Daily Markets: Name of Today's Market Game is US-China Trade Clarity

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Today’s Big Picture

Following yesterday's record closing highs for the S&P 500 and the Dow Jones Industrial Average, investors today will be watching for further developments in the on-again-off-again US-China trade war. While investors cheered yesterday's news that both countries had agreed to remove some tariffs if a trade deal is reached, we'll point out that no actual deal has in fact been agreed upon.

The name of the game today is clarity following conflicting reports that the White House's plan to roll back China tariffs faces internal opposition. Presidential trade adviser Peter Navarro said,"There is no agreement at this time to remove any of the existing tariffs as a condition of the phase one deal," while White House economic adviser Larry Kudlow shared, "If there's a phase one trade deal, there are going to be tariff agreements and concessions."

That lack of clarity has global equity markets taking a breather today following yesterday’s market rally that continued a favorable week for global stocks predicated on improving prospects for a “phase-one” agreement between the US and China. With one eye on the trade front, investors will also be watching the bond market today after yesterday saw the yield on the 10-year Treasury experience the biggest one day jump since the 2016 election - rising from 1.81% to 1.95%.

As we wait to see what the next move is in the US-China trade war chess match, which in our view looks more like a game of checkers, Asian markets closed trading today in mixed territory but finished the week in positive territory. European equities were mostly lower and US futures point to a market open that looks both mixed and muted.

And while the CNN Money Fear & Greed Index registered Extreme Greed this week, yesterday we also learned that Wall Street is going to get a bit less bullish - New York officials announced they are going to move the famous 7,000 pound "Charging Bull" sculpture by Arturo Di Modica due to safety concerns. The iconic bull has sat it in the current location in Bowling Green for nearly thirty years.

Data Download

September's household spending in Japan jumped 9.5% year over year well above the expected 7.8% increase. This marks the tenth consecutive annual increase in spending, the longest streak on record since the data became available in 2001, and likely reflects consumers proactively shopping ahead of the October 1 sales tax hike to 10% from 8%. Given concerns over the economic impact of that tax hike as well as the slowing global economy, today Japan Prime Minister Shinzo Abe issued orders for Japan’s first economic stimulus package since 2016. 

Year over year declines were registered for October Export /Import data for China reflecting the slowing global economy as well as the current US-China trade war. October exports fell 0.9% year over year, the third consecutive month of such declines, while October imports dropped 6.4% year over year, marking the sixth consecutive month of year over year declines. 

Citing concern over a deepening economic slowdown and insufficient government action, Moody’s lowered its outlook for India to negative, 

France's September industrial production increased 0.3% month over month, in-line with expectations, rebounding from a 0.9% drop in August. For the September quarter, private sector employment in France rose 0.3% to 19.65 million, modestly ahead of the 0.2% preliminary estimate for the quarter. 

Key data for the US will include the preliminary University of Michigan Consumer Sentiment for November will be released at 10 am ET today and is expected to rise to 95, down slightly from October's 95.5 and September's 93.2. Today also brings September Wholesale Inventory data as well as the weekly Baker Hughes Oil Rig Count report.

Stocks to Watch

Alibaba (BABA) is planning to launch a Hong Kong share offering during the final week of November, a move that would raise $10-$15 billion as the world's largest-ever cross-border secondary listing. 

Duke Energy (DUK) beats September quarter EPS expectations by $0.12 on revenue that rose 4.7% year over year to $6.94 billion, which missed the $7.24 consensus forecast. Duke issued 2019 guidance for EPS of $4.95-$5.15, in-line with expectations. 

Magna International (MGA) reported September quarter EPS of $1.41, $0.07 ahead of expectations, on revenue of $9.32 billion, which was in-line with the consensus forecast. The company reduced its 2019 outlook for North American light vehicle industry production to 16.3 million units down from 16.6 million, in part due to the General Motors (GM) strike. This prompted the Magna to trim its 2019 revenue forecast to $38.7-$39.8 billion from $38.9-$41.1 billion as well as its 2019 operating margin guidance to 6.3%-6.5% from 6.65-6.9%. 

US Concrete (USCR) missed September quarter EPS expectations by $0.03 and missed on revenue as well. Year over year growth at its ready-mix concrete business was mitigated by declines at the aggregate products segment. The company now sees 2019 coming in at the lower end of its previously forecasted revenue range of $1.5-$1.575 billion.

Honda Motor (HMCreported September quarter results that hit EPS expectations and beat on revenue, but the company revised its 2019 operating profit guidance due to unfavorable currency headwinds. 

Facebook (FB) will finally begin to monetize WhatsApp and plans to offer a catalog feature where businesses can display a "mobile storefront” showcasing their wares with images and prices. This follows a similar shopping strategy at Instagram launched this past March. 

Sears (SHLDQwill close another 96 stores by February 2020 leaving 182 Sears and Kmart stores, down from 425 locations in February 2019. 

Allianz SE (AZSEY) reported September quarter operating profits of EUR 3.0 billion (around $3.3 billion) and total revenue growth of 8.1% to EUR 33.4 billion.  The company shared its 2019 operating profit is expected to be EUR 11.5 billion, plus or minus 500 million euros. 

Despite reporting better-than-expected EPS and revenue, shares of Activision Blizzard Inc (ATVI) were down as much as 6.6% at one point during after-hour trading yesterday.

Booking Holdings Inc (BKNG) shares were down over 8% yesterday during normal market hours but then reversed some of those losses (down just 3.3% from Wednesday’s close) in after-hours after the company reported an EPS beat but revenue miss.

Gap Inc (GPS) released full-year and third-quarter as well as same-store sales yesterday that were all weaker than expected.  The company also announced yesterday that President and CEO Art Peck will step down with non-executive board chairman Robert Fisher serving as interim president and CEO. Shares fell nearly 9% in after-hours trading.

Viasat (VSAT) shares rose over 6% yesterday after the close following the company’s earnings release which boasted a beat on both the top and bottom lines for the company’s fiscal Q2 results.

Walt Disney (DIS) posted its fiscal fourth-quarter results after the bell yesterday, beating on both top and bottom line which led DIS shares to surge in after-hours trading. The company's streaming service, Disney+ is set to launch on November 12th, featuring content from Disney, Pixar, Marvel, and more for $6.99 per month or $69.99 per year. CEO Bob Iger told CNBC yesterday that Amazon's Fire TV will also carry Disney Plus after the company's settled a dispute over ad inventory.

Zillow Group (Z) beat on both revenue and EBITDA yesterday, with revenue rising nearly 120% year-over-year. Shares rose as much as 13.7% in after-hours trading.

Today Shenandoah Telecommunications (SHENwill replace Genomic Health (GHDX) that is being acquired by Exact Sciences (EXAS) in the S&P SmallCap 600 index before the market open. 

After today’s market close, there are no expected earnings reports to be had. Eager beaver investors that want to use the weekend to get ready for next week, including boning up on which companies will report, can consult with Nasdaq’s earnings calendar page

On the Horizon

  • Upcoming IPOs:
    • Silvergate Capital Corp (SI), the holding company for Silvergate bank, is expected to price November 7th between $13 and $15 and begin trading on NYSE.
    • Monopar Therapeutics (MNPR), a clinical-stage biopharmaceutical company focused on developing proprietary therapeutics designed to improve clinical outcomes for cancer patients, is expected to price 2.2 million shares today between $8 and $10 per share
    • 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 being trading on the Saudi stock market in early December with the IPO prospectus released on November 10th. 
    • For a more complete least of upcoming IPOs by month, please visit the Nasdaq IPO Calendar.
  • Dates to mark:
      • November 14 - US decision on European auto tariffs
      • November 15 - US Retail Sales for October
      • November 19 - Huawei compliance deadline for US companies
      • 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 5-6 - OPEC meeting

Thoughts for the Day 

“Weekends are a bit like rainbows; they look good from a distance but disappear when you get up close to them.” -  John Shirley 

“Dear Friday, I'm so glad we are back together. I'm really sorry you had to see me with Monday, Tuesday, Wednesday and even Thursday, but I swear I was thinking about you the whole time." - Nearly Every One of Us

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.

Read Chris's Bio

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.

Read Lenore's Bio