Daily Markets: Stimulus Hopes Once Again Drive Equities Higher

Close up of the Wall Street sign with the American flag in the background
Credit: Carlo Allegri - Reuters /

Today’s Big Picture

Equities in Asia finished the day mostly higher with both Japan’s Nikkei and India’s Sensex rising 1.1% followed by Hong Kong’s Hang Seng that climbed 0.6% for the day. Over the weekend, China’s National People's Congress passed an Export Control Law that will allow China to take countermeasures against any country or region that abuses export-control measures and poses a threat to national security and interests. That rule will go into effect on December 1, and we expect with 15 days to go until the 2020 presidential election, odds are there will be some response from both candidates at this week’s final presidential debate.

By mid-day trading, the vast majority of European equity indices were higher, and U.S. futures point to a positive open later this morning. Despite the continued climb in global coronavirus cases, futures once again reflect the hope that a fiscal stimulus deal will be reached sooner than later. On Sunday, House Speaker Pelosi said in an interview on ABC’s “This Week” that she is “hopeful” a deal could be reached before the election but stressed that the White House has until Tuesday to agree to a deal in order to have anything passed before the election. Now to see if this is another instance of Lucy snatching the football away from Charlie Brown at the last moment...

Data Download


Worldwide there are almost 40 million cases and over 1.1 million lives lost. The U.S. is now averaging more than 55,000 new coronavirus cases every day, a more than 60% increase from the mid-September dip. Friday the U.S. reported the most infections in a single day since July. There are now over 8.1 million cases in the nation and nearly 220,000 deaths, according to data from Johns Hopkins University. Twenty-seven states have reported spikes in cases of between 10% and 50% and 10 states reported their highest one-day counts ever on Friday. Last week twenty-one states saw a new record high in the 7-day average of new cases.

An 89-year old Dutch woman has become the first known person to die from a second Covid-19 infection. The woman did have a compromised immune system due to treatment she was receiving for a rare bone marrow cancer, but researchers believe her immune response should have been sufficient to overcome the disease. She was initially hospitalized early this year and released after five days with no symptoms save for some persistent fatigue. Almost two months later she once again tested positive and no antibodies were found in her blood. She passed away two weeks later.

International Economy

Japan’s exports fell 4.9% YoY in September, a decidedly poor sign for the global economy coming from a major exporter, while imports fell 17.2%.

Data out of China today was mostly stronger than expected:

  • Q3 GDP growth rate accelerated less than expected to 4.9% YoY from the prior 3.2%, weaker than the consensus 5.2% pace. On a QoQ basis, growth slowed to 2.7% in Q3 from 11.5% in Q2.
  • Industrial Capacity Utilization rose to 76.7% in Q3 from 74.4% in Q2.
  • Industrial Production expanded more than expected in September at 6.9% YoY from the prior 5.6%, besting estimates for 5.8%.
  • Retail sales were stronger than expected, rising 3.3% YoY in September from the previous 0.5%, nearly doubling the 1.8% consensus estimate.
  • Unemployment fell to 5.4% in September from 5.6% previously.

Construction output for the Euro Area in August contracted 0.9% YoY after a 3.4% decline in July, the seventh consecutive month of contractions.

Eurozone governments expect to go deeper into deficits this year than any year prior, with the aggregate fiscal deficit reaching €976 billion or roughly 8.9% of GDP. This puts the year’s deficit at nearly 10x that of last year’s and earlier forecasts for this year.

Domestic Economy

Friday delivered a bipolar view of the U.S. economy, split between positive news in consumer spending and more dour news out of Industrials. After a disappointing report for August, Consumer Spending on goods and services is now 3.7% above January’s pre-Covid peak with headline spending in September up 1.9% MoM versus expectations for a 0.8% increase.

Of the thirteen categories for retail sales, all but one (Electronics & Appliances) rose in the month. Clothing rose 11.0%, Sporting Goods rose 5.8%, and Autos and Parts Dealers gained 3.6% in contrast to what we saw in industrial production. Online sales now account for 15.3% of all sales, up from 12.9% in January - the biggest category gain since January. Bars and Restaurants now command 10.1% of spending, down 2.3% since January - the biggest category loser. We find it rather fascinating that the second-biggest gainer was Motor Vehicles and Parts, gained 1% of wallet spend, even though the second biggest loser, Gas Stations had a 1.5% decline in wallet despite U.S. retail gas prices falling about 3.5% between February 1 and the end of September. Folks are buying cars and parts, but not going anywhere.

The industrial side of the economy is not so rosy with industrial production, excluding energy extraction, refining, and distribution declining slightly in September to sit 6% lower than February’s level. Capacity Utilization rose just slightly to 71.5% from 71.4%, below expectations for an increase to 71.8%. Machinery and electrical equipment production combined with primary and fabricated metal output rose just 0.8% in September to sit at less than 90% of February’s level. Most interesting is the sharp contrast in motor vehicles and parts which saw output fall 4% in September MoM and is now 8% below where it was in just July. The biggest source of weakness in industrial production was one of the biggest sources of strength in retail sales - somehow that is so perfectly 2020.

The difference looks to be from inventory depletion with retailers’ inventories down 22% since February while manufacturer and wholesaler inventories fell just 2.0%. The big question is: Will inventories be rebuilt ahead of the holiday shopping season, or is the drop in inventories a sage strategy? The former would be good news for the economy and the later decidedly not so.

Later today in the U.S., we will get a read on homebuilder sentiment in the form of the NAHB Housing Marking Index for October.


Friday’s U.S. equity market roller coaster left the S&P 500 closing the day almost exactly where it began, rising a weak 0.01%. Underneath that headline “meh” close hid some large gains and large losses with 262 S&P 500 components rising on the day with 233 falling. Utilities, health care, industrials, and materials rose around 1% while consumer discretionary and energy, in particular, took a beating - 15 of the bottom 20 performers on the day were in oil and gas. The Nasdaq Composite and the Russell 2000 fell 0.4%, and the S&P 600 dropped 0.6%

Stocks to Watch

Philips (PHG) reported better than expected September quarter results and the company expects to deliver a more granular look at its long-term vision at its November 6 Capital Markets Day. For 2021, Philips' current view is comparable sales will deliver low-single-digit growth, driven by solid growth in Diagnosis & Treatment and Personal Health, partly offset by lower Connected Care sales.

D.R. Horton (DHI) acquired the homebuilding operations of Braselton Homes, the largest homebuilder in Corpus Christi, Texas.

Alibaba Group (BABA) announced it will invest approximately $3.6 billion in respect of Sun Art Retail Group Limited, a leading hypermarket, and supermarket operator in China, that will raise its aggregate direct and indirect stake to approximately 72%.

American Airlines (AAL) plans to make Boeing (BA) 737 Max passenger flights at the end of this year, the first time since the aircraft’s grounding in March 2019.

Tesla (TSLA) is starting to export made-in-China Model 3 vehicles to Europe.

Altice USA (ATUS) presented a revised offer of C$11.1 billion to acquire Cogeco (CGECF) and Cogeco Communications (CGEAF) up from its previous offer of C$10.3 billion.

Cree (CREE) announced it will sell its LED business to SMART Global Holdings (SGH) for up to $300 million.

Ahead of the expected rise in COVID-19 and flu cases this fall and winter, CVS Health (CVS) is looking to hire another 15,000 employees. More than 10,000 of those will be full-time and part-time licensed pharmacy technicians who can help dispense medications and administer COVID-19 tests.

Fintech Ant Group won approval from the China Securities Regulatory Commission for a Hong Kong listing, which is expected to greenlight what could be the largest IPO in history. Investors will want to recognize that Alibaba owns a 33% of Ant Group.

Toshiba (TOSY) expects $3 billion in revenue by 2030 for its quantum cryptography business, which uses quantum physics to generate cryptographic keys for remote parties.

After today’s market close, IBM (IBM), Logitech (LOGI), and PPG Industries (PPG) among others will report their quarterly results. Readers looking to get ready for the volume of those reports to be had in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

    • October 20: Building Permits and Housing Starts
    • October 21: MBA Mortgage Applications, Fed Beige Book
    • October 22: Initial Jobless Claims, Bloomberg Comfort, Leading Index, Existing Home Sales, Kansas City Manufacturing
    • October 23: Preliminary Markit PMIs
    • October 26: Chicago Fed Activity, New Homes Sales, Dallas Fed Manufacturing Activity
    • October 27: Durable/Capital Goods, FHFA Home Prices, Case-Shiller Home Prices, Consumer Confidence, Richmond Fed Manufacturing
    • October 28: MBA Mortgage Applications, Wholesale Inventories, Retail Inventories
    • October 28: Facebook (FB), Google (GOOGL), and Twitter (TWTR) testify before the Senate Commerce Committee
    • October 29: Initial Jobless Claims, Bloomberg Comfort, GDP, Personal Consumption, Pending Home Sales
    • October 30: Personal Income, Personal Spending, PCE Deflator, Employment Cost, MNI Chicago PMI, University of Michigan
    • October 31: Boo!

Thought for the Day

The best time to plant a tree was 20 years ago. The second best time is now. - Chinese proverb


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

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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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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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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