Mon - Fri 10:00-18:00
Johannesburg, Fourways

Daily Markets: Waiting on a Stimulus Package as the Pandemic Accelerates

Today’s Big Picture

Equity indices in the Asia-Pacific region ended the midweek session on a mixed note with the Hong Kong Hang Seng closing up 0.8% while Japan’s Nikkei rose 0.3% and China’s Shanghai Composite down 0.1%. By mid-day trading, European equities were down across the board amid renewed Brexit and coronavirus worries. U.S. equity futures point to a mixed market open later this morning.

As the velocity of corporate earnings picks up, investors continue to watch for progress on stimulus talks in Washington. Last night White House Chief of Staff Mark Meadows commented that stimulus talks made additional progress, but that negotiations “still have a ways to go.” Even if House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin come to an agreement, it will have to pass the Senate. Senate Majority Leader McConnell said he would bring a Trump-supported bill to the floor if it passes the House but reportedly wants a deal after the election. Color us skeptical following the extension of paycheck protection program funding failing to get the necessary 60 votes to clear a procedural hurdle in the Senate yesterday.

Data Download


Deaths due to the coronavirus in the U.S. may be understated by about one-third, according to research from the Centers for Disease Control (CDC). The U.S. has, according to CDC data, 216,025 deaths from the virus as of October 15, but just under 300,000 excess deaths were estimated to have occurred between late January and October 3. Excess deaths are usually defined as the number of individuals who have died from all causes, over and above the expected number of fatalities for a given location and time.

The number of hospitalizations in the U.S. rose over 39,000 for the first time in two months as the nation saw more than 60,000 new infections yesterday. As of Tuesday, 15 states are reporting record high levels of Covid-19 hospitalizations on a 7-day basis since August 4.

International Economy

The European Union enjoyed strong demand for an issue of new coronavirus-related bonds yesterday, with investors placing bids for €233 billion, well in excess of the €17 billion offer.

The UK government has borrowed a record amount in the first half of the fiscal year as the pandemic hit tax receipts while expenditures skyrocketed with a cash requirement of £246 billion, nearly 3x the prior high since records began in 1984. UK inflation rose, as expected, to 0.5% YoY in September, up from 0.2% in August. The Retail Price Index rose 1.1% YoY, up from the prior 0.5%, but below expectations for an increase to 1.2%. Core PPI Output rose 0.3% YoY, up from the prior 0.1% where it was expected to stay. Overall PPI Output fell 0.9% YoY, the same level of contraction as was seen in August.

After canceling hundreds of sailings in the early months of the pandemic between Asia and the U.S., the cost of shipping goods from Asia to the U.S. has risen sharply in the past month as companies look to restock inventories ahead of the holiday season and possibly in anticipation of some sort of lockdowns in the colder months. Long term rates to the U.S. west coast are up 63.4% YoY.

The unemployment rate in Mexico improved to 5.1% in September from the previous 5.2%, from which it was expected to increase to 5.3%.

Domestic Economy

Yesterday’s construction reports found that new housing starts rose just 1.9% MoM in September to an annualized pace of 1.42 million, which was well below expectations for a 2.4% increase. The previous month’s pace was also revised lower to reveal a 6.7% decline, as activity was affected by Hurricane Laura and Tropical Storm Marco. Building permits rose 5.2% to a seasonally adjusted annual rate of 1.55 million, besting expectations for just 1.52 million. The number of units under construction per permit is currently, barring all but a couple of months from the early 1970s and 2013, the lowest on record.

This morning we got the latest weekly mortgage applications data, but the real focus is likely to be the latest Fed Beige Book that is published at 2 PM ET today and, of course, any news on an agreement for a new stimulus bill. The average 30-year fixed mortgage rate in the U.S. rose two basis points to 3.02% for the week ended October 16. Mortgage applications for the week declined 0.6% after a 0.7% decline in the prior week. Homebuyer mortgage applications fell 2.1%, the fourth consecutive weekly decline, while refinance applications rose 0.2%.


Yesterday, the S&P 500 gained 0.5%, closing well off its 1.5% high for the day, a move that was spurred on by continued stimulus talks between House Speaker Pelosi and Treasury Secretary Mnuchin. The Nasdaq Composite increased 0.3%, the Dow Jones Industrial Average increased 0.4%, and the Russell 2000 increased 0.3%. The dollar depreciation accelerated this morning with Democrats and Republicans reportedly getting closer to an agreement for a second stimulus package.

Stocks to Watch

Ericsson (ERIC) reported earnings of SEK1.77 per share, SEK0.39 better than the S&P Capital IQ Consensus of SEK1.38. Sales for the quarter, adjusted for comparable units and currency, increased by 7% YoY, mainly driven by 5G sales in Mainland China. Per the company, “Underlying business fundamentals remain strong in North America driven by consolidation in the U.S. operator market, pending spectrum auctions, and increased demand for 5G.”

While Netflix (NFLX) reported a modest beat relative to September quarter expectations and guided EPS for the current quarter above consensus, NFLX shares were hit in aftermarket trading last night given its miss relative to EPS and expectations for growth in its global net subscribers. During the September quarter, Netflix added 2.2 million net memberships vs. its 2.5 million guidance. For the current quarter, Netflix sees EPS of $1.35 vs. the $0.94 consensus on revenue of $6.572 billion vs. the $6.59 consensus. The company targets global streaming net adds of 6.0 million during the current quarter vs. 8.8 million in the year-ago quarter.

Snap (SNAP) reported September quarter EPS of $0.01 vs. the expected -$0.05 as revenue rose 52.1% YoY to $678.67 million vs. the $551.36 million consensus. Daily Active Users were 249 million in the September 2020 quarter, an increase of 39 million or 18% YoY. The company did not provide forward guidance.

Texas Instruments (TXN) reported better-than-expected September quarter results led by a robust recovery in the personal electronics segment, with revenue increasing by more than 20% sequentially. The company says that strength was broad-based and that it was in a position to support un-forecasted demand. Its auto end market rebounded strongly with revenue up 75% QoQ. The company shared that while visibility has improved, it remains cautious as the broader economic impact from the virus could last for several years. That said, Texas Instruments boosted its outlook for the current quarter to EPS of $1.20-1.40 vs. the $1.18 consensus.

Nestlé (NSRGY) shared its full-year growth for 2020 would come in at the high end of its target range thanks to strong demand for pet food, convenience foods, and big-name brands in the pandemic. For the first nine months of the year, the company shared its organic growth clocked in at 3.5% vs. the 2.8% consensus.

The Wall Street Journal reports Uber (UBER) is considering an overhaul of its business in California if voters reject a ballot measure that would prevent the ride-hailing company’s drivers from being classified as employees.

Cathay Pacific Airways (CPCAY) will cut 8,500 jobs and shut a regional airline as it battles the pandemic related plunge in air travel.

JPMorgan Chase (JPM) is rolling out a checking account paired with its QuickAccept service, which allows businesses to take card payments within minutes, either through a mobile app or a contactless card reader, and users will see sales hit their Chase accounts on the same day. This move looks to target similar offerings by Square (SQ), PayPal (PYPL), and First Data (FISV).

Amazon (AMZN) is launching a free, one-hour grocery pickup for Prime members at all Whole Foods stores in the U.S. To qualify, grocery orders must total $35 or more.

General Motors (GM) unveiled the 2022 GMC Hummer EV sport utility truck that will “deliver the performance of an exotic sports car as well as off-road capability and new technologies.” The initial availability of the Hummer EV next fall will start at $112,595.

After today’s market close, Chipotle Mexican Grill (CMG), CSX (CSX), Discover Financial Services (DFS), Lam Research (LRCX), Las Vegas Sands (LVS), Tesla (TSLA), and Xilinx (XLNX), among other will report their quarterly results. Investors looking to mark their calendars for the rest of the September quarter earnings season should visit Nasdaq’s earnings calendar page.

On the Horizon

    • 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

“To grow, you have to be able to withstand the anxiety of growth. Growth always brings with it tremendous internal conflict and anxiety. It’s just the way it works.” ~ Bruce Springsteen


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

Leave a Reply

Select your currency
ZAR South African rand