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Markets

Stuck Americans Spend on DIY Projects and Crocs: Earnings Wrap

Housebound Americans’ new buying habits are showing up in everything from home-renovation supplies to takeout chicken and casual footwear.

With the third-quarter earnings season well underway, the results are showing how coronavirus shutdowns are helping some companies absorb the impact on the economy, while others struggle.

For instance, paint maker Sherwin-Williams Co. on Tuesday raised its full-year guidance and beat third-quarter expectations, citing “continued and unprecedented strength” in do-it-yourself demand as people spent to spruce up their homes. Restaurant Brands International Inc. said sales at its Popeyes chain jumped 22% amid strong demand for drive-through and takeout. Crocs Inc. saw sales climb 16%.

At the same time, dressy shoemaker Steven Madden Ltd. posted a 31% drop in revenue. Xerox Holdings Corp. also took a hit from the shift to working from home, with equipment sales falling 15% amid business closures and office-building capacity restrictions.

Overall, the earnings season so far has been strong. With about one-third of S&P 500 companies having reported as of Tuesday morning, more than 75% have beat sales estimates and nearly 85% have beat earnings expectations. That may reflect a low bar that analysts had set heading into the quarter, according to Deutsche Bank’s chief strategist Binky Chadha.

“Companies that have reported have beat estimates by a massive 16.3% in aggregate, only modestly lower than the record 20.3% in Q2,” Chadha wrote in a note. The consensus for the fourth-quarter may also be too conservative, he said.

Pharma giants Merck & Co., Pfizer Inc. and Eli Lilly and Co. also joined the nearly 700 companies set to report earnings this week.

Key Developments:

  • AMD Agrees to Buy Chipmaker Xilinx for $35 Billion in Stock
  • Hedge Funds’ Shot at Stock Secrecy Fades as SEC Shelves Revamp
  • U.S. Durable Goods Orders Rose More Than Forecast in September
  • All-In Push for Vaccine in U.S. Raises Risk Virus Will Linger

Here’s today’s top earnings news by sector:

Health Care

  • Eli Lilly reported third-quarter adjusted earnings per share and revenue results that missed analysts’ estimates, while maintaining its full-year guidance. The company said that the EPS miss was partly a function of its higher R&D spend on novel therapies to combat the coronavirus. Lilly spent $125 million on pandemic-response efforts in the quarter.
  • Merck released updated 2020 guidance that included upbeat profit expectations for the year. The company also reported third-quarter adjusted earnings per share and revenue that beat analyst expectations. However, Merck said “lower back-to-school demand” in the pandemic has carved into sales of vaccines.
  • Pfizer reported revenue that came in slightly below analyst estimates and it tightened its guidance for the year. The company said it has enrolled more than 42,000 patients in its Covid-19 vaccine trial, and more importantly, almost 36,000 have received their second dose as of Oct. 26.

Industrials

  • Caterpillar said it sees “positive signs in certain industries and geographies” while failing to give reassurance that the worst of the hit from the coronavirus pandemic is behind the heavy-equipment maker. The company said machine sales fell 20% in September on a rolling three-month basis.

Consumer

  • Restaurant Brands announced a plan to overhaul its drive-thrus with predictive technology after reporting another quarter of falling sales. The enhancements include digital screens with “predictive selling” technology and contactless payment options, the Burger King owner said. The revamped plan was announced as the company reported third-quarter sales of $1.34 billion, down 8.3% year-over-year but still slightly ahead of analyst expectations.
  • Harley-Davidson reported better-than-expected profit as CEO Jochen Zeitz’s moves to cut costs and boost margins on a smaller revenue base paid off in the third quarter. The motorcycle maker said dealer inventory fell more than 30% compared with a year ago.
  • Steven Madden reported adjusted earnings per share for the third quarter that exceeded the average analyst estimate, but revenue dropped 31%.
  • Crocs reported adjusted earnings per share and revenue for the third quarter that topped the average analyst prediction. The shoe company said digital sales in the quarter grew 35.5% to 37.7% of total revenues versus 32.2% for the same period last year, with growth in all regions.

Materials

  • Teck Resources’ revenue for the third quarter fell short of the average analyst estimate. The company reduced its capital expenditures, capitalizing stripping and zinc unit cost guidance for the second half of 2020.
  • Sherwin-Williams reported third-quarter earnings per share and net sales that beat expectations. CEO John Morikis pointed to “continued and unprecedented strength in our DIY business,” as well as solid demand in residential repaint and new residential segments, for the company’s strong third-quarter results.

Technology

  • Xerox reported revenue for the third quarter that came in higher than the average analyst estimate despite business closures and office building capacity restrictions. The workplace technology company said equipment sales revenue fell 15% in the quarter, particularly in the mid-range and high-end products used in offices.

Transport

  • JetBlue reported operating revenue for the third quarter that beat the average analyst estimate. The airline said it expects capacity to decline about 45% year-over-year in the fourth quarter compared to a drop of 58% in the third quarter, reflecting its expectation for improved bookings.

— With assistance by Lu Wang

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Business

SpaceX prices Starlink satellite internet service at $99 per month, according to e-mail

  • SpaceX is expanding the beta test of its Starlink satellite internet service, reaching out via email on Monday to people who expressed interest in signing up for the service.
  • Called the "Better Than Nothing Beta" test, according to multiple screenshots of the email seen by CNBC, initial Starlink service is priced at $99 a month – plus a $499 upfront cost to order the Starlink Kit.
  • That kit includes a user terminal to connect to the satellites, a mounting tripod and a wifi router

SpaceX is expanding the beta test of its Starlink satellite internet service, reaching out via email on Monday to people who expressed interest in signing up for the service.

Called the "Better Than Nothing Beta" test, according to multiple screenshots of the email seen by CNBC, initial Starlink service is priced at $99 a month – plus a $499 upfront cost to order the Starlink Kit. That kit includes a user terminal to connect to the satellites, a mounting tripod and a wifi router. There is also now a Starlink app listed by SpaceX on the Google Play and Apple iOS app stores.

"As you can tell from the title, we are trying to lower your initial expectations," the emails said, signed Starlink Team. "Expect to see data speeds vary from 50Mb/s to 150Mb/s and latency from 20ms to 40ms over the next several months as we enhance the Starlink system. There will also be brief periods of no connectivity at all."

The emails, sent to an unspecified number of users, marks the launch of SpaceX's public beta test of the emerging internet service. For the last few months SpaceX has conducted a limited private beta test with employees – which the company has said showed strong results in both latency and download speeds, key measures for an internet service provider.

SpaceX did not immediately respond to CNBC's requests for comment.

Those who received the emails would have filled out a form on the Starlink website, which asked for potential subscribers' contact information and location. Elon Musk's company posted that form in June and, less than two months later, SpaceX said that "nearly 700,000 individuals" across the United States had indicated interest in the service.

Starlink is SpaceX's plan to build an interconnected internet network with thousands of satellites, designed to deliver high-speed internet to anywhere on the planet. The network is an ambitious endeavor, which SpaceX has said will cost about $10 billion or more to build. But the company's leadership estimate that Starlink could bring in as much as $30 billion a year, or more than 10 times the annual revenue of its rocket business.

To date, SpaceX has launched nearly 900 Starlink satellites – a fraction of the total needed for global coverage but enough to begin providing service in some areas, including in the northwest United States. The company has begun to work with a handful of organizations in rural regions which Starlink satellites in orbit currently cover, such as Washington state.

"Under Starlink's Better Than Nothing Beta program, initial service is targeted for the U.S. and Canada in 2020, rapidly expanding to near global coverage of the populated world by 2021," SpaceX said in the description of its Starlink mobile app.

SpaceX earlier this month announced a partnership with Microsoft, to connect the tech giant's Azure cloud computing network to the Starlink network. SpaceX and Microsoft in recent months have been testing the software needed to connect Starlink and Azure. The partnership is especially key to Microsoft's new mobile datacenters, which the company says are designed "for customers who need cloud computing capabilities in hybrid or challenging environments, including remote areas."

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World News

Harry Potter publisher Bloomsbury posted its highest earnings since 2008, saying that people are shunning streaming and turning to books during lockdown

  • Bloomsbury, the original publisher for the "Harry Potter" series, posted a 17% rise in revenue and 60% rise in profits in the six months to August.
  • It posted its highest first-half earnings since 2008, and said people had "rediscovered the pleasure of reading" during lockdown.
  • Bloomsbury credited its performance to new releases such as Reni Eddo-Lodge's "Why I'm No Longer Talking to White People about Race" and Sarah J. Maas' "Crescent City: House of Earth and Blood."
  • Sales of "Harry Potter" were on the rise too, it said.
  • Visit Business Insider's homepage for more stories.

Harry Potter publisher Bloomsbury posted its highest first-half earnings since 2008 on Tuesday, and said the public had "rediscovered the pleasure of reading" during lockdown.

Bloomsbury credited its performance to the success of bestsellers including Reni Eddo-Lodge's "Why I'm No Longer Talking to White People about Race," Sarah J. Maas' "Crescent City: House of Earth and Blood," and Kiley Reid's "Such A Fun Age."

But revenues were also propped up by books on its backlist, the UK company said. Harry Potter sales were "robust," Bloombury said, and rose by 8% between mid-July and the end of September, according to Nielsen Bookscan.

The paperback edition of "Harry Potter and the Philosopher's Stone" was the fifth-bestselling children's book of 2020 to date, 23 years after it was first published, it added.

Nigel Newton, founder and chief executive of Bloomsbury, told the BBC that there had been "a real uptake in reading" during lockdown, and that people were perhaps "tired of watching streamed movies which they binged on to begin with."

Read more: Inside the world of private libraries, where the minimum investment to create a custom collection is $25,000

Sales of titles by young adult fantasy author Maas increased by 131% in the half, it said, driven by the success of "Crescent City: House of Earth and Blood." Bloombury is publishing her next title, "A Court of Silver Flames," in February 2021.

Sales of both adult and childrens' books grew by roughly equal amounts, it added. Cook books sold well as more people cooked at home, and sales of wildlife books also rose.

Eddo-Lodge's "Why I'm No Longer Talking to White People about Race" was the number one paperback Sunday Times bestseller for seven weeks.

Sales of both e-books and physical books ordered online were significantly higher, the company said.

Total pre-profits in the six months to August were up 60% year-on-year to £4.0 million ($3.9 million), and revenues rose 10% to £78.3 million ($102.0 million).

The company is "confident about the future of publishing," but warned "the short-term is difficult to predict because of the pandemic."

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World News

Ted Cruz says the swelling national debt will re-emerge as a major concern for Republicans

  • Republican Sen. Ted Cruz says the mounting national debt will re-emerge as a major concern for the GOP.
  • The deficit had been growing even before the pandemic hammered the American economy as a result of the 2017 tax cuts and spending increases that Trump had enacted with GOP backing.
  • Many Republicans are reluctant to support another pandemic aid bill, citing the growing federal debt.
  • Visit Business Insider's homepage for more stories.

Sen. Ted Cruz said the growing national debt is set to broadly re-emerge as an area of concern of Republicans down the road.

During an interview on "Axios on HBO" with political reporter Jonathan Swan, the Texas Republican discussed the budget deficit and the federal debt. The pair had an energetic back-and-forth on the matter, with Swan saying Republicans had approved spending policies that grew the deficit, like the 2017 tax cuts.

Cruz also claimed Trump never ran on cutting the debt, but the president campaigned in 2016 to eliminate it within eight years.

Asked if the swelling debt and deficit will become an area of concern for the GOP, Cruz responded: "Sure."

"Isn't that the most cynical, phony thing?" Swan asked.

"You're touching into something that as you know I've raged against," Cruz replied. "I've raged against my own party not genuinely fighting to rein in spending and deficits and debt."

Read more: An investing shop overseeing $476 billion analyzed 650 stocks to fine-tune its election strategy. The firm's experts break down the trades to make around a Biden win — and explains how investors can keep portfolios safe.

The Trump administration enacted a $1.9 trillion tax law in 2017 that mostly benefited large corporations with strong support from Republicans. Congress and Trump also approved significant spending increases in 2018.

As a result of the pandemic, the budget deficit — the gap between tax revenue and federal spending — grew to $3.1 trillion for fiscal year 2020, three times the size it was last year. The larger amount reflects the government action undertaken to confront the pandemic, but the deficit had been growing before 2019 as well.

The largest chunk of spending came from the $2 trillion economic aid package known as the CARES Act approved in late March, which contained $1,200 stimulus checks, $600 enhanced unemployment insurance, and small business aid, among other measures.

In recent months, many Republicans have opposed another federal rescue package, citing the growing federal debt. The White House and Democrats are discussing another stimulus bill that could be nearly $2 trillion with Trump's strong backing. Republican Sen. Rick Scott of Florida blasted the price tag under consideration on Tuesday.

"We've got to understand that we've got to get our fiscal house in order," Scott told CNBC. "Somebody is going to have to pay for this."

But Federal Reserve officials and budget experts across the political spectrum argue more spending is needed to prop up a weakening economy.

Permanent layoffs are mounting and millions of Americans are still out of work. Nearly 23 million Americans are receiving unemployment benefits.

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World News

Pension scams: DWP deny issue as LBC launch their ‘Consumer Hour Scam Awareness Campaign’

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Pension scams were addressed by the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) recently, as it was revealed in August that more than £30million had been lost to pension scams since 2017. According to their analysis, individual losses ranges from less than £1,000 to as much as £500,000.

Additionally, the National Audit Office and other organisations have found the pandemic has created an environment for fraudsters to take advantage of coronavirus fears and target savers.

With these worrying findings emerging, Angela Eagle, a Labour MP for Wallasey, found it prudent to ask the Secretary of State for Work and Pensions, what assessment her department has made of trends in the number of pension scams during the COVID-19 outbreak.

In response to the query, Guy Opperman, the Parliamentary Under-Secretary for the DWP, had the following to say: “DWP is working across government and with regulators to monitor and respond to any increases in transfers or pension scams.

“To date, this monitoring has revealed little evidence to demonstrate an increase in either transfers or scams across the industry as a whole as confirmed by the independent regulator.

“This has been confirmed by responses from industry. The Government will continue to monitor and respond to any emerging evidence.

“The Government established Project Bloom, a cross-government taskforce that brings together law enforcement, government and industry to share intelligence, raise awareness of and the reporting of scams through public communication campaigns, and take enforcement action where appropriate.”

He went on to provide evidence for his assertion: “The Government continues to work with Regulators and enforcement agencies to prevent scams and take appropriate action.

“In the period March – July 2020, 116 reports of possible pension fraud were received by Action Fraud, compared to 179 for the same period in 2019.”

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 [INSIGHT]

While it remains to be seen if the government’s efforts will curtail pension scam issues, steps have been taken elsewhere to protect consumers in the run up to Christmas, a period where transactions typically rise and as such, so do risks.

On October 23, LBC launched: “The LBC Consumer Hour Scam Awareness Campaign” in an effort to raise awareness of the most common scams doing the rounds in the run up to Christmas.

Dean Dunham, the Host of LBC’c Consumer Hour, had the following to say: “We need to do more to stop innocent people, often the vulnerable, falling victims to scams. Leading up to Christmas tens of thousands of people will be caught out by a scam and lose their hard-earned money.

“If we can forewarn people about as many scams as possible, we will reduce the number of victims.”

The campaign will focus on three main areas:

  • To raise awareness about as many scams as possible, in the hope that it will help consumers to avoid these scams
  • To provide useful advice and tips on how to spot a scam
  • To provide useful advice on how to get money back if a person is scammed

The campaign will run up to Christmas on LBC and the station is calling on those that have fallen victim of a scam, or know someone that has been a victim, to get in touch with their story which can be shared to make others aware.

To get in contact with LBC, people can contact the organisation by going to www.lbc.co.uk/radio/special-shows/consumer-hour/.

Additionally, they get in touch by tweeting @deandunham or by calling Dean between 9-10pm on Fridays during the LBC Consumer Hour on 0345 60 60 973, or by texting 84850.

Dean concluded the launch with the following comments: “One victim of a scam is too many, but if this campaign helps to save at least one person from losing their money to a scam, it will be a huge success”.

“People need to let others know about scams and this campaign is the best and most visible way of doing this. Together, we can make a real difference”

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World News

Jurassic Park Ford Explorer for sale has a scary surprise: see the pics

Fox News Autos Test Drive: 2020 Ford Explorer ST

Ford doesn’t make four-door sports cars anymore so it’s powering up its SUVs, reports Fox News Autos Editor Gary Gastelu.

The Mustang may be Ford’s most famous movie car thanks to “Bullitt” and “Gone in 60 Seconds,” but the Explorer has it beat at the box office.

An authentic Explorer used to film Jurassic Park was featured in the "Hollywood Dream Machines: Vehicles Of Science Fiction And Fantasy" exhibit at the Petersen Automotive Museum.

The first-generation of the SUV played a supporting role in the 1993 blockbuster “Jurassic Park” as an automated tour vehicle that met a tragic end courtesy of T. rex and many custom tribute vehicles have been built by fans over the years.

One that was just completed in 2019 and currently up for auction on Bring a Trailer is a near picture-perfect replica of the movie truck that has a scary surprise.

(Bring A Trailer)

It features a vinyl wrap with the park’s paint scheme and logo, front and rear brush guards and yellow wheels. The one thing missing is the movie Explorer’s Plexiglas sightseeing roof, but it may have something better.

(Bring A Trailer)

Inside, the entire headliner has been replaced with a graphic of the T. rex about to tear into the transparent roof. Talk about a driving distraction.

FOX NEWS AUTOS TEST DRIVE: THE 2020 FORD EXPLORER ST IS A SPORTIER UTILITY VEHICLE

(Bring A Trailer)

The costumed Explorer was recently serviced and shows just 56K on its odometer, but Bring A Trailer says it was likely rolled past 100K at least once. It is being offered without reserve with bids accepted through Oct. 30.

CLICK HERE TO GET THE FOX NEWS APP

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Business

What the election could mean for hot healthcare startups

Welcome to Business Insider's daily healthcare newsletter, your daily dose of pharma, biotech, and healthcare news. Subscribe here to get this newsletter in your inbox every weekday.

Hello,

Today's a big earnings day for some of the major drugmakers in the COVID-19 vaccine and treatment race including Pfizer, Merck, and Eli Lilly. (No, we don't yet have data on Pfizer's late-stage COVID-19 vaccine trial.)

Meanwhile late on Monday, the Senate confirmed Amy Coney Barrett to the Supreme Court. Kimberly Leonard has the story on what adding a conservative judge could mean for Roe v. Wade, and the 16 abortion case that are making their way up to the high court right now.

Also today: We asked 14 top digital health leaders what the election will mean for the industry, 6 mental health startups that raised the most cash in the third quarter, and potentially diverging approval standards between Europe and the US.

5 ways the election could upend digital health, according to 14 healthcare CEOs, investors, and policy experts

  • The 2020 presidential election could determine the future of digital health, healthcare investors and CEOs told Business Insider.
  • The pandemic contributed to the quick adoption of digital health services like telehealth and digital therapeutics, but it's not clear how permanent their success can be without lasting policy.
  • The biggest concerns experts had were over whether the ACA would remain intact, and what a surge of uninsured Americans could mean for the cost structures that digital health groups rely on.

Read the full story from Megan Hernbroth and Blake Dodge here>>

Here are the 6 mental health startups raising the most cash as the pandemic overwhelms workers and companies

  • Mental health startups closed a record 68 funding deals in the third quarter of 2020, according to a new report from CB Insights.
  • Investors have remained interested in funding mental health startups since the onset of the coronavirus pandemic as companies had to quickly adjust to accommodate remote work and the complications that came with it.
  • Six startups raised the most in the third quarter, and many specialized in providing benefits for employers to offer employees.

Read the full story from Megan Hernbroth here>>

A clinical trial volunteer participates in Johnson & Johnson's study to test a coronavirus vaccine candidateJanssen

The EU's drug regulator would reportedly approve a COVID-19 vaccine even if it worked in less than 50% of people — a lower threshold than the FDA

  • The European Union's drug regulator would approve a COVID-19 vaccine even if it worked in less than half of people, the Wall Street Journal reported.
  • In comparison, the US's drug regulator, the Food and Drug Administration (FDA), expects a vaccine efficacy rate of at least 50%.
  • The news suggests that the European Medicine Agency and the FDA could disagree on which vaccines to approve.

Read the full story from Kate Duffy here>>

More stories we're reading:

  • Health startup AccuRx exploded during COVID-19 as doctors flocked to its free software – but new fees mean officials could soon pull the plug (Business Insider)
  • A General Catalyst-backed blank-check firm is looking to go public (Reuters)
  • Verily's COVID-19 testing program has been stopped in San Francisco and Alameda counties (Kaiser Health News) 
  • WATCH: Why bats can fight off so many viruses (Business Insider)
  • At age 27, I found out I have a 44% chance of developing breast cancer. Here's how I'm dealing with the specter of a diagnosis. (Insider)

Lydia 

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Business

Home prices in August see biggest gains in more than two years, S&P Case Shiller says

  • Strong demand and very limited supply of homes have caused home price gains to accelerate dramatically.
  • The 10-City Composite posted a 4.7% gain, up from 3.5% in the previous month. The 20-City Composite rose 5.2% year-over-year, up from 4.1% in July.
  • All 19 cities for which data was reported rose monthly and annually, with all 19 seeing larger annual gains than in July.

Strong demand and very limited supply of homes have caused home price gains to accelerate dramatically. Prices beat expectations, rising 5.7% annually in August, up from 4.8% in July, according to the S&P CoreLogic Case-Shiller National Home Price Index.

The 10-City Composite posted a 4.7% gain, up from 3.5% in the previous month. The 20-City Composite rose 5.2% year-over-year, up from 4.1% in July. Detroit was not included in the findings, due to insufficient data reporting. All 19 cities for which data was reported rose monthly and annually, with all 19 seeing larger annual gains than in July.

"A trend of accelerating increases in the National Composite Index began in August 2019 but was interrupted in May and June, as Covid-related restrictions produced modestly-decelerating price gains," said Craig Lazzara, managing director and global head of Index Investment Strategy at S&P Dow Jones Indices.

"The last time that the National Composite matched August's 5.7% growth rate was 25 months ago, in July 2018. If future reports continue in this vein, we may soon be able to conclude that the Covid-related deceleration is behind us. "

Phoenix, Seattle and San Diego reported the highest annual gains among the 19 cities (excluding Detroit) in August. Phoenix led the way with a 9.9% price increase, followed by Seattle with an 8.5% increase and San Diego with a 7.6% increase.

Chicago, New York City and San Francisco saw the smallest annual home price gains in August.

S&P Case-Shiller is a repeat sales index, running on a three-month average; it measures the sale prices of similar homes over time. Other home price indexes, like the measure from the National Association of Realtors, show much higher price gains because they calculate the median price of all homes sold during the month.

Since there is currently much more sales activity on the higher end of the market, where there is more supply available, that is skewing the median price much higher. The Realtors reported a 15% annual price gain for September.

Prices are being fueled not just by strong demand but by record low mortgage rates. Rates set several new records over the summer and continued to do so in September as well. Low mortgage rates give buyers more purchasing power, allowing sellers to raise prices.

"Weekly home price data shows that sellers continue to be in the driver's seat as asking prices maintain records. This has kept the median home price stuck near summer's peak even as snow begins to fall in some markets," said Danielle Hale, chief economist for realtor.com. "Looking forward, we expect continued price growth in the months ahead as demand holds steady with mortgage rates below 3%."

The median sale price for newly built homes rose 3.5% in September annually, according to the U.S. Census. Builders are struggling with higher prices for land, labor and materials, and are therefore unable to build as many entry-level homes as they might like. Buyer demand is strongest at the low end of the market, but supply is leanest.

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Economy

U.S. New Home Sales Unexpectedly Tumble 3.5% In September

New home sales in the U.S. unexpectedly showed a sharp decrease in the month of September, according to a report released by the Commerce Department on Monday.

The report said new home sales tumbled by 3.5 percent to an annual rate of 959,000 in September after jumping by 3 percent to a revised rate of 994,000 in August. The pullback surprised economists, who had expected new home sales to surge up by 2.8 percent.

“We expect the pace of sales to moderate further in the fourth quarter,” said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

She added, “While strong demand and low mortgage rates are supportive of home sales, the resurgence in Covid-19 cases, a recovery that may be shifting into reverse and a weak labor market pose downside risks.”

The unexpected pullback in new home sales was partly due to a steep drop in sales in the Northeast, which plunged by 28.9 percent to a rate of 32,000.

New home sales in the Midwest and South also slumped by 4.1 percent and 4.7 percent, respectively, while new home sales in the West spiked by 3.8 percent.

The Commerce Department also said the median sales price of new houses sold in September was $326,800, up 1.4 percent from $322,400 in August and up 3.5 percent from $315,700 in the same month a year ago.

The estimate of new houses for sale at the end of September was 284,000, representing a supply of 3.6 months at the current sales rate.

Last Thursday, the National Association of Realtors released a report showing a much bigger than expected spike in U.S. existing home sales in the month of September.

NAR said existing home sales soared by 9.4 percent to an annual rate of 6.54 million in September after jumping by 2 percent to a revised rate of 5.98 million in August.

Economists had expected existing home sales to surge up by 5.0 percent to a rate of 6.30 million from the 6.00 million originally reported for the previous month.

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World News

AMD to buy chip peer Xilinx for $35 billion in data center push

  • Semiconductor designer Advanced Micro Devices on Tuesday said it has agreed to buy Xilinx in a $35 billion all-stock deal.
  • The acquisition will intensify AMD's battle with Intel in the data center chip market.
  • The two U.S. firms have benefited from a more nimble approach to grab market share from Intel, which has struggled with internal manufacturing.

Semiconductor designer Advanced Micro Devices on Tuesday said it has agreed to buy Xilinx in a $35 billion all-stock deal that will intensify its battle with Intel in the data center chip market.

The deal, which AMD expects to close at the end of 2021, would create a combined firm with 13,000 engineers and a completely outsourced manufacturing strategy that relies heavily on Taiwan Semiconductor Manufacturing. The two U.S. firms have benefited from a more nimble approach to grab market share from Intel, which has struggled with internal manufacturing.

AMD has long been Intel's chief rival for central processor units (CPUs) in the personal computer business. Since Chief Executive Lisa Su took over AMD in 2014, she has focused on challenging Intel in the fast-growing business of data centers that power internet-based applications and services and are fuelling the rise of artificial intelligence and fifth-generation telecommunications networks.

Xilinx has also been working to penetrate data centers with programmable processors that help speed up specialized tasks such as compressing videos or providing digital encryption. Its primary rival in the area, Altera, was scooped up by Intel for $16.7 billion in 2015 in what was then Intel's largest-ever deal.

"There are some areas where we're very strong, and we will be able to accelerate some of the adoption of the Xilinx product family," Su told Reuters in an interview. "And there are some areas where (Xilinx CEO) Victor (Peng) is very strong, and we believe that we'll be able to accelerate some of the AMD products into those markets."

The tie-up comes at a time when Intel's manufacturing technology has fallen years behind TSMC's. AMD, which spun off its factories nearly a decade ago, has rocketed ahead of Intel with chips that perform better. The performance edge helped AMD gain its best market share since 2013 at slightly less than 20% of the CPU market, which has in turn pushed its shares up 68% between the start of the year and the close of trade on Oct. 26.

Xilinx also uses TSMC's factories, called "fabs" in the industry, to make its chips, with both U.S. companies using modular designs that let them swap out different pieces of a chip to avoid bottlenecks or delays.

"We ended up with TSMC, and have stayed with them, not due to any contractual reason — we could go to any fab at any time — but because they are best-in-class," Peng told Reuters in an interview. "It's about the choices you make."

Under the deal, Xilinx shareholders will receive about 1.7 shares of AMD common stock for each share of Xilinx common stock, valuing Xilinx at $143 per share, or about 24.8% higher than its $114.55 closing price on Oct. 26. AMD shareholders will own about 74% of the combined firm, with Xilinx shareholders owning the remaining 26%. The companies said the transaction was intended to be a tax-free reorganization for U.S. federal income tax purposes.

AMD's Su will lead the combined company as chief executive, with Xilinx's Peng serving as president responsible for the Xilinx business and strategic growth initiatives. The companies expect the deal to generate $300 million in cost savings.

AMD also reported earnings on Tuesday earlier than scheduled. It reported revenue and adjusted earnings of $2.80 billion and 41 cents per share, beating Wall Street expectations of $2.57 billion and 36 cents per share, showed IBES data from Refinitiv.

Bernstein analyst Stacy Rasgon said there is a danger that a major acquisition in an adjacent chip market could distract AMD's leadership while Intel fights to regain market share.

"The worry would be, AMD has this great self-grown story of their own, which is just starting to play out. Why are you doing this now? Is it just opportunistic? Does it distract from the current story?" he said.

Xilinx's Peng, however, said meetings between the two companies have already revealed they have very similar methods for designing chips.

"I'll be honest, I don't think it's really as challenging as some other combinations," he said. "I had one of my leadership teams who was not familiar with AMD say to me after a meeting, 'Boy, they're just like us.'"

AMD forecast fourth-quarter sales above estimates

Separately, AMD forecast fourth-quarter revenue above Wall Street expectations after the semiconductor designer announced the deal to buy Xilinx.

AMD expects current-quarter revenue to be about $3 billion, plus or minus $100 million, compared with analysts' average estimate of $2.63 billion, according to IBES data from Refinitiv.

Total revenue jumped 56% to $2.80 billion in the third quarter ended Sept. 26, above analysts' expectations of $2.57 billion.

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