Markets

Daily Markets: Equities Cheer FDA's Blood Plasma Decision

Front of the FDA Headquarters building
Credit: Jason Reed - Reuters / stock.adobe.com

Today’s Big Picture

Equities in Asia started the week off on a positive note led by the U.S. Food and Drug Association authorizing the use of blood plasma recovered from coronavirus patients as a treatment option, and a drop in Hong Kong's new virus cases. Reports the Trump administration is seeking to reassure U.S. companies including Apple (AAPL) that they can still do business with Tencent’s WeChat messaging app in China also helped boost Asian equities today. Those positive factors spilled over to lead European equities higher as of mid-day trading and U.S. futures point to a positive open when those markets open later this morning.

Today is a relatively quiet day with minimal economic data and corporate earnings reports to be had, which likely means investor attention once again focus on a Washington that remains deadlocked concerning the next round of economic stimulus. With the Republican National Convention kicking off tonight, and 71 days until the 20200 presidential election, we suspect there will be no shortage of political muckraking and grandstanding. Amid the bluster to be had, we suggest investors remain focused on the economic data and corporate commentary to be had while keeping a watchful eye for what could be next in terms of economic stimulus and trade relations.

Data Download

International Economy

Over the weekend Mexico passed its worst-case scenarios of over 60,000 Covid-19 deaths and South Korea is about to shut down schools and suspend sporting events and push for a return to work from home nationally as the nation experiences its worst resurgence in nearly six months.

The mid-month inflation rate in Mexico for August for 0.24% MoM and 3.99% YoY, which was a tad hotter than the expected 3.7% YoY increase. Mid-month core inflation rose 0.18% MoM vs. the expected 0.3%.

Later today we will get retail sales from Argentina which fell 93.1% YoY in May after falling 97.6% YoY in April. Ouch.

Domestic Economy

After a relatively light week last week for economic data, this week will be much fuller with 33 data releases including more housing data, regional Fed indices, sentiment releases, and the second release of Q2 GDP estimate on Thursday. Today we will get the Chicago Fed National Activity Index.

Markets

Friday saw the Nasdaq 100 and the Dow gain 0.7%, the Nasdaq Composite gained 0.4% and the Russell 2000 fell 0.8%. The S&P 500 managed to close up 0.4% despite the majority of stocks in the index closing in the red on the day. The major driver of the day’s gain was once again Apple, which rose 5.1%, more than any other stock in the S&P 500 and has gained nearly 30% since the end of July when the company announced it would split its stock at the end of August.

That’s nothing compared to Tesla (TSLA) which after having announced a 5 for 1 stock split on August 11, saw its shares rocket up about 50%. To be fair, that was the fourth time in the past year that TSLA rose at least 50% over 8 days. The top five tech stocks known as the High Five now account for about half of the Nasdaq 100’s market cap and a quarter of the S&P 500.

Strength, however, has not been all that widespread. Last week four S&P 500 sectors gained on the week (Technology, Consumer Discretionary, Communication Services, Consumer Staples), one was flat (Real Estates), and six closed lower (Energy, Utilities, Financials, Industrials, Materials, and Health Care). While the Nasdaq 100 is up 32.2% in 2020, the small-cap heavy Russell 2000 is down 7%. The S&P 500 may be up 5.2%, but the S&P 500 Equal Weight is down 5.5%. Looking at sectors, the S&P Homebuilders SPDR (XHB) hit a new record high last week and the U.S. Home Construction iShares (ITB), which is main homebuilding stocks such as DR Horton (DHI) and Lennar (LEN), made a new high Friday and is up 27.4% YTD.

We’d note that as the market continues to grind higher, data from Refinitiv Lipper showed that for a second week in a row ending August 19, investors were net redeemers of fund assets. For the week ending August 19, investors pulled $10.2 billion on a net basis across funds and ETFs.

Stocks to Watch

Following the U.S. Food & Drug Administration authorizing the use of blood plasma from patients who have recovered from COVID-19 as a treatment for the disease shares of immunoglobulin therapy providers, including Kamada (KMDA), Grifols (GRFS), Cerus (CERS), and ADMA Biologics (ADMA) among others are trading higher in pre-market activity.

The U.S. Bureau of Safety and Environmental Enforcement shared that because of Hurricane Marco and Tropical Storm Laura energy firms including Royal Dutch Shell (RDS.A), Equinor (EQNR), BP (BP), Chevron (CVX), and Murphy Oil (MUR) among others shut 57.6%, or 1.07 million barrels per day, of offshore crude oil production and 44.6%, or 1,205 million cubic feet per day, of natural gas output in the U.S. Gulf of Mexico.

Reports suggest ByteDance (BDNCE) investors are in talks to use their stakes in the Chinese tech company to help finance their bid for its short-video app TikTok. Given its financial resources and technical ability to design new algorithms for TikTok that would separate it from ByteDance and its Chinese short video app Douyin, Microsoft (MSFT) looks to be the front-runner for TikTok.

The U.S. Patent & Trade Office granted Tiziana Life Sciences (TLSA) Patent No. 10,759,862 for methods and use of fully human monoclonal antibody (mAb; TZLS-501) that recognizes both IL-6 receptor (IL-6R) and IL-6 receptor complex with IL-6 (IL-6R/IL-6) for prophylactic and therapeutic intervention for human diseases. The patent will be published on September 1.

Delta Air Lines (DAL) shared its plans to resume service on 50 international flights this winter and into 2021 that were suspended due to the pandemic. Among the daily flights the company is looking to resume are ones from Seattle to Tokyo, Seoul, Beijing, and Shanghai. In the U.S., Delta will continue to block middle seats through at least the end of 2020.

Bloomberg reports Food delivery business DoorDash is aiming to go ahead with an initial public offering in November or December. The company joins an increasingly busy IPO calendar that includes Airbnb, Unity Technologies, Snowflake, Asana, Palantir Technologies, and Sumo Logic.

After today’s market close, Hertz Global (HTZ) and Palo Alto Networks (PAWN) are expected to report their quarterly results. Investors looking to get a jump on those reports and other upcoming ones to be had this week should visit Nasdaq’s earnings calendar page.

On the Horizon

  • Dates to mark:
      • August 25: Case-Shiller Home Prices, New Home Sales, Consumer Confidence, Richmond Fed Manufacturing
      • August 26: MBA Mortgage Applications, Durable Goods
      • August 27: GDP, Personal Consumption, Initial Jobless Claims, Bloomberg Comfort, Pending Home Sales

Thought for the Day

“Some people never go crazy. What truly horrible lives they must lead.” ~ Charles Bukowski

Disclosures

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

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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Mark Abssy

Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.

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