The Week Ahead on Wall Street

Economic Data

Today, the Empire State manufacturing index for August is released. This data point tracks general business conditions in the state of New York. For July the reading climbed 26 points to 43. This was the highest reading on record, and well above expectations.

Tomorrow, retail sales for July are released. Retail sales in June increased 0.6% from May and were up 18% year-over-year. Investors will be watching to see how the Delta variant of COVID-19 is impacting sales at the nation’s retailers. Also Tuesday, business inventories for June and industrial production for July are released.

On Wednesday, be on the lookout for housing starts for July. This tracks the number of new houses that began construction during the month. New construction has been under pressure in recent months as builders deal with labor shortages, high material costs, and a lack of property to build on. Investors will be paying close attention to July housing starts to see if those pressures are abating. In June housing starts came in at 1.64 million.

On Thursday, initial and existing unemployment claims for last week are released by the Labor Department. Unemployment numbers have been declining for a few weeks now as businesses reopen. Last week claims fell from 387,000 to 375,000, which was close to setting a new pandemic low. Investors will be paying close attention to this number as the Delta variant spreads.

There are no economic reports scheduled for Friday.

Earnings

Today, Tencent Music Entertainment (TME) reports quarterly earnings. The Chinese internet giant’s WeChat messaging-app unit got sued by Chinese prosecutors last week. They contend that WeChat’s youth mode violates laws protecting minors. Investors will want to know what impact this regulatory pressure is having on Tencent’s bottom line.

Tomorrow, be on the lookout for earnings from Walmart (WMT). The nation’s biggest retailer is offering the majority of its warehouse workers bonuses to stay throughout the holidays. In some instances it is also dolling out pay raises. The moves are part of Walmart’s strategies to recruit and retain workers in a tight labor market. It also comes as the Delta variant of COVID-19 is rapidly spreading. Investors will undoubtedly be focused on the impact of both labor shortages and rising costs for Walmart.

On Wednesday, be on the lookout for Target’s (TGT) quarterly earnings. Aiming to capitalize on the growth it saw during the pandemic, the retailer just launched its own brand of pet food, Kindfull, which went on sale over the weekend. In addition to hearing more about the new brand, investors will be paying close attention to what Target has to say about back-to-school shopping. With the Delta variant spreading throughout the country, consumers are reining back spending, putting the back-to-school shopping season at risk.

Be on the lookout for Estée Lauder’s (EL) earnings Thursday. The makeup company has been benefiting from increased spending on the part of consumers after months of shutdowns. It is also gaining traction in China. Investors will be parsing through Estée Lauder’s report and forecast for any signs the economic recovery is slowing. Supply-chain issues and costs of goods could impact the beauty products company’s bottom line.

Also Thursday, Deere (DE) reports quarterly earnings. The farm equipment company just spent $250 million to purchase Bear Flag Robotics, which makes autonomous technology for farm equipment. The company has been testing its technology on a variety of crops. The move is part of Deere’s efforts to counter labor shortages by using technology. It also comes as Deere looks to embrace new technologies like drones and robotics. Investors will be paying attention to what Deere has to say about the acquisition and others coming down the pike.

The Week Ahead at SoFi

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Contemporary Amperex Technology to Raise $9 Billion in Stock Sale

Contemporary Amperex Technology to Ramp up Manufacturing

Contemporary Amperex Technology, the leading battery maker in China, is raising $9 billion via a share offering to expand its manufacturing. The company is aiming to capitalize on the growth in electric vehicles and the demand for lithium-ion batteries. CATL, which was founded in 2011, supplies batteries for Tesla’s (TSLA) plant in Shanghai and other EV manufacturers.

In addition to pouring proceeds into its battery plants in Fujian, Guangdong, and Jiangsu provinces, CATL will invest in research and development. With prices for raw materials rising, the company is working on ways to produce cheaper batteries with sodium ions. The goal is to make prices for EVs in line with gas-powered cars.

CATL’s Stock Rises

As demand for EVs climbs, so has CATL’s stock price. In 2020 the company’s revenue increased 10%. In the first quarter of 2021 it almost doubled to $3 billion. The stock is up 150% so far this year, setting a new high earlier in August. In addition to Tesla it counts NIO (NIO), XPeng (XPEV), Li Auto (LI), and Mercedes-Benz (DMLRY) as customers. With a market capitalization of around $180 billion it is one of China’s most valuable listed companies. The stock is outperforming its battery-maker rivals including Panasonic (PCRFY) and LG Chem.

CATL previously sold shares to investors, raising $3 billion a little over a year ago. This latest stock sale will have as many as 35 investors including insurance companies, financial institutions, and asset-management firms.

EV Market Poised for Strong Growth

The EV market across the globe is taking off as concerns about global warming prompt governments, politicians, business leaders, and citizens to call for greener alternatives. That is driving sales of EVs to record highs. 220,000 EVs were sold in China in July—double the number sold during the month a year ago.

Earlier this month US President Biden made a big commitment to an EV future, calling for half of all vehicles produced in the US by 2030 to be EVs. China wants EVs to account for 20% of all new cars by 2025 and 50% by 2035. With those kinds of commitments from two of the world’s biggest markets, it is understandable that shares of CATL have been surging and it wants to cash out.

Gig Economy Companies Costs Rise Amid Labor Shortages

Airbnb, DoorDash, and Uber See Costs Rise

From Airbnb (ABNB) to DoorDash (DASH), some of the nation’s largest gig-economy companies are seeing costs rise. But it is not from spending to lure new customers. They are pouring money into recruiting efforts to hire more drivers and find hosts.

Gig-economy companies are figuring out ways to enhance the supply side of their operations to meet pent-demand, which has not been slowing down. As a result, costs are rising at Airbnb, DoorDash, and Uber, among others.

Airbnb Needs More Hosts

Airbnb was hit hard during the pandemic with travel coming to a halt. But as vaccinations rolled out and shutdown restrictions eased, business has recovered. While Airbnb did not have to spend a lot of money to find new customers, it has spent to expand the number of hosts on its platform. For its second quarter Airbnb had sales and marketing costs of $292 million, which is the highest it's been since the first quarter of 2020.

Travel could slow down again if the Dela variant continues to spread, presenting a risk to the spending strategy at Airbnb. It is something Airbnb warned in its annual letter to shareholders. It said spikes in hospitalization in Florida, Texas, and other parts of the country could lead to lower bookings and cancellations.

Drivers in Demand

DoorDash is also seeing costs rise as it competes with Uber (UBER), Lyft (LYFT), and Instacart for drivers. Sales and marketing costs in the second quarter increased 150% year-over-year with much of the money being spent to recruit drivers. DoorDash also experienced higher advertising costs during the quarter as other gig-economy companies also ran recruitment ads.

Meanwhile, Uber said it has been spending more to recruit drivers. The company does expect the heavy spending in the second quarter to recede a bit as it was aggressive with hiring during the quarter.

Demand for gig-economy services is skyrocketing at the same time companies are struggling to meet demand. It will be interesting to see how long this supply/demand imbalance lasts and how the gig-economy companies respond.