The Week Ahead on Wall Street

Economic News

Today, there is no economic data scheduled to be released.

Tomorrow, be on the lookout for the Consumer Confidence Index for October, which tracks how consumers are feeling about the economy and their personal finances. In September the reading was 109.3—a seven-month low as rising COVID-19 cases weighed on sentiment. Investors will be paying close attention to see if that has reversed as COVID-19 cases ticked downward.

On Wednesday, durable goods orders for September are released. This data point tracks monthly industrial activity and provides insight into how the supply chain is holding up. In August, durable goods rose 1.8%, besting the 0.7% increase economists were expecting. With supply-chain problems worsening, investors will be paying close attention to this data point when it's released.

On Thursday, be on the lookout for initial and existing unemployment claims to be released. The number of people collecting unemployment for the first time has continued to decline as more Americans return to the workforce. Last week, initial unemployment claims were 290,000, the lowest level since the pandemic hit the US in March 2020.

On Friday, consumer spending for September is released. In August consumer spending increased 0.8%, which is a reversal from a decline of 0.1% in July. Spending was focused on furniture, clothes, and groceries in August. Spending on experiences was down as the Delta variant of COVID-19 spread. Investors will be paying close attention to see if sentiment has changed since then as we head into the holiday season. Also Friday, personal income and core inflation for September are released.

Earnings Reports

Today, Restaurant Brands (QSR), which owns Burger King and other fast food chains, reports quarterly earnings. Earlier this month Burger King became the first fast food chain to sell Impossible Foods’ plant-based nuggets. Burger King is testing the vegan nuggets in Des Moines, Boston, and Miami. Investors will be looking for an update on the launch. Tomorrow, be on the lookout for Twitter (TWTR) to report quarterly earnings. The social media company just opened up Spaces, Twitter’s take on Clubhouse’s audio chat rooms, to all its users. The feature launched in November 2020 but only for users with 600 or more followers. Investors will want to learn more about Spaces and if it will drive user numbers and engagement.

On Wednesday, General Motors (GM) reports quarterly earnings. Earlier this month the vehicle maker laid out plans to boost operating margins by between 12% and 14% by 2030, almost double the 7.9% reported in 2020. GM also expects revenue to reach $280 billion, double its average of $140 billion over the past five years. EVs, auto services, and supporting businesses are expected to drive this growth. Investors will want to hear more about that when GM weighs in with its quarterly earnings.

On Thursday, be on the lookout for Apple (AAPL) to report quarterly earnings. Investors will be paying close attention to what Apple has to say about the supply chain and the impact it is having on its ability to sell iPhones ahead of the holiday season. Orders for its newest products including the iPhone 13, iPad mini, and its Apple Watch, may not be fulfilled until next month or December. Investors will be paying close attention to what Apple has to say about the supply chain when it reports quarterly earnings.

Friday, be on the lookout for ExxonMobil (XOM) to report quarterly results. The oil company, which has faced intense pressure to adopt greener business practices, is currently mulling whether to continue with big oil and gas projects as it charts a more environmentally friendly future. Board members, including three who were nominated by an activist investor, have raised concerns about a few projects including liquefied natural gas development in Mozambique and a gas project in Vietnam.

The Week Ahead at SoFi

This week, learn what it means to be indispensable at work. Then Brian Walsh hosts webinars on how to manage credit card debt, plus clarity on open enrollment. RSVP in the SoFi app!

The Impact of Apple’s Privacy Changes

Snap’s Growth Prospects Hurt by Apple’s Privacy Measures

Apple’s (AAPL) privacy changes, which were rolled out this spring, are starting to negatively impact the online advertising market. This is making it more difficult for ecommerce companies and tech companies including Facebook (FB) and Snap (SNAP) to make money on ads. Under the new policy, apps have to ask for users’ permission to track them. As a result, many users have opted out, which makes it harder for Facebook and Snapchat to offer brands and marketers targeted ads.

When Snap reported quarterly earnings late last week, the maker of Snapchat, the messaging app, forecast that growth will slow in its current quarter. The company pointed to Apple’s privacy changes as one of the main reasons for the slowdown. Snap said Apple’s new rules make it harder for advertisers to test and measure the effectiveness of ad campaigns.

Ad Prices Climb Amid Apple’s New Privacy Policy

Facebook has already warned investors that the changes Apple made to its privacy policies may hurt financial results. The social media giant has been vocal in its opposition to Apple’s change. Many small businesses from clothing retailers to jewelry makers rely on Facebook and Instagram ads to reach new customers. Facebook argues that the changes hurt these small companies.

Meanwhile, the price of Facebook ads is increasing, with clients recently paying 25% more on average to run ads on Facebook. As a result of higher prices and less ability to target customers, some brands are reigning in the amount they spend on advertising.

Consumers Appreciate Apple’s Change

Facebook will report quarterly earnings later today, which will give investors a clearer picture of how Apple’s changes are impacting the social media giant’s ad revenue. Facebook has been known to weather storms before and might be able to do so again. After all, Facebook argues that changes are helping it grow its own internal ad business.

Despite the outcry from social media companies, Apple’s change has been well received by consumers, particularly in the US. Among users in the US, only 16% allow apps to track them when given the option from Apple. The change has also been applauded by lawmakers, regulators, and privacy activists. It will be interesting to see how social media companies adjust to the new normal.

Homeowners Face Rising Insurance Premiums

Higher Material, Labor Costs Cause Increased Premiums

Insuring a home is getting more expensive, with homeowners paying on average $1,398 per year. From 2017 through 2020, homeowners’ insurance rates increased about 11.4%. More of the same is happening in 2021. In the third quarter, premiums increased on average 6.6%. Some markets, including California and Florida, have seen homeowners’ insurance rates jump as high as 25%.

Factors which are impacting the real estate market as a whole are also driving increases in home insurance premiums. These include higher materials costs, supply-chain delays, and labor shortages. This is making it more expensive for insurers to repair and rebuild homes.

Natural Disasters Coming at a Faster Rate

Homeowners’ insurance rates are also up due to an increase in natural disasters. From wildfires to floods, disasters are happening more frequently and have been more severe. Since 2017, home insurers have had over $370 billion in insured damage. The insurers are passing along the increased number of disaster claims to policyholders in the form of rate increases.

Last week Travelers (TRV), which is the first insurer to report earnings, told Wall Street that labor and material price increases have led home insurance costs to exceed its expectations. As a result, Travelers said it will continue to increase rates. Allstate (ALL), which reports earnings in early November, previously said it was being hit by higher repair costs.

Options Are Available for Homeowners

Homeowners facing increased premiums do have ways to reduce the cost of insurance. Many insurers provide discounts for making home improvements which will limit the damage from severe weather. For instance, installing hurricane shutters or elevating HVAC equipment to prevent damage from flooding, can get homeowners premium discounts.

There are also government funded programs to help cover the cost of homeowners insurance such as the federal flood-mitigation assistance program. The program is for people who have suffered multiple floods. Grants are given to help homeowners reduce the likelihood of future flooding by making improvements such as raising the home’s elevation. It also pays for homeowners to revisit their policies annually to see if there is a cheaper alternative. After all, with prices rising pretty much everywhere, homeowners need to find more ways to save.