Daily Markets: Investors Seeking Tangible Trade Progress; Black Friday Data Comes In

Traders - Michael Nagle / Bloomberg
Credit: Michael Nagle / Bloomberg

Today's Big Picture

The main focus for the markets continues to be the hope that the US and China will reach a trade deal with the possibility for Brexit in the coming weeks having no apparent impact. President Trump threatened this morning to place tariffs on metal imports from Brazil and Argentina, after which European shares fell into the red. Asian markets finished the day in positive territory thanks to better-than-expected data out of China. European equities were also possibly affected by November data that showed manufacturing activity in the region continued to contract, and Germany's election results that increase geopolitical uncertainty. US futures indicate a positive open.

Last week we closed the books on November, a month that saw all key major US stock market indices climb higher led by the Nasdaq Composite Index, which finished up 4.5% for the month. Close behind were the Nasdaq 100 (NDX) and the Russell 2000, which both climbed 4.0% for November. Trailing behind were the S&P 500 and the Dow Jones Industrial Average, and despite that lag, November marked the best month for the S&P 500 since June.

Today marks the first day of trading for the last month of the year, and after today there are just 20 trading days until we ring in 2020. Despite last year's plummet towards the new year, December has been the best month of the year for the S&P 500 since 1950. As we begin the march toward 2020, investors will be looking toward tangible progress toward a phase-one trade deal between the US and China as they digest the latest data to assess the speed of the global economy as well as 2020 EPS expectations.

Data Download

Thanksgiving Day this year was about more than just turkey with shoppers spending a record amount online Thursday and Friday. Data from Adobe Systems (ADBE) found shoppers spent $4.2 billion online on Thanksgiving Day, a 14.5% increase year over year, and a new record high with 65% of digital orders placed via a smartphone. The digital spending continued on Black Friday, hitting $7.4 billion per Adobe, but the shopping enthusiasm was not present at brick & mortar stores to the same degree. Data from ShopperTrak found that while brick & mortar sales rose 2.3% on Thanksgiving, they fell 6.2% on Black Friday as more consumers chose to shop online or on Thursday. And the shopping long weekend concludes today, which is Cyber Monday, and sales are expected to set a new record as the most significant and fastest-growing online shopping day of the year with $9.4 billion in sales, almost a 19% increase year over year.

While online sales in the US were strong, retail sales in Hong Kong are suffering from the protest movements that have rocked the region. Retail sales dropped 24% in October year-over-year, the most significant decline since the data tracking began in 1992, according to the Hong Kong Census and Statistics Department.

Earlier today, we received almost back to back reports that showed China's manufacturing activity bounced back in November. China's Purchasing Managers' Index recovered to 50.2 in November versus 49.3 in October, marking the first time in several months the indicator has risen above 50, the expansion-contraction line. The November Caixin/Markit Manufacturing Purchasing Managers' Index rose to 51.8 from October's 51.7 versus expectations for a decline to 51.4. Per the report, "new export orders saw the first back-to-back monthly rise for over a year-and-a-half. Staffing levels were broadly stable following a seven-month sequence of decline," however, "the level of positive sentiment towards the 12-month outlook for production slipped to a five-month low in November." Non-manufacturing PMI did even better, coming in at 54.3 versus expectations for 53.1.

Japan saw its manufacturing contract once again in November as export orders hit the weakest level in five months. The Jibun Bank Final Japan Manufacturing Purchasing Managers' Index rose to 48.9 from 48.4 in October - an improvement but still contracting. And with new orders remaining in contraction territory, the odds are slim we will see a rebound above 50 in December.

Eurozone manufacturing contracted for the 10th consecutive month in November with IHS Markit's PMI index hitting 46.9. While up from October's 45.9 reading, new orders remained in contraction territory for the month with net export orders falling for the 14th consecutive month.

Christine Lagarde testifies to the European Parliament in Brussels today. However accommodating former European Central Bank Chair Mario Draghi was, she's likely to be even more.

Later today, we will get more several key pieces of US-facing economic data that will likely lead the Atlanta Fed and New York Fed to revisit their GDP forecasts for the current quarter:

  • October Construction Spending;
  • November IHS Markit US Manufacturing PMI;
  • November ISM Manufacturing Index.

Stocks to Watch

Hyatt Hotels (H) announced it will open more than 20 new luxury hotels and resorts over the coming 13 months across its Park Hyatt, Andaz, Alila, Grand Hyatt, Miraval, and The Unbound Collection by Hyatt brands.

Hostess Brands (TWNK) announced it will acquire Voortman Cookies Limited, a leading and rapidly growing manufacturer of premium, branded wafers as well as sugar-free and specialty cookies, from Swander Pace Capital in a cash transaction of $320 million. Hostess expects the transaction to provide approximately $20 million of incremental adjusted EBITDA in 2020, growing to $40 to $50 million by 2022.

Disney's (DIS) Frozen II took in $124 million at the domestic box office over the five-day Thanksgiving weekend, becoming the highest-grossing film ever for the holiday period in the US.

Weighed down by the ongoing Sino-U.S. trade war and protests in neighboring Hong Kong, November gaming revenue in Macau slid 8.5% year over year to $2.8 billion. While that was better than the expected 10%-13% drop for the month, the November results still marked the second weakest month of 2019. Companies that are likely to respond to the news include Wynn Macau (WYNMF)Wynn Resorts (WYNN)Las Vegas Sands (LVS)MGM Resorts (MGM), and Melco Resorts & Entertainment (MLCO).

At 4 PM ET, Apple (AAPL) will be holding a media event that will honor its "favorite apps and games of 2019." This is a new event for Apple, and while it's likely to focus on its app stores and Apple Arcade, we'll be keeping our eyes peeled for any surprises.

After today's US market close, Coupa Software (COUP) is slated to report its quarterly results, and consensus expectations call for EPS of $0.06 on revenue of $96.2 million. Readers that are game to get a jump on the more than 80 companies reporting their quarterly results later this week should visit 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.
    • Analytics and social management company Sprout Social (SPT) has launched its IPO offering of 8.8 million shares with an expected pricing range of $16-$18.
    • For a more complete list of upcoming IPOs by month, please visit the Nasdaq IPO Calendar.
  • Dates to mark:
    • December 2-6: Amazon Web Services re:invent 2019
    • December 3-4: NATO Summit
    • 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 date
    • December 25 - Christmas holiday

Thought for the Day

"If only one of the presidential candidates would make it part of his platform to do something about making Monday part of the weekend. I think he would get a lot of votes." - Thomas Wayne

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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