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Daily Markets: Fading Stimulus Hopes Hit Equities

Today’s Big Picture

Equities in Asia finished today’s trading mixed with Japan’s Nikkei and Hong Kong’s Hang Seng both up 0.1% while China’s Shanghai Composite closed down 0.6% and South Korea’s Kospi fell 0.9%. By mid-day trading, the major equity indices in Europe were mostly lower, and U.S. futures were little changed as investors digest the volume of bank earnings out this morning.

Weighing on equities is the growing realization that the recent ping-pong negotiations make a new COVID-19 fiscal stimulus package look increasingly less likely before the 2020 presidential election. Even as the number of voices calling for a fresh round of stimulus continues to grow as the economic and earnings data increasingly paint a picture of a still-struggling economy, hope for any package until early 2021 is waning, leaving equities vulnerable.

Data Download

International Economy

Australia’s Westpac Consumer Confidence Index rose to 105 from 93.8, an 11.9% improvement in October following an 18% improvement in September.

South Korea’s central bank kept its prime rate steady at 0.5%, as expected.

China’s outstanding yuan loans rose by 13.0% YoY in September, the same pace as in August and slightly above expectations for a decline to 12.9%.

Japan’s Industrial Production rose just 1.0% MoM in August, after the previous 8.7% expansion, and below expectations for a 1.7% increase. IP was down 13.8% YoY in August, up from the prior 15.5% decline in July. Capacity Utilization improvement for August slowed to a 2.9% gain from the previous 9.6% improvement.

Industrial Production in the Euro Area similarly was down 7.2% YoY in August after a 0.7% MoM increase.

The Inflation Rate in Spain rose 0.2% MoM in September but remains down -0.4% YoY. The Harmonised rate rose 0.4% MoM but also remains down -0.6% YoY.

Domestic Economy

U.S. Consumer Prices rose 0.2% MoM in September, the fourth consecutive monthly increase, but slower than the 0.4% increase in August. On a YoY basis, CPI rose 1.4%. Core CPI rose 0.2% MoM and 1.7% YoY.

Real hourly wages in the U.S. declined in September MoM, but longer workweeks result in an overall increase in weekly wages. On a YoY basis, weekly wages increased considerably.

  • For all employees
    • Real average hourly earnings declined 0.1% MoM (seasonally adjusted) in September as a result of a 0.1% increase in average hourly earnings being offset by a 0.2% increase in CPI.
    • Real average weekly earnings rose 0.2% MoM due to the combo of an increase in real average hourly earnings combined with a 0.3% increase in the average workweek.
    • Real average hourly earnings rose 3.3% YoY, seasonally adjusted, and real average weekly earnings rose 4.1% YoY due to the combination of rising hourly and a 0.9% increase in the average workweek from 34.4 in September 2019 to 34.7 in 2020.
  • For the 80+% of the workforce in the production and nonsupervisory category
    • Real average hourly earnings declined by 0.2% MoM as a result of an increase in CPI while wages remained flat.
    • Real average weekly earnings rose 0.1% MoM due to a 0.3% increase in the average workweek, offsetting a decline in hourly earnings.
    • Real average hourly earnings rose 3.0% YoY, seasonally adjusted, and real average weekly earnings rose 4.5% YoY due to the combination of rising hourly and a 1.5% increase in the average workweek from 33.6 hours in September 2019 to 34.1 in September 2020.

On today’s domestic economic docket, we have the weekly MBA Mortgage Applications data and the September Producer Price Index (PPI) reading both landing before US equity markets open. This afternoon brings the Fed’s September Beige Book and September Treasury Budget.


Yesterday, the major U.S. equity indices snapped their four-session winning streaks following renewed concerns over the coronavirus, and comments from JPMorgan (JPM) and Citigroup (C) that the U.S. needs another coronavirus relief package. Prospects for such a package ahead of the 2020 presidential election out of Washington continue to be dim. The S&P 500 and Dow Jones Industrial Average both finished the day down 0.6% while the Russell 2000 dropped 0.7%, and the Nasdaq Composite declined 0.1%. From a sector perspective, weakness was and in financials (-1.9%), real estate (-1.7%), energy (-1.6%), and industrials (-1.1%).

Stocks to Watch

Despite revenue falling 11.6% YoY to $20.3 billion, missing the $20.9 billion consensus, Bank of America (BAC) reported September quarter EPS of $0.51 vs. the $0.50 consensus. Of note in the company’s earnings press release, during the quarter, it boosted its provision for credit losses to $1.4 billion “driven by COVID-19 impacts.” Total net charge-offs decreased $174 million of 15% from the June quarter to $942 million. Consumer net charge-offs decreased $170 million QoQ to $564 million “aided by benefits of deferrals and government stimulus.” Commercial net charge-offs were essential flat QoQ at $408 million.

PNC (PNC) reported September quarter EPS of $3.39 per share, $1.28 better than the consensus forecast; revenue for the quarter rose 0.9% YoY to $4.28 billion, topping the $4.01 billion consensus. The company’s provision for credit losses was $52 million, a decrease of $2.4 billion. Average commercial loans of $175.6 billion decreased $13.7 billion, or 7%, reflecting lower utilization of loan commitments. Average consumer loans of $77.5 billion decreased $1.3 billion, or 2%, due to lower auto, credit card, home equity, and student loans partially offset by higher residential mortgage loans.

United Health (UNH) reported better than expected September quarter revenue and EPS and boosted its 2020 guidance. Revenue for the September quarter rose 7.9% YoY to $65.1 billion vs. the expected $63.97 billion. The company now sees 2020 EPS of $16.50-$16.75 vs. the $16.56 consensus and its prior guidance of $16.25-$16.55.

Semiconductor capital equipment company ASML Holding (ASML) reported September quarter EPS of €2.54 per share vs. the €2.25 consensus as revenue for the quarter rose 32.6% YoY to €3.96 billion, beating the expected €3.7 billion. For the current quarter, the company revenue in the range of €3.6-3.8 billion, which bookends the €3.7 billion consensus. Longer-term, the company reiterated that secular market drivers such as 5G, AI, and high-performance computing remain in place.

China Southern Airlines (ZNH) reported its September passenger capacity decreased 23.67% YoY, with capacity for domestic routes up 6.55% YoY. For regional and international routes, its capacity fell 92.25% YoY and 89.88% YoY, respectively, during September.

Six Flags (SIX) says in an SEC filing that it’s committed to reducing its full-time workforce by 10% as part of transformation productivity initiatives.

Allscripts (MDRX) announced it will sell its CarePort Health business to WellSky, a global health, and community care technology company, for $1.5 billion.

Kroger (KR) targets expanding its Simple Truth brand’s plant-based offering to more than 75 products by the end of 2020. New products include non-dairy cheeses, oat milk ice cream, and Emerge fresh chicken-less patties and grinds.

Dollar General (DG) is opening a new store concept Popshelf, aimed at higher-end suburban shoppers in Nashville in the coming weeks. The company targets opening two such stores in the coming weeks and plans to open another 30 by the end of next year.

After today’s market close, Alcoa (AA), Sleep Number (SNBR), and United Airlines will report their quarterly results. Readers looking to get ready for the sea of earnings in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

    • October 15: Initial Jobless Claims, Bloomberg Comfort, Empire Manufacturing, Import/Export Prices, Philly Fed Outlook
    • October 16: Options Expiration Day, Retail Sales, Industrial Production, Business Inventories, University of Michigan Consumer Sentiment, TIC Flows
    • October 19: Home Builder Sentiment
    • October 20: Building Permits and Housing Starts
    • October 21: MBA Mortgage Applications, Fed Beige Book
    • October 22: Initial Jobless Claims, Bloomberg Comfort, Leading Index, Existing Home Sales, Kansas City Manufacturing
    • October 23: Preliminary Markit PMIs
    • October 26: Chicago Fed Activity, New Homes Sales, Dallas Fed Manufacturing Activity
    • October 27: Durable/Capital Goods, FHFA Home Prices, Case-Shiller Home Prices, Consumer Confidence, Richmond Fed Manufacturing
    • October 28: MBA Mortgage Applications, Wholesale Inventories, Retail Inventories
    • October 28: Facebook (FB), Google (GOOGL), and Twitter (TWTR) testify before the Senate Commerce Committee
    • October 29: Initial Jobless Claims, Bloomberg Comfort, GDP, Personal Consumption, Pending Home Sales
    • October 30: Personal Income, Personal Spending, PCE Deflator, Employment Cost, MNI Chicago PMI, University of Michigan
    • October 31: Boo!

Thought for the Day

“How wonderful it is that nobody need wait a single moment before starting to improve the world.” ~Anne Frank

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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