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Daily Markets: Amazon, Intel, and Visa Earnings on Deck For Today

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Today’s Big Picture

It'll be another big earnings day with 45 S&P 500 companies reporting among a sea of more than 220 such reports, and the European Central bank announcing its monetary-policy decision spinning out of the last meeting headed by President Mario Draghi. As a reminder, Draghi will be replaced by former International Monetary Fund head Christine Lagarde on October 31st.

Asian and European markets were mostly higher following yesterday's blitz of earnings reports from U.S. companies and some positive news on the US-China trade war front. It's being reported this morning that China is willing to purchase at least $20 billion in agricultural products in the coming year following a phase one trade agreement with the US. and possibly increase purchases even more in later rounds of trade talks.

As the avalanche of US company earnings reports is being had early this morning, US equity futures are pointing to a positive open. 

Data Download

As we noted above, at 7:45 AM ET this morning the market will receive the ECB’s latest interest rate decision and that will be followed by an 8:30 AM ET press conference. Global markets will be looking for more insight on the ECB’s new round of bond purchase slated to begin on November 1, as well as revisions to its GDP forecast for 2019 and 2020. Exiting its September meeting, the ECB’s GDP forecast for 2019 and 2020 stood at 1.1% and 1.2%, respectively. 

Leading up to that decision, this morning we received the IHS Markit October Flash PMI data for the Eurozone as well as that for Germany and France.  For the region in full, the October composite PMI reading was 50.2, up a tick compared to 50.1 the prior month, but just below the expected 50.3. Manufacturing remained in contraction territory at 45.7 and was a tad below the expected 46.0, while Services edged up month over month to 51.8. The German manufacturing economy continued to contract in October hitting 41.9, while its services economy softened month over month. France, however, surprised modestly to the upside with modest stronger than expected readings for both manufacturing and services that brought its October composite to 52.6 vs. 50.8 in September. 

The IHS Markit PMI Flash data train will roll into the US later this morning. Expectations for the region’s Flash Manufacturing PMI for October call for a decline to 50.3 from September’s 51.1. The US Census Bureau will report on New Home Sales for last month which are expected to have declined to 692,000 from 713,000 in August. We’ll also get the September US Durable Goods Orders, which will continue to see year over year comparisons impacted by Boeing’s (BA) 737 MAX issues. The real point of focus in that report will be core capital goods orders, a proxy for business investment.  And late morning we’ll get the latest Kansas Fed Manufacturing Index and the question to be answered will be if the September rebound for the region carried into October?

Japan’s Jibun Bank Manufacturing flash PMI for October came in 48.5, below expectations for 48.8. Services flash PMI managed to just barely stay out of contraction territory at 50.3 (below 50 is contraction), down considerably from September’s 52.8.  The Composite flash PMI dropped into contraction as well at 49.8 from 51.1 in September.  The nation’s Coincident Index for August registered at 99.0, down from 99.7 in July and below the expected 99.3.  On a somewhat positive note, the nation’s Leading Economic Index for August came in slightly ahead of expectations at 91.9 for August but was still below the 93.7 reading for July. 

Stocks to Watch

The major US equity indices closed in positive territory yesterday despite weak reports from Caterpillar (CAT) and Boeing (BA).  Caterpillar disappointed on both EPS and revenue and lowered its full-year forecasts reporting lower demand from its customers - not a good sign for the global economy. While Boeing’s revenue wasn’t as bad as feared (actually beating expectations), it missed by a wide margin on EPS but claimed it will stick to its timeline for the return of the 737 Max, which calmed investors fears. Texas Instruments (TXN) gave guidance for the current quarter Q4 that was well below expectations - not a good sign for the microchip sector.

Shares of Nokia (NOK) are getting hit in pre-market trading despite the company besting expectations for the September quarter. The culprit is the company not only slashing its 2020 guidance but also announcing it will not distribute expected dividends in order to increase its 5G investment as well as the company’s cash position. 

Shares of Twitter (TWTR) are also under pressure this morning following September quarter revenue and EPS that missed expectations. The micro-blogging company also guided current-quarter revenue to $0.94-$1.01 billion, below the consensus forecast of $1.06 billion. Average monetizable daily active usage (mDAU) was 145 million for the September quarter, compared to 124 million in the same period of the previous year and compared to 139 million in the previous quarter. 

MSC Industrial (MSM) bested expectations with Non-GAAP EPS of $1.30, $0.07 ahead of the consensus. Revenue for the quarter rose 0.6% year over year, also coming in ahead of expectations. This closely watched company for metalworking and maintenance, repair, and operations (MRO) products and services for industrial markets guided its current-quarter revenue and EPS to $811-$827 million and $1.115-$1.21, respectively below the consensus of $842 million and $1.27.

Shares of Southwest Airlines (LUV) are trading up in pre-market trading following September quarter EPS of $1.23, $0.15 ahead of Wall Street forecasts, on revenue that rose 1.1% year over year. Southwest sees unit revenue flat to up 2% in the current quarter following solid booking trends and cost per available seat mile rising 4% to 6%.

Comcast (CMCSA) shares are seeing some lift pre-market following better than expected September quarter revenue and EPS. Growth in the core cable business was primarily driven by high-speed internet, wireless and business services, while its video and voice businesses continued to decline. 

Microsoft (MSFT) beat on both the top and bottom lines but lowered guidance. The company's cloud business Azure enjoyed a 59% increase in year-over-year sales with overall sales up 14% and profits up 24%. Ford Motor (F) also lowered forward guidance and discussed its focus on cost reduction in the face of declining auto sales. The company reported more than $2 billion in operating profits in the US, Mexico, and Canada in Q3, but reported losses in every other region, a $281 million loss in China alone.

After yesterday’s close Tesla (TSLA) blew the doors off of expectations (technical term) with adjusted earnings per share of $1.86 versus expectations for a loss of -$0.42 on revenue of $6.3 billion, less than the expected $6.33 billion. As we mentioned yesterday, two major focus points for the company were its new factory in Shanghai, (for which the company produced a glossy 28-page photo-filled up) and the Model Y production, which the company expected to launch by next summer. 

Facebook (FB) CEO Mark Zuckerberg had a grueling day yesterday, taking questions for six hours in front of the House Financial Services Committee concerning the company’s plans for Libra, its cryptocurrency. After the session members of Congress appeared to be unimpressed as ranking member Patrick McHenry from North Carolina stated, "Frankly, I’m not sure that we’ve learned anything new here.”

BRP Group (BRP), a Florida-based independent insurance broker also known as Baldwin Risk Partners, priced 16.4 million shares at $14.00, the low end of the targeted $14-$16 range.

After the market close, three of the higher-profile earnings reports will be from

  • Amazon (AMZN): Consensus expectations call for EPS of $4.49 on revenue of $68.7 billion. Investors will be assessing the company’s Amazon Web Services as well as profitability at its International business. With the expansion of one-day Prime delivery, margins at the company’s US business are likely to be a point of focus. 
  • Intel (INTC): This chip company is expected to report EPS of $1.16 on revenue of $18.07 billion. In addition to its comments on overall PC demand, investors will be scrutinizing chip demand associated with data center and cloud applications as well as watching the company’s capital spending plans for 2019 and 2020. 
  • Visa (V): The consensus EPS for this transaction processing company is $1.43 per share on revenue of $6.08 billion. Comments on transaction activity as well as its mix between credit and debit as well as geographic strength will be items to watch. 

Other earnings investors will be scrutinizing include Aflac (AFL)Alaska Air (ALK), Cerner (CERN)Capital One (COF)Cypress Semiconductor (CY)Deckers Outdoor (DECK)Eastman Chemical (EMN)First Solar (FLSR)Gilead Sciences (GILD)Juniper Networks (JNPR)LogMeIn (LOGM)LPL Financial (LPLA)Principal Financial Group (PFG)Proofpoint (PFPT)Resmed (RMD)Southwestern Energy (SWN)T-Mobile US (TMUS), and Verisign (VRSN).

On the Horizon

Upcoming IPOs this week:

  • Aesthetic Medical International Holdings (AIH), headquartered in Shenzhen, China, is a provider of aesthetic medical services in China including surgical aesthetic treatments such as eye surgery, rhinoplasty, breast augmentation, and liposuction as well as non-surgical treatments such as laser and cosmetic dentistry. The company plans to offer 2.5 million shares priced between $11 and $13 and list on Nasdaq Friday. 
  • Happiness Biotech Group Ltd (HAPP) will issue 2 million shares at $5.50 today on the Nasdaq. The offering represents 8% of outstanding shares and is expected to raise $11 million. Founded in 2005, the Chinese company manufactures traditional health supplements.
  • OneWater Marine (ONEW), a recreational boat retailer operating 63 stores in 11 states, plans to offer 3.2 million shares priced between $18 and $20 per share, listing on Nasdaq Global Market today.
  • Phathom Pharmaceuticals (PHAT), which focuses on gastrointestinal diseases, plans to sell 7.9 million shares priced between $18 and $20 and list on Nasdaq.
  • Progyny (PGNY), a fertility benefits management company, plans to sell 6.7 million shares priced between $14 and $16 and list on Nasdaq Friday.
  • Youdao (DAO), the education unit of Nasdaq-listed Chinese internet technology company NetEase Inc (NTES) plans to offer 5.6 million American Depositary Shares (ADS) priced between $15 and $18 and list on NYSE Friday.

 Dates to mark:

    • October 25: University of Michigan Consumer Sentiment Survey will be of particular importance after the disappointing September retails sales.
    • October 29-30: Federal Reserve monetary policy meeting where expectations for a rate cut are currently over 90%.
    • October 31: Brexit?
    • November 1: October Caixin China General Manufacturing PMI
    • November 4: Tokyo Stock Exchange Closed

Thoughts for the Day

“Literally every person is messed up, so pick your favorite train wreck and roll with it.” 

- Hannah Marbach

Snaccidnet - Eating an entire bag of chips by mistake.

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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Chris Versace

Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.

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Lenore Elle Hawkins

Lenore Elle Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, her focus is on macroeconomic influences that create investing headwinds or tailwinds. Lenore co-authored the book Cocktail Investing and in addition to her Tematica work, provides M&A consulting services for companies in Europe looking to expand globally. She holds a degree in Mathematics and Economics from Claremont McKenna College, an MBA in Finance from the Anderson School at UCLA and is a member of the Mont Pelerin Society.

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