Daily Markets: Markets Lack Direction Without Stimulus Or Vaccine

Bull and bear statues are pictured outside Frankfurt's stock exchange in Frankfurt, Germany
Credit: Ralph Orlowski - Reuters /

Today’s Big Picture

With no further monetary stimulus coming, at least in the near term, the focus is back on fiscal stimulus and a coronavirus vaccine. The major equity markets in Asia were mostly higher today, with China leading, its Shanghai Composite rose 2.1%, and the Shenzhen component 1.8%. Hong Kong’s Hang Seng gained 0.5%, South Korea’s Kospi 0.3%, and Japan’s Nikkei 225 rose 0.2%. The lone decliner for the day was Australia’s ASX 200, falling 0.3%.

By midday trading, the European equity markets were mixed, but with only slight moves in either direction. U.S. equity futures were similarly mixed this morning.

News from Moderna (MRNA) that the results from its vaccine trial may come later this year than expected and AstraZeneca’s (AZN) temporary trial hold in the U.S., combined with the congressional testimony from the director of the Centers for Disease Control concerning a vaccine not being widely available to most Americans until 2021, have investors rethinking their optimism for just how quickly life will get back to normal. The wheels aren’t falling off the cart, but markets have been pricing for perfection. The breaking announcement just before this publication of this piece that the Commerce Department will ban U.S. business transactions with China-owned apps WeChat and TikTok on Sunday as investors wait to hear if President Trump will block the Oracle deal with TikTok reveals that U.S.-China relations aren’t exactly improving – one more worry to add to the stack for investors this week.

Data Download

International Economy

Japan’s inflation rate slowed -0.1% MoM and to 0.2% YoY in August from 0.3% in July while core inflation actually dropped into negative territory at 0.4% YoY from flatline in July. Ex-food and energy was also negative at -0.1 from +0.4 in July.

Germany’s Producer Price Index (PPI) was unchanged MoM in August after rising 0.2% in July and dropped to -1.2% YoY from -1.7% YoY in July.

Retail Sales in the UK slowed in the UK to 0.8% MoM in August from 3.7% in July, but on a YoY basis, rose to 2.8% from the prior 1.4%, still below expectations for an increase to 3.0%. This was the fourth consecutive month of gains. Retail Sales ex-fuel rose to 4.3% YoY in August from 3.1%, better than the expected 4.2% increase.

Industrial Orders in Italy fell 7.2% YoY in July, up from -11.6% in June. Industrial Sales fell 8.1% YoY, up from -16.4% in June.

Domestic Economy

Initial jobless claims declined slightly by 33,000 to a seasonally adjusted 860,000 the week ended September 12. Those collecting unemployment benefits through regular state programs fell by 916,000 to 12.6 million for the week that ended September 5 (the metric lags one week). The decline in those collecting benefits is likely driven by those returning to work, but also by the fact that those who applied back in March have hit the 6-month limit in many states.

Total starts and permits for housing missed estimates and dropped sequentially, but the construction of single-family homes is still running strong with single-family permits up 6%, making a new high for share of total permits. In fact, single-family housing permits are now above where they were pre-pandemic and have made a new post-Great Financial Crisis high. Multi-family housing starts fell 25% MoM, and permits fell 17%.

The Philadelphia Fed’s regional manufacturing Index was released yesterday and came in slightly weaker than expected and was weaker sequentially. The only sub-indices that declined MoM were Inventories and the Average Workweek. Shipments are now in the 98th percentile of all historical readings, and is at the highest level since July 2004, after reaching the lowest level on record just six months ago, while Delivery Times is in the 96th percentile.

Combining the Philly Fed release with the Empire Fed’s better-than-expected numbers from earlier this week and we get a fairly positive view of current and future conditions. All categories in August rose except for inventory and expected delivery time, with current shipments in the top 4% of all readings as companies look to build back up post lockdowns. The overall composite, employment, workweek, and new orders were in the top decline of all historical readings. What is most promising is that CapEx expectations are substantially up YoY. On the other hand, a measure of weekly economic activity by the NY Fed found output down 5.1% YoY and has been decelerating over the past two weeks.

Later today in the U.S., we will get the Current Account for Q2, Michigan Consumer Sentiment report, the CB Leading Index, and the usual weekly Baker Hughes oil rig report.


After the Federal Reserve’s announcement that (effectively) real rates will remain negative through at least 2023, investors were unenthusiastic. The Nasdaq 100 fell 1.5%, the S&P 500 lost 0.8%, the S&P 500 equal weight, and the Dow closed down 0.5%. The small-cap Russell 2000 fell 0.6%, and the S&P 600 dropped 0.8%.

Stocks to Watch

Camping World (CWH) announced yesterday that its board had approved a 75% increase in the company’s special quarterly dividend from $0.08 a share to $0.14. The increase is funded by excess tax distributions. Do we guess that camping is now the future of family vacations? At least the days of metal pipe-supported 300lb soaking-wet canvas family-sized tents are well behind us.

Ryanair (RYAAY) warned that it may further slash its winter flight schedule if demand for travel remains so low amidst the travel restrictions across Europe, as it cut its schedule for October a second time, now forecasting 40% of last year’s levels, down from the 50% cut it expected in August and its original 30% cut target. The company commented that the “continuous” changes to rules around travel have reduced consumers’ interest in making bookings. The company is also facing shareholder anger over CEO Michael O’Leary’s proposed $540,600 annual bonus, which proxy advisor Institutional Shareholder Services (ISS) said “raises concerns” and was difficult to justify amid the unprecedented pandemic-induced travel sector crisis.

Ericsson (ERIC) announced it has agreed to acquire Cradlepoint, a US-based provider of Wireless Edge WAN 4G and 5G Enterprise solutions. The all-cash deal is valued at $1.1B and is expected to close at the end of Q4 2020. Cradlepoint is expected to begin contributing to operating cash-flow starting in 2022. Ericsson stated its 2022 group financial targets remain unchanged.

Moderna announced yesterday that it had enrolled over 25,000 participants in its trial, 10,000 of whom have already received both doses of the vaccine. While Pfizer (PFE) and BioNTech (BNTX) have announced that they expect to have their phase 3 trial data available by the end of October, Moderna said its results might be as late as December if the infection rate in the U.S. slows in the coming weeks.

Apple (AAPL) announced it will launch the Apple Store online in India on September 23, offering Apple’s full range of products and support directly to customers across the country for the first time. The new online store will look to provide customers with a virtual version of a brick and mortar store customer experience. In a potential twist, will after-hours customers get routed to Cupertino?

Chinese EV company NIO (NIO) has announced it will be using a portion of proceeds from its August 2020 ADR offering to redeem a RMB 511.5M ($75.6M) share position held by the Jianheng New Energy Fund. The amount represents a return of a capital increase payment Jianheng New Energy Fund had made plus prorated interest accrued at an interest rate of 10% annualized.

After today’s market close, Utz Brands (UTZ) will announce earnings. Investors looking to get the nitty-gritty on those reports and others to be had later today should visit Nasdaq’s earnings calendar page.

On the Horizon

    • September 21: Chicago Fed Activity
    • September 22: Existing Home Sales, Richmond Fed Manufacturing
    • September 23: IHS Markit Flash PMI data (September), FHFA Home Prices, MBA Mortgage Applications. Samsung (005930:KS) Unpacked event
    • September 24: Initial Jobless Claims, Bloomberg Comfort, New Home Sales, Kansas City Fed Manufacturing
    • September 25: Durable Goods, Capital Goods
    • September 28: Dallas Fed Manufacturing
    • September 29: Trade Balance, Wholesale Inventories, Retail Inventories, Case-Shiller Home Prices, Consumer Confidence
    • September 30: Caixin China General Manufacturing PMI (September), ADP Employment, GDP, Personal Consumption, MNI Home Sales, Pending Home Sales
    • October 1: Personal Spending, PCE, Initial Jobless Claims, Bloomberg Comfort, Markit Manufacturing PMI, ISM Manufacturing, Construction Spending
    • October 2: Nonfarm Payrolls, Unemployment Rate, Average Hourly Earnings, University of Michigan Sentiment, Factory Orders, Durable Goods, Capital Goods

Thought for the Day

“Diplomacy is the art of telling people to go to hell in such a way that they actually look forward to the trip” - Anonymous (1937 November 27, St. Louis Star-Times)


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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