Monday 25-Oct Comments: Buying Paypal; Earnings Avalanche, Delta Plus, Infrastructure Vote 

Buying more of Paypal (PYPL) here

Over the weekend, PayPal (PYPL) announced it is not currently pursuing Pinterest (PINS) in the wake of reports from Bloomberg that the two were in discussions, ending speculation over a potential $45 billion deal. PayPal shares were up over 5% in pre-market trading this morning while Pinterest shares were down around 10%.

We think this is a perfect opportunity to improve our cost basis in this stock. Last week, shares of PYPL traded down about 30 points, from 270$ to 240$ on this news. Even after the refusal of this deal, shares are now trading at 250$ area. This represents a perfect buying opportunity. If you imagine people who sold on this news because they doubted this acquisition, they're now buying back a lot of shares. We wrote about the news last week here if you want to know more about what happened. 

Market Overview

Today kicks off an earnings avalanche this week with over a quarter of the S&P 500 component companies reporting along with the five largest tech names. After Snap's (SNAP) share price got pummeled last week thanks to the impact of Apple's  (AAPL) increased mobile privacy protection in iOS 15, investors will be focused on Facebook's (FB) results today. We initiated Google last week and we will look forward to their report tomorrow. 

As the velocity of earnings reports jumps frenetically this week, we'll also see a widening out in the kinds of companies reporting their quarterly results. So far this earnings season, we've heard from banks and other financial companies whose businesses are not directly impacted by supply chain shortages and rising input as well as transportation costs. There have been some companies, such as Honeywell (HON) , that have discussed the impact of those items on their quarterly results and outlook. Perhaps the most pointed example was from personal care product company Procter & Gamble (PG) , which shared it now sees its bottom line being impacted by materials, freight, and foreign exchange to the tune of $2.3 billion after-tax, roughly $0.90 per share.

Given the significant climbs in oil, steel, cotton, cocoa, coffee, and other commodities as well as gas prices year to date, we expect to hear much more about supply chain and cost headwinds impacting corporate bottom lines this week. Investors will likely be digging into headwind-related comments from Caterpillar (CAT) , Boeing (BA) , Sherwin Williams (SHW) , AGCO (AGCO) , Kimberly Clark (KMB) , Coca-Cola (KO) , and Hershey Foods (HSY) this week.

Those same supply chain bottlenecks are expected to limit the availability of products for the upcoming holiday shopping season, but even so, Adobe (ADBE) is calling for 2021 digital holiday shopping to rise 10% year over year to $207 billion during November and December. Given potential shortages, holiday shopping is expected to be pulled forward even earlier this year, and we'll be looking for confirmation of that when Visa (V)  and Amazon (AMZN) report this week. We'll also be looking for what UPS (UPS) and Norfolk Southern (NSC) have to say on the matter as well as being on the lookout for commentary on attempts to pass these higher costs onto consumers and customers. We've recently heard that Procter & Gamble (PG) , Nestle (NSRGF) , Verizon Communications (VZ) , and other companies plan to continue raising prices or pushing customers to buy more expensive products into 2022 to "offset fast-growing costs amid a global supply-chain crisis."

In terms of the current chip shortage that is plaguing automotive companies, General Motors (GM) and Ford Motor (F) report this week, and we'll not only be watching their comments and timetables on that but also how it may impact their EV plans. Also, on the chip front, Apple issues its quarterly results this week, and reports indicate shipping times for its newest iPhones and Mac models are being measured in weeks, not days.

Delta Plus Variant

With the Delta Plus variant having spread to 11 provinces, China has reinstated some travel restrictions for people arriving from anyplace in the country that's reported locally transmitted COVID cases. All train services around China related to tourism have also been halted. The same Delta Plus variant is also spreading in the UK. As of now, the U.S. is still set to open its borders to fully vaccinated foreign travelers on Nov. 8.

Infrastructure Bill

Turning to Washington, it is looking increasingly likely that a slimmed-down reconciliation spending plan and the bipartisan infrastructure bill will go a vote on Capitol Hill. Senators Chuck Schumer and Joe Manchin spent the weekend with President Biden at his home in Delaware to hammer out passable proposals ahead of Biden's trip to Europe later this week. Speaker of the House Nancy Pelosi said Democrats are "pretty much there now" on a social spending deal but did not specify a price tag. Pelosi expects a deal by the end of the week.