Daily Markets: Earnings Season Heats Up With Tech in the Hot Seat

Today’s Big Picture

Today kicks off an earnings avalanche this week with over a quarter of the S&P 500 component companies reporting along with the five largest tech names. Of the companies that have already reported, nearly 84% have beat on estimates. After Snap’s (SNAP) share price got pummeled last week thanks to the impact of Apple’s (AAPL) increased mobile privacy protection, investors will be focused on Facebook’s (FB) results today and Alphabet’s (GOOG) and Twitter’s (TWTR) tomorrow.

While the S&P 500 and the Dow made new record highs last week, the Nasdaq 100, Nasdaq Composite, and Russell 2000 have yet to break out to new highs. Investors will be looking to get some confirmation from these, with expectations that a breakout of the small caps will be a particularly bullish signal for the markets.

Shares in Asia-Pacific were mixed today, with Hong Kong’s Hang Seng relatively unchanged while mainland China’s Shanghai Composite rose 0.8% and the Shenzhen Component added 0.7%. Japan’s Nikkei lost 0.7%, but South Korea’s Kospi rose 0.5%, and Australia’s ASX 200 rose 0.3%. By midday trading, European markets were also mixed, but U.S. equity futures point to positive moves at the open. Crude strengthened in Asian trade earlier today, with WTI hitting its highest since October 2014.

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Coronavirus

With the Delta Plus variant having spread to 11 provinces, China has reinstated some travel restrictions for people arriving from anyplace in the country that’s reported locally transmitted Covid cases. All train services around China related to tourism have also been halted. The same Delta Plus variant is also spreading in the UK. As of now, the U.S. is still set to open its borders to fully vaccinated foreign travelers on Nov. 8.

U.S. top health officials now expect that Covid-19 vaccines for children aged 5 to 11 will be available by early November.

International Economy

Yesterday China’s struggling Evergrande announced that it had resumed work on over ten projects.

Last week’s data out of the Eurozone showed the economy is growing now at its slowest pace over the past six months. This morning Germany’s Ifo Business Climate Index for October declined more than expected to 97.7 from 98.8 versus expectations for a smaller decline to 97.9. This is the index’s lowest level since April, as Europe has been plagued by supply chain bottlenecks and falling production capacities. Expectations for future months and the view on current business conditions both worsened month over month.

Mexico’s unemployment rate came in better than expected at 4.2% in September, down a tick from 4.3% in August, where it was expected to remain.

Domestic Economy

Friday’s flash Markit PMIs for both Manufacturing and Services in October were a mixed bag, just like what we’d seen on Friday from Europe. Services rose more than expected to 58.2 from 54.9 in September versus expectations for a minor increase to 55.1 while Manufacturing fell more than expected to 59.2 from 60.7, versus expectations for a minor decline to 60.3.

In other news worthy of a stiff drink, the U.S. budget deficit for 2021 has reached $2.772 trillion, the second-highest on record, versus the $3.132 trillion in 2020.

Speaking of spending, it is looking increasingly likely that a slimmed-down reconciliation spending plan and the bipartisan infrastructure bill will go a vote on Capitol Hill. Senators Chuck Schumer and Joe Manchin spent the weekend with President Biden at his home in Delaware to hammer out passable proposals ahead of Biden’s trip to Europe later this week.

Later today, we will get the Chicago Fed National Activity Index for September and the third of the five regional Fed Manufacturing indices, the Dallas Fed Manufacturing Index.

Markets

The major U.S. equity indices closed in the green for the third consecutive week, despite the tech sector getting hit hard on Friday after hearing Snap’s disappointing numbers, thanks to Apple’s improved mobile privacy features.

The Treasury curve continued to flatten with the yield on the long bond falling six basis points to 2.07% as the short-end rose, with the 2-year yield hitting 0.46%, its highest since early 2020.

Stocks to Watch

Shoppers at Walmart (WMT) can now buy bitcoin for cash at some stores through Coinstar kiosks. Coinstar has partnered with Coinme, the cash-to-crypto business, to make these purchases possible.

Before U.S. equity markets open this morning, Kimberly Clark (KMB), Otis Worldwide (OTIS), and Restaurant Brands International (QSR) are expected to report their quarterly results.

This morning the UK-based HSBC (HSBC) reported a 74% increase in profits and a share buyback of up to $2 billion. Pre-tax profits reached $5.4 billion versus the prior year’s $3.1 billion and expectations for $3.8 billion.

Tesla (TSLA) rolled back its Full Self-Driving advanced driver-assistance software to version 10.2 after some issues with the 10.3 version. CEO Elon Musk said that the issue is to be expected with beta software. The company also reportedly raised its EV prices this weekend. The base Model 3 and Model Y both were bumped up to $2K to $43,990 and $56,990, while the base Model S and Model X vehicles were raised by $5K each to $94,990 and $104,990.

Procter & Gamble (PG), Nestle (NSRGY), Verizon Communications (VZ), and other companies plan to continue raising prices or pushing customers to buy more expensive products into 2022 to “offset fast-growing costs amid a global supply-chain crisis.”

IPOs

The Zhejiang Geely Holdings (ZGH) owned Swedish carmaker Volvo Cars announced this morning that it is cutting the size of its stock market listing and will be pricing at $6.2 per share. The offering is now expected to raise around 20 billion Swedish crowns versus the previously anticipated 25 billion. Geely Sweden Holdings AB will not exercise its upsize option. The shares are expected to begin trading now on Friday, a day later than previously expected, with the company having a market capitalization of around $19 billion.

Allbirds (BIRD) had launched its 19.23 million share IPO with a targeted price range of $12-$14.

For more, visit Nasdaq’s Latest & Upcoming IPOs page.

M&A Activity

PayPal (PYPL) announced it is not currently pursuing Pinterest (PINS) in the wake of reports from Bloomberg that the two were in discussions, ending speculation over a potential $45 billion deal. PayPal shares were up over 5% in pre-market trading this morning, while Pinterest shares were down around 10%.

After Today’s Market Close

American Campus Communities (ACC0), Celestica (CLS), Facebook (FB), Logitech International (LOGI), and Packaging Corp. (PKG) are among the companies slated to report their quarterly results. Those looking to get a jump on the earnings reports in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

• October 26: S&P/Case-Shiller Home Price Index, New Home Sales, CB Consumer Confidence
• October 27: Durable Goods Orders, Wholesale Inventories, Durable Goods, Goods Trade Balance
• October 28: Q3 GDP (advance estimate), Weekly Jobless Claims, Pending Home Sales
• October 29: Personal Income & Spending, PCE Price Index, Employment Cost Q3, Chicago PMI, Michigan Consumer Sentiment
• November 1: Markit and ISM Manufacturing PMIs, Construction Spending
• November 2: Total Vehicle Sales, IBD/TIPP Economic Optimism, API Crude Oil Stock
• November 3: ADP Employment Change, Markit Services & Composite PMIs, ISM Non-Manufacturing & Composite PMIs, Factory Orders, Federal Reserve Interest Rate decision
• November 4: Balance of Trade, Unit Labor Costs, Nonfarm Productivity, weekly jobless claims
• November 5: Non-Farm Payrolls, Unemployment Rate
• November 9: PPI, API Crude Oil stock change
• November 10: Inflation, Weekly jobless claims, Wholesale inventories, EIA Crude and Gasoline stocks, Monthly budget statement
• November 12: JOLTs report, Michigan Consumer Sentiment

Thought for the Day

“Hear everybody but listen to yourself.” ~ Ron Howard

Disclosures

• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Index
• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
• Verizon (VZ), Walmart (WMT) are constituents of the Tematica Research Thematic Dividend All-Stars 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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