Daily Markets: Holding Pattern Continues For Trade, Fed; Stocks to Watch

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Today’s Big Picture

Depending on your time zone, late last night or early this morning the US and China held their latest round of trade conversations. Following the call, China's Ministry of Commerce said China and the US "reached consensus on properly resolving relevant issues" and agreed to stay in contact on the remaining points for a phase-one trade deal. That news led global equities higher, subsequently, however, while the US Trade Representative acknowledged the phone conversation occurred, there was no comment on what was discussed.

To us, it resembles an awkward high school conversation between two teens trying to figure out if they should stay together or break up without any real resolution one way or the other being had.  Perhaps we're past the "it's not me, it's you" stage, but it's far from a once again harmonious union, which means, at least for now, any substance and timing associated with a phase-one trade deal remains uncertain.

In other non-event news, in his speech last night Federal Reserve Chair Powell said, "Monetary policy is now well-positioned to support a strong labor market and return inflation decisively to our symmetric 2% objective.  If the outlook changes materially, policy will change as well. At this point in the long expansion, I see the glass as much more than half full. With the right policies, we can fill it further, building on the gains so far and spreading the benefits more broadly to all Americans."

Our cynical side would point out the Fed has never called a recession before it happened, but as Lenore correctly identified years ago, part of the Fed's role is that of an economic cheerleader. While Powell thrashed his economic pom poms last night, our Fed decoder ring says he and the rest of the FOMC are likely to remain data-dependent when it comes to what’s next for monetary policy. The Flash November IHS Markit data for the US offers the Fed some breathing room for now.

The net effect of that collective no real news led Asian equities to finish the day mixed. European equities are also mixed in trading today, and US futures point to the same for today’s market open.  

Data Download

The December GfK Consumer Confidence reading for Germany inched higher to 9.7, a tick higher than expected and up from November's three-year low reading of 9.6. Economic expectations rose 15.5 points to 1.7 suggesting Germans are more optimistic about global growth given potential US-China trade progress. The willingness to buy component, however, fell modestly month over month.

September Retail Sales for Mexico rose 2.4% year over year, ahead of expectations but down vs. August’s 2.6% increase on the same basis. 

Back in the US, we’ve got several fresh economic data points to be had today including the weekly retail facing Redbook Index, the September reading for the S&P Case-Shiller Home Price Index, October Trade Balance data, October New Home Sales and two pieces of data for November - the Richmond Fed Manufacturing Index and Conference Board Consumer Confidence

Stocks to Watch

Best Buy (BBY) shares are up in pre-market trading following quarterly revenue and EPS that topped expectations, and the company lifted its outlook for the coming year. The company now expects a full-year EPS of $5.81-$5.91 vs. the prior view of $5.60-$5.75 prior view and the $5.76 consensus.

Watch company Movado Group (MOV) missed quarterly EPS expectations by $0.21 as revenues came in weaker than expected for the quarter. Citing intensified challenges in the watch category Movado also slashed its 2020 outlook, with EPS now forecasted in the $1.55-$1.70 range down from the prior $2.25-$2.35.

Reports suggest Disney’s (DIS) Disney+ is averaging 1 million new subscribers a day…Intel (INTC) is shopping its connected home division… and Dell Technologies (DELL) is considering selling its RSA Security business for at least $1 billion.

Shares of Ambarella (AMBA) were higher in aftermarket trading yesterday following better than expected quarterly results and upside guidance relative to consensus expectations. With shipments of its products to automotive and security camera markets ramping, Ambarella boosted its current-quarter revenue outlook to $55-$59 million vs. the consensus of $55.66 million. 

Last night Palo Alto Networks (PAWN) reported better than expected quarterly EPS on in-line revenue, and reaffirmed its 2020 revenue guidance but trimmed its EPS outlook. The 2020 EPS revision to $4.90-$5.00 from $5.00-$5.10 reflects dilution associated with the acquisition of machine identity-based micro-segmentation company Aporeto. Baked in that updated forecast, the company's current-quarter guidance is EPS between $1.11-$1.13 vs. the $1.30 consensus. In response, PAWN shares fell in aftermarket trading.

Also last night, branded apparel company PVH (PVH) beat quarterly consensus EPS expectations by $0.11 on better than forecasted revenue, but the company stitched together a mixed outlook. PVH guided current quarter EPS below expectations citing a "very competitive and highly promotional" holiday season but guided 2020 EPS above consensus. 

Enterprises cloud company Nutanix (NTNX) reported better than expected quarterly results after last night's close but guided current-quarter revenue below consensus. Quarterly billings fell sequentially due to a significant drop in hardware billings year over year and the company continued to transition to a subscription business model. 

Activist investor Starboard Value reportedly took a small stake in CVS Health (CVS), which follows speculation that Walgreens Boots Alliance (WBA) is in talks to be taken private. 

After today’s market close we have several quarterly earnings reports coming at us and these are the ones we'll be focusing on:

  • Box (BOX) is expected to report EPS of -$0.01 on revenue of $174.4 million.
  • Consensus expectations for Dell (DELL) call for EPS of $1.59 on $23 billion in revenue for the quarter. 
  • Guess? (GES) is expected to report EPS of $0.18 on revenue of $620.5 million
    • HP (HPQ) is forecasted to deliver EPS of $0.58 on revenue of $15.3 billion
  • A more complete listing of companies reporting earnings today can be found at Nasdaq’s earnings calendar page

On the Horizon

  • Upcoming IPOs:
    • Saudi Aramco (ARMCO) - which is expected to be the largest IPO in history, produces about 1/10th of the world's crude and is the world's most profitable company - is set to begin trading on the Saudi stock market in early December. November 17th Saudi Aramco said in a press statement that it is looking to sell a 1.5% stake in the company which translates into about 3 billion shares with the indicative price range for the shares $8 to $8.53 for an IPO valuation of $1.6 to $1.7 trillion - yes, that’s with a T. A final price is expected to be set on December 4th.
    • For a more complete list of upcoming IPOs by month, please visit the Nasdaq IPO Calendar.
  • Dates to mark:
      • November 28 - US Stock Market Closed for Thanksgiving Holiday
      • November 29 - Black Friday; US stock market closes at 1 PM ET
      • December 2 - Cyber Monday
      • December 2 - Apple (AAPL) Press Event
      • December 5-6 - OPEC meeting
      • December 15 - New tariffs on consumer goods from China scheduled to go into effect barring any deal
      • December 20 - US government funding 

Thought for the Day 

“Get your facts first, then you can distort them as you please.” - Mark Twain

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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