission.”
In the letter to Southwest’s board, Icahn said he’s “extremely disappointed” with management’s performance over the past few years as “a large shareholder.” He cited a “debilitated relationship with regulators,” runaway expenses and a weakened credit profile.

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Commonstock is a relatively new social media platform dedicated to financial markets. It requires traders to link to their brokerage account to verify the investments they post about really happened. 
The San Francisco-based start-up announced a $25 million Series A funding round Tuesday. Hedge fund managers Bill Ackman, Dan Loeb and Stanley Druckenmiller are among Commonstock’s early strategic investors. 
“The ability for anybody to prove they own Tesla or Peloton by percentage, and show their skin in the game, weeds out a lot of the grifters who might say they had a 1,000% return,” says David McDonough, Commonstock’s founder and CEO.

David McDonough, founder and CEO of Commonstock
Commonstock

A new social network is betting that enthusiastic retail traders are here to stay and that they want more transparency than what’s offered on Reddit. 
Commonstock is a social media platform for talking about trades and financial markets. It features a Twitter-like news feed, with users ranking and commenting on investment strategies. But unlike Reddit’s popular WallStreetBets forum, it’s not anonymous. Traders to link to brokerage accounts in order to verify the investments they post about are real.

“The ability for anybody to prove they own Tesla or Peloton by percentage, and show their skin in the game, weeds out a lot of the grifters who might say they had a 1,000% return,” Commonstock’s CEO and founder David McDonough told CNBC in an interview. “There’s no lying about it — you can see somebody’s performance in real time.” 
The San Francisco-based start-up announced a $25 million Series A funding round on Tuesday, led by Coatue along with QED, Floodgate, Upside Ventures and others. It did not disclose a valuation. Hedge fund managers Bill Ackman, Dan Loeb and Stanley Druckenmiller are also among Commonstock’s early, strategic investors. 
The company uses software known as an API to let traders link to Fidelity, Robinhood, E-Trade and other brokerage accounts. Profiles feature a user’s stock picks and performance. Instead of total followers, the feed shows the aggregate dollar amount of people following someone. 
The platform officially launched in August 2020, a few months before the stock market went viral. In late January 2021, a group of retail traders banded together on social media to buy GameStop and inflict pain on the hedge funds betting against it. McDonough, who left Google in 2017 to start Commonstock, said there was an immediate user boost from the meme-stock saga. The client base was doubling month over month without marketing, he said.

The Roaring Kitty effect

GameStop aside, the past few years have brought a renaissance in retail stock trading. An estimated 10 million new traders entered the market this year alone, on pace with last year’s record, according to JMP Securities. The ubiquity of zero-commissions, fractional trades and the availability of stimulus checks, combined with people looking for new entertainment during the pandemic, have helped fuel new interest in investing.  

“It sounds counterintuitive, but Roaring Kitty, AMC and GME probably did more to educate a generation of people than any of the financial textbooks and classes before,” McDonough said. “Investing is now interesting, and it’s part of the social discussion.”
Some of that frenzy has already faded, with retail trading volume down from the peak in January. Still, McDonough said the platform is seeing elevated levels of engagement and “stickiness.” Commonstock users who may have been lured in by the entertainment of GameStop have kept their money in the markets, according to McDonough. For the most part, he said younger traders are not placing “YOLO” or “you only live once” bets. Their investments tend to follow Fidelity fund manager Peter Lynch’s adage of “invest in what you know.”
That’s often internet culture and meme stocks, or brand names like Peloton or Nike, and Tesla.
“They know that when Elon Musk tweets, it’s going to drive a lot of attention to Tesla, or they love their Peloton bike so they’ll buy a share of Peloton — when you have 10 million more people doing that, it creates a new purchasing power in the market that can move prices,” McDonough said. 

Commonstock’s social media interface
Commonstock

Frank Rotman, co-founder and partner at QED Investors, was one of Commonstock’s early backers. Having an “all signal, no noise” social media outlet led them to double down in the Series A, he said.
“On Reddit, everyone is willing to raise their hand and show you what to trade, but you don’t know who these people are and why they’re giving you the information they are,” Rotman said. “It’s devolved into high-fiving each other and memes, and it’s not about stocks or the companies themselves.”
Commonstock hasn’t started monetizing yet. McDonough said he plans to follow Facebook, Twitter, Snapchat’s playbook of growing the network and user engagement, and making money down the road.
Eventually, McDonough said Commonstock would consider a subscription service, advanced features, and aggregating and anonymizing data. But he said they would never sell data to hedge funds, or other third parties, and instead plan to offer that data as a resource to retail traders. 

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U.S. Bank, the fifth biggest retail bank in the nation, is expected to announce Tuesday that its cryptocurrency custody service is available to fund managers, CNBC has learned.
The offering will help investment managers store private keys for bitcoin, bitcoin cash and litecoin with the help of sub-custodian NYDIG, according to Gunjan Kedia, vice chair of the bank’s wealth management and investment services division.
Support for other coins like ethereum is expected over time, Kedia said.

U.S. Bancorp
George Frey | Bloomberg | Getty Images

The race to cater to institutional investors who want to wager on cryptocurrency is heating up.
U.S. Bank, the fifth biggest retail bank in the nation, is expected to announce Tuesday that its cryptocurrency custody service is available to fund managers, CNBC has learned.

The offering will help investment managers store private keys for bitcoin, bitcoin cash and litecoin with assistance from sub-custodian NYDIG, according to Gunjan Kedia, vice chair of the bank’s wealth management and investment services division. Support for other coins like ethereum is expected over time, Kedia said.
The move is the latest sign that established financial players are beginning to accept cryptocurrencies as a legitimate asset class. In the realm of custody banks, which verify and safeguard trillions of dollars of traditional assets for money managers, major players including Bank of New York Mellon, State Street and Northern Trust have all announced plans to custody digital assets.
“Our clients are getting very serious about the potential of cryptocurrency as a diversified asset class,” Kedia said in an interview. “I don’t believe there’s a single asset manager that isn’t thinking about it right now.”

Gunjan Kedia, vice chair of the bank’s wealth management and investment services division.
Courtesy: US Bank

U.S. Bank, which was founded during the Civil War in 1863, is a top ten player in custody with more than $8.6 trillion in assets under custody and administration, according to data from the Federal Deposit Insurance Corp.
After a key regulator released a paper last year that established that national banks could custody crypto assets, Kedia surveyed the firm’s biggest clients to determine if their interest was genuine. She found that interest in crypto was broad and not limited to niche players, and that clients wanted the bank to move quickly.

“What we were hearing across the board, is that while every currency might not survive – there may not be room for thousands of coins— there’s something about the potential of this asset class and the underlying technology that would be prudent for us to stand up support for it,” she said.
Some investment clients already have positions in bitcoin, while others are waiting for custody services to begin, she said. U.S. Bank is one of the first institutions to have a live custody product available, Kedia said.
The price of bitcoin has whipsawed this year, surging to an all-time high of about $64,000 in April before losing half its value the next month. But the original cryptocurrency has proven to be resilient: It has weathered China’s move to ban the digital currency last month, and early Tuesday hit $50,000 once again.
There is irony in the fact that while bitcoin was created to cut out financial middlemen, swaths of the old financial order are being recreated to cater to digital currencies. After all, fund managers could choose to store their own cryptocurrency keys. But managers want the imprimatur of established names like U.S. Bank to help allay concerns from their own clients, Kedia said.
In order to onboard a manager into the crypto product, U.S. Bank has to trace the origin of the client’s funds in the industry’s standard anti-money laundering and “Know Your Client” checks, she said.
The product is only for institutional managers with private funds in the U.S. or Cayman islands, according to the bank. But if and when the U.S. Securities and Exchange Commission approves a bitcoin ETF, demand is expected to rise.
“We have a lot of funds who are hoping to invest in ETFs,” Kedia said. “Some literally want custody contracts signed the day the SEC approves an ETF.”

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