Daily Markets: Cupid's Arrow Missing Today's Markets

Today's Big Picture

Love may be the theme for today's Valentine's day, but the markets are mostly feeling, "I think I'll just throw on my comfy sweats, grab a pint of ice cream and go for a Netflix marathon." Or maybe that's just us.

Yesterday investors continued to reassess risk concerning COVID-19, leaving the major US indices little changed. Today Asia closed mostly in the green, albeit just slightly, except for Japan's Nikkei, which closed down just over 0.5%. Markets in Europe were mixed by mid-day trading, but little changed either way. US equity futures point to a slight increase at the open - another day with little direction.

Perhaps cupid and his arrows have investors distracted ahead of the long weekend in the US? Given Presidents' Day in the US is Monday, markets will be closed so we wouldn't be surprised to see traders taking a cautious stance into the weekend to avoid any COVID-19 surprises before markets re-open on Tuesday.

The tariff reductions agreed to as part of the phase one U.S-China trade deal takes effect today. Under the agreement, China will halve levies on some $75 billion of US imports. However, tension between the two countries could be making a quiet return as phase-two trade deal conversations are underway. Yesterday US prosecutors filed new criminal charges against Huawei Technologies, alleging that the company orchestrated an effort to steal trade secrets from US companies - a violation of the Racketeering Influenced and Corrupt Organization Act, which is often used to prosecute organized crime. These charges were added to the existing criminal case filed against the company last year, which argued theft of intellectual property from US companies.

In response, China's foreign ministry argued that the US should, as they put it, stop suppressing Chinese companies without reason. China's foreign ministry spokesman Geng Shuang claims these actions damage America's credibility and image. Odds are cupid won't be slinging any of his arrows toward the would-be Beijing and DC couple today.

Data Download

China's Foreign Direct Investment (FDI) grew by $57.1 billion in December of 2019, much higher than the $17.7 billion average in the prior quarter. Foreign Direct investment in December amounted to roughly 1.4% of GDP. TBD how COVID-19 affects this - unlikely to be a positive.

No wonder investors are unsure as to how to assess the risks of COVID-19. A senior Trump administration official told CNBC yesterday the United States does "not have high confidence in the information coming out of China" regarding the number affected by COVID-19. More sweet nothings between the two nations.

Growth in the Eurozone slowed more than expected in the last quarter of 2019, down to 0.9% YoY versus expectations for 1.2%. Employment change (preliminary) came in at 1% YoY, as expected.

The region's largest economy, Germany, saw its growth stall out at 0% GDP growth QoQ in the fourth quarter of 2019, versus expectations for 0.2% growth. The YoY trend slowed to 0.4% growth versus expectations for 0.6%. While the economy slowed, prices rose as Wholesale prices in Germany rose 1% MoM in January and 0.3% YoY, versus expectations for 0% and a decline of 1.3%, respectively.

Prices in Spain also rose more than expected, with the YoY inflation rate at 1.1% versus expectations for just 0.8%.

Later this morning we'll get two heavy-hitter pieces of January US economic data - Retail Sales and Industrial Production. Inside those two reports, we'll look to see the degree to which consumers opened their wallets following the holiday season and where, and get another perspective on the US manufacturing economy. Before the market closes for the long weekend, we'll also get the February read on the Michigan Consumer Sentiment Index.

Stocks to Watch

They say Valentine's Day is going to the dogs…. and it is… sort of. According to the National Retail Federation (NRF), people will spend roughly $1.7 billion in Valentine dollars on pets this year, and while we can neither confirm nor deny that at least one of your authors intends to participate in that cavalcade of spending. Potential beneficiaries of this particular branch of holiday spending include PetSmart (PETM), Chewy (CHWY), Amazon (AMZN), and Kroger (KR).

Of course, that is a drop in the proverbial bucket compared to the total Valentine's Day spending that the National Retail Federation sees reaching $27.4 billion this year. In investor speak this means many products to be purchased from the likes of Hershey (HSY), Coty (COTY), Inter Parfums (IPAR), L Brands (LB), Diageo (DEO) and a bevy of others including of course Amazon and several of the businesses owned by Darden Restaurants (DRI).

And while love will be in the air for some, Borden Dairy is not feeling it with Dean Foods (DF) as Bloomberg reports Borden doesn't intend to pursue a merger and doesn't expect any further discussions.

Shares of cybersecurity company FireEye (FEYE) jumped higher yesterday following headlines the company could be acquired by Cisco Systems (CSCO).

Alibaba (BABA) warned yesterday that the COVID-19 outbreak would negatively impact its current quarter. While online orders for food and other daily necessities have increased thanks to its customers being forced to stay home, demand for things like consumer electronics and fashion items has slowed.

Shares of Canopy Growth (CGC) are popping in pre-market trading following quarterly earnings that demolished top and bottom-line expectations for the December quarter. Recreational B2B sales in Canada rose 8% due to more than 140 stores becoming active in the quarter and higher sales of premium dried flower and pre-roll joints. The company's Recreational B2C sales rose 16% QoQ.

Pinterest (PINS) fell in aftermarket trading last night following Facebook (FB), releasing Hobbi, an app for helping "you document and remember the things you love to do," including saving and sharing photos. It will be interesting to see how Hobbi differentiates itself from Facebook's Instagram.

A judge temporarily halted Microsoft's (MSFT) work on that now-infamous $10 billion contract for cloud computing services for the Defense Department contract. Amazon asked for the block last month, arguing that the Trump administration played politics and is seeking to depose the President along with other senior administration officials. No love lost between the richest man on earth and the President.

After beating December quarter expectations for its top and bottom line and boosting its outlook for the current quarter above consensus expectations, shares of NVIDIA (NVDA) climbed in aftermarket trading last night. Upside relative to expectations was had at the company's gaming, professional visualization and data center businesses. We'd note that while NVIDIA upped its current-quarter revenue guidance above consensus, it also reduced its revenue outlook by $100 million to account for potential coronavirus impact.

Roku (ROKU) shares jumped after the company reported better than expected quarterly revenue last night and guided EPS for both the current quarter and 2020. Underneath the financial metrics for the quarter, the operational ones were as impressive: the number of active accounts rose 36% YoY to 36.9 million with average revenue per user climbing 29% to $23.14 as streaming hours rose 60% to 11.7 billion.

Shares of Royal Caribbean Cruises (RCL) moved lower after-hours following an update on the effects of the coronavirus outbreak on its business. The company canceled 18 sailings in southeast Asia and modified several itineraries that will hit its 2020 EPS by roughly $0.65 per share vs. the expected $10.18 in EPS for the full year. Alongside that revision, the company shared that should it "cancel all of its remaining sailings in Asia through the end of April, it would impact 2020 financial performance by an additional $0.55 per share."

Who says there isn't any inflation out there? Altice USA (ATUS) announced it would increase its prices for new mobile subscribers by 50% to $30 per month.

Clinical-stage oncology company Revolution Medicines (RVMD) priced its IPO of 14 million shares at $17, well ahead of the initial $14-$16 price range and the original 10.0 million share offering size.

Tesla (TSLA) announced that it plans to sell roughly 2.7 million new shares (around $2 billion worth based on yesterday's close) as it looks to cash in on the parabolic share price rise of over 240% in the past six months. The proceeds will be used to pay down some of its $6 billion in net debt.

No companies are expected to report quarterly results after US markets close today for a long weekend that has them closed in observance of Presidents' Day. For those looking to get a jump on earnings reports coming next week, please visit Nasdaq's earnings calendar page.

On the Horizon

• Upcoming IPOs:
  • For a complete list of upcoming IPOs by month, please visit the Nasdaq IPO Calendar.
• Dates to mark:
  • February 17: US equity markets are closed in observance of Presidents' Day
  • February 19: European Central Bank rate decision
  • March 3: 2020 Presidential Election Super Tuesday
  • March 5-6: OPEC meeting
  • March 12: European Central Bank rate decision
  • March 17-18: Federal Reserve FOMC meeting
  • April 28-29: Federal Reserve FOMC meeting
  • April 30: European Central Bank rate decision
  • May 12-14: Google I/O Developer Conference
  • May 25: US stock market closed for Memorial Day

Thoughts for the Day

"Love recognizes no barriers. It jumps hurdles, leaps fences, penetrates walls to arrive at its destination full of hope."- Maya Angelou

Disclosures

• Hershey (HSY) and Microsoft (MSFT) are constituents in Tematica Research's Thematic Dividend All-Stars Index.
• Tesla (TSLA) is a constituent in Tematica Research's Cleaner Living Index.
• Cisco Systems (CSCO) and FireEye (FEYE) are constituents in the Foxberry Tematica Research Cybersecurity & Data Privacy Index.

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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