Daily Markets: Stocks Could Hinge On News From Washington On Stimulus - Or Lack Thereof

A man looks at stock quotes in Beijing
Credit: Jason Lee / Reuters

Today’s Big Picture

Equities in Asia finished the week’s trading on a mixed note with China’s Shanghai Composite Index closing down 1.0% while Japan’s Nikkei and Hong Kong’s Hang Seng finished 0.2% and 0.5% higher, respectively. By mid-day trading, European equities were higher across the board, and U.S. futures point to a positive open later this morning. 

We suspect that, similar to many U.S. voters’ minds, U.S. futures were little changed by last night’s final presidential debate. As the velocity of September quarter earnings accelerates, so does the number of new coronavirus cases around the globe. The market’s near-term focus remains on the potential for a fiscal stimulus deal out of Washington. We’ve been skeptical about the likelihood of such a deal ahead of the 2020 election, which is just 11 days away. It appears that view is gaining momentum given reports that even though House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are fine-tuning details of a nearly $2 trillion aid package, some House Democrats are telling Pelosi that they don’t want to vote on legislation before the election if the Senate won’t do so as well. 

This means there is a high probability that the final day of trading this week will hinge on the latest stimulus package development headlines emanating from Washington. Given the extended build-up associated with the potential stimulus package, our concern remains it could very well be a “buy the rumor, sell the news” event for equities.

Data Download


The FDA has approved the Gilead Sciences (GILD) antiviral drug Veklury (remdesivir) for the treatment of patients with COVID-19 requiring hospitalization. Veklury works to stop the replication of SARS-CoV-2, the virus that causes COVID-19, and is now the first and only approved COVID-19 treatment in the U.S. Following early investments to rapidly expand manufacturing capacity to increase supply, the drug is now widely available in hospitals across the country.

International Economy

Today is a big day for October Flash PMIs worldwide, which mostly saw weakening in Services with Manufacturing mostly weaker (except for Germany) or relatively unchanged.

  • Australia’s Markit Manufacturing declined to 54.2 from 55.4 while Services rose from 50.8 to 53.8.
  • Japan’s Jibun Bank Manufacturing rose slightly to 48 from 47.8 and Services declined to 46.6 from 46.9 - both still in contraction.
  • France’s Manufacturing PMI fell to 51.0 from 51.2 as did Services from 47.5 to 46.5, the second month of contraction for the service sector.
  • Germany’s Manufacturing rose to 58.0 from 56.4 while Services declined from 50.6 to 48.9 - now in contraction and the first month in the past four that the German service sector has contracted.
  • The Euro Area Manufacturing PMI rose slightly to 54.4 from 53.7 while Services declined to 46.2 from 48 - now in contraction and the second consecutive monthly decline in Services. According to Chris Williamson, chief business economist at IHS Markit, “The eurozone is at increased risk of falling into a double-dip downturn as a second wave of virus infections led to a renewed fall in business activity in October.”
  • The UK’s Manufacturing slowed to 53.3 from 54.1 as did Services from 56.1 to 52.3 as tightening Covid-19 restrictions limited activity more than was expected. The report found a steep fall in employment with another month of deep job cuts.

Japan’s inflation rate remains non-existent, at 0% YoY in September, down from 0.2% in August. Core Inflation is deflationary at -0.3%, up from -0.4% previously.

Retail sales in the UK rose 4.7% YoY in September, accelerating from 2.7% growth in August. Ex-fuel was even stronger, up 6.4% YoY from 4.3% previously. Food and online retailers have done particularly well in recent months with spending on home improvement and gardening items significantly boosting sales. Household goods sales rose 11% from February’s volumes. This was the fifth consecutive month of expanding retail sales after the record contraction in April.

Domestic Economy

Yesterday, weekly initial jobless claims came in at a seasonally adjusted 787K, down 55K from the prior week, which was also revised lower by 56K to 898K. Continuing jobless claims, which are lagged by a week, also declined down to 8.373 million, the lowest level since the end of March. One area of concern is that two programs, the Pandemic Emergency Unemployment Compensation, and extended benefits, have seen rising numbers over the past few weeks.

Existing home sales rose to their highest level since Q2 2006 despite record-low inventories. Total existing-home inventories are down 19.3% so far in 2020 with single-family home inventories down 22.5%.

In contrast to the weakness we are seeing in Japan and Europe, manufacturing in the U.S. remains strong in October after the third regional Fed manufacturing report was released yesterday. On a composite basis, shipments, new orders, and the length of the workweek were reported to be increasing at a pace that is in the top 2% of all historical readings. Inventories are in the bottom fifth of all readings. That said, the outlook for shipments, new orders, unfilled orders, workweek, and delivery times are down MoM across all three.

Later today, we will get the Flash October IHS Markit Manufacturing and Services Purchasing Managers’ Indices for October that are expected to come in at 53.5 and 54.6 respectively.


The U.S. equity markets continue to drift directionless, with the major indices sliding back and forth across breakeven for most of yesterday morning’s trading, as hopes for the passage of a new stimulus bill also drift and new coronavirus cases spike around Europe and the U.S. The Dow and the S&P 500 both closed up 0.5% and the Nasdaq up 0.2%. Market leadership continues to be a bit like a hot potato, as yesterday the S&P 500 tech sector fell 0.4% to be the second-worst performer. Growth, in general, under-performed while the beaten-up energy sector and banks gained on the day - Exxon Mobil (XOM) rose 5.1%, Chevron (CVX), and JPMorgan Chase (JPM) both gained 3.6%, and Bank of America (BAC) rose 3.5%.

Stocks to Watch

American Express (AXP) missed September quarter EPS expectations despite reporting modestly better than expected revenue for the quarter. Per the company, "Since the lows of mid-April, we have seen a steady recovery in our overall spending volumes. In fact, we had positive year-over-year growth in non-T&E spending, which has long accounted for the large majority of our overall volumes. While credit remains strong, with delinquencies and net write-offs at the lowest levels we have seen in a few years, we remain cautious about the direction of the pandemic and its impacts on the economy, which is reflected in our reserve levels."

Shares of Mattel (MAT) jumped in after-hours trading last night as September quarter sales and profits topped even the highest Wall Street estimates. The company reported quarterly EPS of $0.91, up sharply from $0.20 in the year-ago quarter. Sales during the quarter in the North America segment increased 13% YoY and international sales were up 7%. Barbie was a key factor in the company’s quarter as the Dolls business was up 22% YoY to $690.5 million. 

ABB Ltd. (ABB) reported September quarter EPS of $0.21, $0.04 ahead of the consensus forecast as revenue of $6.58 billion topped expectations. Per the company, “The impact of COVID-19 continues to weigh on the short-term outlook across many end-markets, particularly in oil and gas, conventional power generation, automotive, marine, and buildings. Some end markets such as electrical distribution, transport, data centers, consumer electronics, and food and beverage continue to show relative resilience.” ABB expects current quarter order and revenue growth to “remain challenged” on a YoY basis. 

Barclays (BCS) reported quarterly EPS of GBP0.04 vs the GBP0.07 consensus and revenues that came is slightly short of the consensus forecast. The company sees certain headwinds to income in Barclays UK persisting in 2021, including the low-interest rate environment.

Daimler (DDAIFreported September quarter adjusted EBIT of €3,479 million vs. €3,142 in the year-ago quarter. Group's total unit sales decreased 8% YoY to 772,700 cars and commercial vehicles and revenue slipped by 7% YoY to €40.3 billion vs. €43.3 billion in the September 2019 quarter. Daimler expects the significant unit-sales reductions recorded in the first nine months due to the COVID-19 pandemic will only be partially offset by the end of the year. 

Shares of automotive safety systems company Autoliv Inc. (ALV) are trading higher in pre-market trading following the company reporting third-quarter profit and sales that rose above expectations and providing an upbeat full-year outlook. For 2020, the company sees revenue down 14.5% YoY to ~$7.31 billion vs. the $7.26 billion consensus.

Boston Beer (SAM) reported stronger than expected September quarter results despite revenue rising 30% YoY but still short of the consensus forecast. Strength in the quarter was led by increases in the Truly Hard Seltzer and Twisted Tea brands, partly offset by decreases in the Sam Adams, Angry Orchard, and Dogfish Head brands. The company now sees its 2020 EPS in the range of $14.00-$15.00 vs. its prior outlook of $11.70-$12.70.

Intel (INTC) reported essentially in-line September quarter results with revenue for the quarter ahead of prior expectations driven by continued strength in notebook sales, which helped offset COVID-driven headwinds affecting significant portions of its business. In the company‘s Data Center Group (DCG), Cloud revenue grew 15% YoY on continued demand to support vital services in a work and learn-at-home environment. The PC-centric business (CCG) rose 1% YoY on continued notebook strength to support the work- and learn-at-home dynamics of COVID-19. Intel issued in-line guidance for the current quarter with EPS of ~ $1.10. The company commented it is seeing many of the same dynamics for the current quarter it did with the prior one - continued strength in consumer notebook/ laptops supported by work and learn-from-home dynamics and from increased supply.

A California appeals court ruled Uber Technologies (UBER) and Lyft (LYFT) must comply with AB5, an order that requires them to reclassify their drivers as employees. Next up, the November 3rd Election Day to see if California Voters approve Proposition 22, a ballot initiative asking voters to exempt them from such a reclassification. 

Bloomberg reports PayPal (PYPL) is exploring acquisitions of cryptocurrency companies including Bitcoin custodian BitGo.

EQT Corp. (EQT), the biggest producer of U.S. natural gas, is seeking to acquire rival CNX Resources (CNX).

Wells Fargo (WFC) is reportedly exploring the sale of its asset-management unit, a business that could fetch more than $3 billion.

fuboTV (FUBO) updated its Multiview feature on Apple TV allowing subscribers to watch up to four channels simultaneously, doubling the feature's previous capability of two channels.

After today’s market close, there are no expected quarterly earnings report. Investors looking to get prepared for next week’s sea of earnings reports should visit Nasdaq’s earnings calendar page

On the Horizon

    • 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 key to retaining your vitality is retaining your curiosity and if you can’t be curious about the times we’re living in right now, you are not curious my friend.” ~Bruce Springsteen


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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