North American Morning Briefing: Stock Futures -2-

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After a record-breaking bull run for the U.S. stock market this year, many Wall Street analysts are starting to warn that investors could be in for a bumpy ride in the coming weeks and months.

Analysts at firms including Morgan Stanley, Citigroup Inc., Deutsche Bank AG and Bank of America Corp. published notes this month cautioning about current risks in the U.S. equity market. With the S&P 500 already hitting 54 records this year through Thursday-the most during that period since 1995-several analysts said that they believe there is a growing possibility of a pullback or, at the least, flatter returns.

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House Democrats Consider 26.5% Corporate Tax Rate

WASHINGTON-House Democrats expect to propose raising the corporate tax rate to 26.5% from 21% and imposing a 3-percentage-point surtax on individual income above $5 million, according to two House Democratic aides familiar with the plans.

The tax increases would be part of the House Ways and Means Committee’s plans to pay for the party’s priorities in a fast-moving budget bill. Those items include an expanded child tax credit, a national paid-leave program and renewable-energy tax breaks.

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Economy Week Ahead: Inflation, Retail Sales and Industrial Output

Measures of U.S. inflation and consumer spending are in focus this week.

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Meme Stocks AMC and GameStop Push Small-Cap Benchmark Higher

Meme stocks are distorting the way some investors see parts of the market.

The Russell 2000 value index, designed to follow shares of small companies that are viewed as bargains relative to the rest of the market, is up 21% this year. Meanwhile, the Russell 2000 growth index, populated with companies whose earnings are expected to flourish faster than the rest of the market, has increased only 5%.

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Short-Lasting Inflation Depends on Long-Lasting Goods

For decades, Americans have enjoyed falling prices for cars, electronics and furniture.

Until the Covid-19 pandemic, that is. For the past year, prices for durable goods have been rising-and not just by a little. Whether those prices come back down is a key part of the puzzle facing the Federal Reserve as it plots how to handle an unexpectedly strong burst of inflation.

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Riskier Chinese Property Bonds Suffer as Evergrande Struggles

Bonds from lower-rated Chinese property developers have fallen steeply in price after warnings of a potential default at industry giant China Evergrande Group sent investors scrambling to protect themselves against trouble elsewhere in their portfolios.

Various dollar bonds due in 2023 and 2024 from Fantasia Holdings Group Co. and Guangzhou R&F Properties Co. have fallen to less than 60 cents on the dollar, pushing yields on most of these debts above 40%.

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Libor Transition Stokes Sales of Risky Corporate Debt

Wall Street’s shift away from Libor is fueling sales in the red-hot market for bundles of risky corporate loans.

Managers of collateralized loan obligations-securities made up of bundled loans with junk credit ratings-are rushing to close deals ahead of the year-end move away from the London interbank offered rate. The interest-rate benchmark underpins trillions of dollars of financial contracts but was scheduled for phaseout after a manipulation scandal.

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Democrats Grapple With Limits of Antipoverty and Climate Bill

WASHINGTON-Democrats are grappling with the fiscal and political limits of their pursuit of a broad antipoverty and climate bill, with some senior lawmakers preparing to slim down or eliminate elements of the proposal as moderates push to shrink the $3.5 trillion package.

Senators return to Washington Monday after a weekslong break, in a rush to craft the legislation at the center of President Biden‘s agenda, an effort that Republicans oppose. To pass the bill with just Democratic votes, lawmakers will need to navigate a host of intraparty disagreements over the legislation-which aims to expand access to child care, education and healthcare while also raising taxes on high-income households and companies.

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Biden‘s Covid-19 Vaccine Mandate Further Stresses Supply of Rapid Tests

America’s Covid-testing infrastructure, from drugstores to diagnostics manufacturers, is bracing for a surge in demand following the Biden administration’s order that most large U.S. companies mandate their workers get vaccinated or be screened weekly for the virus.

Makers of over-the-counter Covid-19 tests are continuing to boost production, while laboratories and companies are ramping up operations that some had scaled back after the virus largely retreated earlier this year.

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Iran Pledges to Cooperate With U.N. Atomic Agency, Easing Nuclear Talks Threat

Iran reached an agreement Sunday with the United Nations atomic agency that will grant international inspectors access to some of the country’s nuclear-related sites, a step likely to avert a crisis in the negotiations on restoring the 2015 nuclear deal.

The agreement comes after International Atomic Energy Agency Director-General Rafael Grossi made a last-minute trip to Tehran this weekend in a bid to persuade Iran to step up its cooperation with the agency ahead of a meeting of the IAEA’s top member states starting Monday.

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House Democrats Consider 26.5% Corporate Tax Rate

WASHINGTON-House Democrats expect to propose raising the corporate tax rate to 26.5% from 21% and imposing a 3-percentage-point surtax on individual income above $5 million, according to two House Democratic aides familiar with the plans.

The tax increases would be part of the House Ways and Means Committee’s plans to pay for the party’s priorities in a fast-moving budget bill. Those items include an expanded child tax credit, a national paid-leave program and renewable-energy tax breaks.

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California Recall Puts Governor’s Pandemic Leadership to the Test

California Gov. Gavin Newsom on Tuesday will be the first governor in a recall election to face voters divided over Covid-19 restrictions and collectively angry about a pandemic that continues to upend lives nationwide.

State leaders around the U.S. have exercised broad authority to try to safeguard the health and well-being of both their residents and economies over the past 18 months, including decisions that have drawn fire from all sides.

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After Hurricane Ida, Louisiana Bayou Community Contemplates Moving or Rebuilding

POINTE-AUX-CHÊNES, La.-The closer you get to the marina, the stronger the smell. “Sewer mixed with swamp,” said Christine Verdin, who grew up in the community and serves on the council of the Pointe-au-Chien tribe. “I wish we could bottle this up as perfume and send it to people who haven’t been around and say, ‘You didn’t come to see what it looked like, but now you can smell it.’”

Two weeks after Ida ripped through this unincorporated bayou community of 3,700, 80% of homes are uninhabitable, said Chuckie Verdin, tribal council leader in Pointe-aux-Chênes, where around a third of residents are members of the tribe that includes primarily people of Chitimacha descent. Nobody has power or running water.

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TODAY IN CANADA

Earnings:

None scheduled

Economic Indicators:

None scheduled

Stocks to Watch:

Kansas City Southern Says Canadian Pacific Bid Superior to Canadian National Deal: Kansas City Southern said a recent takeover offer from Canadian Pacific Railway is superior to one it already accepted from Canadian National Railway in the latest twist in a hotly contested battle for the railroad.

As set out in the terms of its existing agreement with Kansas City Southern, Canadian National now has five business days to improve its offer to avoid termination of the deal. It could also choose to walk away — and receive a $700 million breakup fee and reimbursement for a similar fee it previously covered.

Canadian Pacific, which had given Kansas City Southern until Sunday to make a determination, said in a statement Sunday that it stands ready to complete a deal. Canadian National said in a statement that it is evaluating all of its options.

Should Canadian Pacific ultimately prevail, it would reunite two companies that first agreed to a $25 billion tie-up in March, before Canadian National swooped in with a roughly $30 billion topping bid.

In a deal with Canadian Pacific, Kansas City Southern shareholders would receive 2.884 Canadian Pacific shares and $90 in cash for each of their shares, now valued at about $288 a share, or $26 billion.

Under the current deal with Canadian National, Kansas City Southern shareholders would receive 1.129 Canadian National shares and $200 in cash, valued at worth about $334 a share.

Expected Major Events for Monday

06:00/GER: Aug WPI

08:00/ITA: 2Q Labour Cost Index

18:00/US: Aug Monthly Treasury Statement of Receipts & Outlays of the U.S. Govt

23:01/UK: 4Q Manpower UK Employment Outlook Survey

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Monday

Adamis Pharmaceuticals Corp (ADMP) is expected to report $-0.04 for 2Q.

Aimia is expected to report for 2Q.

Champions Oncology Inc (CSBR) is expected to report $0.03 for 1Q.

Coda Octopus Group Inc (CODA) is expected to report for 3Q.

EVI Industries Inc (EVI) is expected to report for 4Q.

Evolution Petroleum (EPM) is expected to report $0.09 for 4Q.

FedEx Corp (FDX) is expected to report.

Frequency Electronics (FEIM) is expected to report for 1Q.

KalVista Pharmaceuticals Inc (KALV) is expected to report $-0.92 for 1Q.

Matrix Service (MTRX) is expected to report $-0.03 for 4Q.

MaxCyte is expected to report for Interim.

NAPCO Security Technologies Inc (NSSC) is expected to report $0.25 for 4Q.

Ocean Power Technologies Inc (OPTT) is expected to report for 1Q.

Optical Cable (OCC) is expected to report for 3Q.

(MORE TO FOL(LOW)) Dow Jones Newswires

09-13-21 0608ET