Today’s Big Picture
The major equity indices in Asia followed U.S. equities from Monday, closing mostly higher on hopes for further stimulus. Japan’s Nikkei rose 0.5%, Hong Kong’s Hang Seng gained 0.9%, South Korea’s Kospi rose 0.5%, and Australia’s S&P/ASX 200 rose 0.4%, while markets in China were closed today for a holiday. By mid-day trading, equities in Europe were mixed following the day’s mostly “meh” economic data and reports that European Central Bank President Christine Lagarde is prepared to add additional stimulus and lower rates. U.S. futures suggest a weak open later this morning.
With little in the way of economic data and earnings reports today, the day’s trading will likely be dictated by fresh news on the U.S. fiscal stimulus front as House Speaker Pelosi and Treasury Secretary Mnuchin continue talks. There’s also Fed Chairman Powell’s morning speech to the National Associations of Business Economic Annual Meeting. We suspect Powell will stay on message, which includes calling for additional fiscal stimulus as new waves of the coronavirus are leading to new rounds of restrictions. The market appears to be pricing in a higher probability for a stimulus bill on the heels of the flurry of coronavirus cases in the White House.
Inflation in South Korea came in at 1% YoY in September, up from 0.7% previously where it was expected to remain, rising at the fastest pace in six months.
Australia’s Exports were down 4% MoM in August, weakening from the previous 3.4% contraction, while Imports rose 2%, slowing from the prior 6.2% increase in July. On a positive note, ANZ Job Advertisements rose 7.8% MoM in September after a 2.6% increase in August. While that is good from a sequential perspective, ads are down 25% on an annual basis.
India’s Markit Services PMI rose to 49.8 in September from 41.8 – still in contraction but improving despite the challenging coronavirus situation in the nation.
Factory Orders in Germany rose 4.5% MoM in August, beating expectations for just a 2.6% increase, after an upwardly revised 3.3% increase in July – good news to see acceleration here – and it was a beat on expectations for a 2.6% increase. That said, September’s factory orders were 3.6% below February’s, before the pandemic restrictions began, but down just 2.2% YoY compared to the 6.9% YoY drop in July.
Construction PMIs in the Euro Area and the UK remain (mostly) in contraction territory (under 50) in September, with the exception of Italy and the UK:
- Euro Area overall dropped slightly to 47.5 from 47.8
- France rose to 47.3 from 46.
- Germany fell to 45.5 from 48.
- Italy rose to 51.2 from 50.6
- The UK rose from 54.6 to 56.8 thanks to a mini-housing boom. This is the fourth consecutive reading above 50 and the fastest pace of growth in nearly five years.
While last week’s Markit PMIs for the manufacturing sector came in as expected at 54.6 for September, slightly below August’s 55.0, yesterday’s Non-Manufacturing Index strengthened, rising to 57.8 from 56.9, versus expectations for a decline to 56.2. This was the fourth consecutive expansion for the service sector, and the first time the survey showed expansion in the Employment sub-index since February. What was possibly most interesting about the Non-Manufacturing report was how conflicting the commentary was based on sector. Arts, Entertainment, and Recreation remain exceedingly pessimistic, while Health Care and Social Assistance were more positive, and the Construction industry is struggling with insufficient labor levels. Retail continues to struggle with supply-chain challenges, particularly with port and rail delays.
According to Black Knight’s August Mortgage Monitor, the delinquency rate has fallen for a third consecutive month and is now down to 6.9% from 7.8% in May but remains near some of the highest levels since 2013. The decline in August, while welcome, is a significant deceleration from prior months.
Later today, investors will receive the August report for the US trade deficit as well as the weekly Redbook retail sales data before the domestic equity markets open for trading today. Soon after that open, not only will we get the August JOLTS Job Openings data, but Federal Reserve Chairman Powell will be giving a speech at the National Associations of Business Economic Annual Meeting. Of course, in today’s COVID-19 world, he will be doing so via webcast. With the minutes of the Fed’s September FOMC meeting to be published tomorrow, no doubt folks will be parsing Powell’s words rather carefully.
The S&P 500 finished 1.8% higher yesterday following positive headlines on President Trump’s health, stimulus talks, and a better than expected September reading for the ISM Non-Manufacturing Index. We’d note that not only did all 11 S&P 500 sectors trade higher yesterday, but once the S&P 500 pierced its 50-day moving average at the market open, it kept that 3,365 level in its rearview for the entire trading session. The Dow Jones Industrial Average closed +1.7% on the day, and advancers led decliners by around 10:1 for the Dow. The day’s leaders were once again the Nasdaq Composite Index and the Russell 2000 that rose 2.3% and 2.8%, respectively.
Stocks to Watch
Grupo Aeroportuario del Pacifico (PAC) reported terminal traffic at the company’s 14 airports declined by 38.3% in September, with domestic passenger traffic down 33.7% and international traffic off 47.1%.
For the first time, Southwest Airlines (LUV) is asking union employees to accept pay cuts to avoid furloughs and layoffs through the end of 2021.
Exxon Mobil (XOM) plans to cut up to 1,600 positions in Europe as it works to cut costs in the face of diminished demand with the pandemic.
Cisco Systems (CSCO) has been ordered by U.S. District Judge Henry Morgan to pay $1.9 billion to Centripetal Networks that accused it of copying its cybersecurity patents. Cisco plans to appeal to the U.S. Federal Circuit Court of Appeals.
Uniti Group (UNIT) will begin offering nationwide dark fiber services on 31,000 fiber route miles, spanning 35 states across Tier I, II, and III markets.
Wind and grid megawatt-scale solutions company American Superconductor (AMSC) guided its September and December quarters above consensus expectations. For the September quarter, the company sees revs of $20.5-$21.5 million vs. $18.83 million consensus and prior guidance of $17-21 million. The revenue range for the December quarter is $22-$25 million vs. $19.18 million consensus. Alongside the upside guidance, American Superconductor announced it acquired Northeast Power Systems, a private company based in upstate New York that supplies medium-voltage metal-enclosed capacitor banks, harmonic filters and related equipment.
Property insurance company Palomar Holdings (PLMR) estimates pretax catastrophe losses of $34-$38 million, net of reinsurance in September quarter due to anticipated losses from Hurricanes Hanna, Isaias, Laura and Sally.
Hess (HES) agreed to sell its 28% working interest in the Shenzi Field in the deepwater Gulf of Mexico to BHP Billiton (BIL:GR) for a total consideration of $505 million. The field produced an average of 11,000 net barrels of oil equivalent per day in the first eight months of 2020.
Toyota’s (TM) North America subsidiary and Hino Trucks have agreed to jointly develop a heavy-duty (Class 8) fuel cell electric truck for the North America market with an initial demonstration targeted for the first half of 2021.
Nokia (NOK) will team with Finland’s Tampere University to develop 5G chipsets and will explore other areas such as machine learning, AI, and security hardware development.
Bloomberg reports a House panel led by Democrats investigating competition in the technology sector is poised to propose sweeping reforms to block giants such as Amazon (AMZN) and Apple (AAPL) from both owning marketplaces and selling their own products on them.
After today’s market close, Levi Strauss (LEVI) will issue its latest quarterly results. Investors looking to get a jump on the rest of the expected quarterly earnings reports to be had in the coming days should visit Nasdaq’s earnings calendar page.
On the Horizon
- October 7: MBA Mortgage Applications, Consumer Credit, FOMC Meeting Minutes
- October 8: Initial Jobless Claims, Bloomberg Comfort
- October 9: Wholesale Inventories, Wholesale Trade Sales
- October 13: NFIB Small Business, CPI, Real Hourly Earnings, Budget Statement
- October 13-14: Amazon’s (AMZN) 2020 Prime Day event
- October 14: MBA Mortgage Applications, PPI
- 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
“Observe how people react when you stop fulfilling roles they designed for you.” ~ Nicole LaPera
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.