Friday,
September 17, 2021

Market recap

Dow Jones

34,751.32

-63.07 (-0.18%)

S&P 500

4,473.75

-6.95 (-0.16%)

Nasdaq

15,181.92

+20.39 (+0.13%)

JOANN Stores

$11.24

+$0.31 (+2.84%)

Dollar Tree

$89.27

+$0.83 (+0.94%)

Molson Coors Beverage

$46.36

-$0.21 (-0.45%)

Amid evolving news surrounding COVID-19 and the economic reopening, your financial needs are our top priority. For more information,click here.

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Top Story

Rising Transportation Costs Add to Manufacturers’ Supply-Chain Woes

Companies Paying Much More to Ship Finished Goods

From JOANN Stores (JOAN) to Dollar Tree (DLTR), companies are facing rising transportation costs. Transportation costs tend to be a small portion of a finished product’s price, but that is changing as manufacturers across industries are having to pay more for transportation of goods.

Higher transportation costs are impacting many parts of the supply. It has become more expensive to transport materials and to ship out finished goods. In addition to rising raw material costs, the cost of shipping containers is rising. Truck drivers are hard to come by due to labor shortages. Add rising gasoline prices to the mix and it is not too surprising that retailers’ costs are soaring. For example, JOANN said its costs for moving products are currently 10 times higher than normal.

Spot Container Prices Skyrocketing

Last week spot container shipping rates from Asia to the West Coast of the US increased five times from last year’s rates. They are over 14 times higher than they were in 2019. Companies like Mondelez International (MDLZ), Molson Coors Beverage (TAP), and 3M (MMM) blamed transportation for most of the cost inflation they are seeing. Meanwhile, Dollar Tree said in August it does not expect to see improvement in transportation costs until next year.

French tire maker Michelin (MGDDY) said it is spending tens of millions of dollars of extra cash to move the rubber it needs to produce tires from the tropics to its manufacturing plants. The company is also being hit from rising shipping container costs and a shortage of truck drivers.

Companies Pass Costs Onto Consumers

Companies are not the only ones feeling the pinch from rising transportation costs. Consumers are also seeing higher price tags as companies pass along expenses by raising prices for their finished goods. That is the case at Michelin and at Procter & Gamble (PG), the consumer products giant. P&G expects $1.9 billion in additional costs for the fiscal year ending in June 2022.

Manufacturers of everything from tires to diapers have been feeling the pressure from supply-chain delays and materials shortages. With those costs not expected to ease until next year at the earliest, it will be interesting to see how companies respond.

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August Retail Sales Post a Surprise Gain

Economy Gains Strength Despite Rising COVID-19 Cases

Though COVID-19 cases remain high, the economy is showing signs of strength with retail sales in August posting a surprise gain and weekly initial unemployment claims remaining near pandemic lows this week.

Take retail sales for starters. Sales in August increased 0.7% compared to July, even though economists had expected retail sales to show a 0.8% month-over-month decline. Before the reports, economists had expected retail sales to decline as consumers cut back spending due to the fast-spreading Delta variant of COVID-19. Supply-chain bottlenecks and rising prices were also expected to dent consumer spending, but this trend was not as severe as expected.

Bars and Restaurants See Declines in August

Excluding restaurants and bars, sales during August were strong in many areas as consumers hit malls and online stores during the back-to-school season. Auto sales declined 3.6% in August. Retail sales for August would have increased 1.8% on the month if vehicle sales were not included. Ecommerce also saw a healthy 5.3% uptick in August.

Gains also came in the home furnishing category, which was up 3.7%, and general merchandise, which increased 3.5%. Electronics and appliances did not fare as well with a 3.1% and 2.7% decline, respectively. Overall, year-over-year retail sales are up 15.1%, underscoring consumers’ resiliency.

Initial Unemployment Claims Tick Higher, Hover Near Pandemic Lows

Initial jobless claims for last week, which came in at 332,000, marked a slight uptick from the low of 312,000 the week earlier, but were still near pandemic lows. Some of the layoffs were blamed on Hurricane Ida, which hit Louisiana at the end of August. Meanwhile the four-week moving average for claims declined to 335,750 last week—the lowest level since March 2020 when the pandemic hit US shores.

Initial unemployment claims have been dropping since the middle of July despite rising COVID-19 cases. While the slight uptick in unemployment is partly because of concerns about the pandemic, it is also due to more job openings than this time last year. While cases of COVID-19 continue to rise, consumers and job seekers are taking it in stride. It will be interesting to see if this remains the case as we enter the winter months.

Friday Funding: Mynd, Pine Labs, and Apna

Real Estate Platform Operator Raises $57.3 Million

Mynd, a startup which operates a platform to help real estate investors manage their investments, raised $57.3 million in venture capital led by QED Investors. Following the fundraising round, the company is valued at $807 million. Since its inception in 2016, Mynd has raised a total of $174.9 million. Invesco Real Estate led the first round and committed to buying and renting 20,000 single family houses on its platform over the course of three years.

Mynd manages more than 9,000 rentals in 25 markets throughout the US, and plans to add 15 more markets over the next three years. Proceeds from the funding round will be used to enhance its digital platform, expand into new markets, and add to its workforce.

Pine Labs Raises $100 Million in Pre-IPO Funding

Pine Labs, an Indian fintech company, raised $100 million in venture funding. Invesco led the pre-IPO round. Pine Labs is gearing up to go public next year, aiming to raise $100 million at a $6 billion valuation. This is expected to be its final capital raise before the IPO.

Hundreds of thousands of merchants use Pine Labs’ payment terminals and invoicing tools. The startup also offers working capital to merchants. What sets Pine Labs apart from other POS providers is that they are integrated with more than two dozen banks and fintechs, while most POS systems integrate with one bank. Proceeds from the funding will be used for expansion and other initiatives.

Job Search Startup Raises $100 Million

Apna, a startup which helps workers learn new skills and land new jobs, raised $100 million in venture funding. The Series C fundraising round was led by Tiger Global and values the company at $1.1 billion. Other investors included Owl Ventures, Insight Partners, Sequoia Capital India, Maverick Ventures, and GSV Ventures.

Apna was valued at $570 million in June following a Series B round. The startup has more than 16 million users on its platform, up from 10 million in June. Proceeds will go to expand into more cities in India, the US, Southeast Asia, the Middle East, and Africa.

Not-So-Breaking News

  • Apple’s (AAPL) iPhone 13 sales are off to a strong start in China a few days after it debuted. Over two million consumers placed pre-orders for the iPhone 13, which is higher than the 1.5 million pre-orders the iPhone 12 garnered last year.

  • Delays in Electronic Arts (EA) “Battlefield 2042” game won’t impact sales, which lifted the stock. The game is delayed about a month due to chip shortages and supply-chain snafus.

  • Southwest Airlines (LUV) is offering employees extra pay if they are vaccinated against COVID-19. The company is following other airlines in offering incentives to employees to get vaccinated.

  • Lucid Motors’ (LCID) upcoming electric sedan received an EPA-rated range of 520 miles on a single charge. With the rating, Lucid Motors’ Air Dream EV sedan will have the longest range on the market.

  • FedEx (FDX) is boosting hiring ahead of the holiday season. The delivery company is now aiming to hire 90,000 new employees, up from the 70,000 it planned to hire last year.

  • How Much Credit Card Debt is Too Much? Information like your monthly payment, your debt-to-income ratio, and your credit utilization level can help determine the answer. Read more.

Financial Planner Tip of the Day

“Many lenders will allow customization of due dates to line them up with pay dates. Most allow automatic payments from a checking or savings account. Take the time to find the mix that works and keeps accounts up-to-date.”

Brian Walsh, CFP® at SoFi

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