Markets

Daily Markets: The Bulls are Back as Tech Takes Center Stage

Bull and bear statues
Credit: alswart / stock.adobe.com

Today’s Big Picture

Today is all about tech with behemoths like Microsoft (MSFT), Alphabet (GOOG), and Twitter (TWTR) set to report along, with trading platform Robinhood (HOOD). Investors are in a more bullish mood thanks to a number of factors:

  • Facebook’s (FB) September quarter results showed it hadn’t been hit as bad as feared following Snap’s (SNAP) results, which were affected by Apple’s (AAPL) privacy changes in iOS 15.
  • New coronavirus cases in the U.S. look to be rolling over.
  • While the economic data coming in of late is pointing to slowing, the pace isn’t quite as bad as feared.

Equity indices in Asia finished mixed today following new record closing highs for U.S. markets yesterday. The gainers were the Nikkei 225, which rose 1.8%, South Korea’s Kospi added 0.9%, and Australia’s ASX 200 rose marginally. On the downside, China’s Shanghai Composite lost 0.3%, the Shenzhen Component lost 0.4%, and Hong Kong’s Hang Seng dropped 0.4%. By mid-day trading, the major equity indices in Europe were in the green, and U.S. futures point to minor gains at the open.

Data Download

Coronavirus

The FDA Advisory Committee is expected to rule this afternoon on coronavirus vaccines for kids aged 5-11.

International Economy

South Korea’s GDP in Q3 slowed more than expected to 4.0% YoY after its 6.0% YoY pace in Q2 and compared to expectations for slowing to a 4.2% pace. The QoQ sequential pace came in at half of the 0.6% pace expected, slowing to just 0.3% QoQ from Q2’s 0.8% growth.

According to the most recent CBI Distributive Trades Survey, more UK retailers are facing stock shortages (2 out of 5) than at any point since records began in 1985, thanks to the ongoing supply chain disruptions. The balance of retailers reporting adequate stock compared to those that did not has fallen from -23% in September to -31%, the lowest on record.

Another Chinese property developer, Modern Land, has missed payment on a $250 million offshore bond, saying that payment on the notes and interest was not met by yesterday’s deadline. Earlier this month, the company had requested a 3-month extension to the maturity on the bond. The missed payment was blamed on “unexpected liquidity issues arising from the adverse impact of a number of factors including the macroeconomic environment, the real estate industry environment, and the Covid-19 pandemic.”

Domestic Economy

Yesterday’s release of the Chicago Fed National Activity index revealed the second consecutive decline in economic momentum for the US with a drop to -0.13 in September from 0.05 in August, the lowest level since April.

On the other end of the spectrum, yesterday’s Dallas Fed Manufacturing Index rose from September’s 14-month low of 4.6 to 14.6. The production index dropped 5.9 points to 18.3, indicating that while factory activity increased, it did so at a slower pace. Shipments and capacity utilization fell slightly, and supply-chain disruptions continue to vex manufacturers, with the unfilled orders index and delivery time index rising to 20.9 and 25.9, respectively. Prices rose at a record pace, and labor market metrics indicate longer workweeks and strong employment growth.

Later today, we will get the S&P/Case-Shiller Home Price Index, New Home Sales, and the Conference Board’s Consumer Confidence Index.

Markets

The S&P 500 and Dow Jones Industrial Average set both intraday and closing record highs yesterday as the stock market continued to benefit from positive momentum in front of a big week for earnings. The Nasdaq Composite finished the day 0.9% higher, as did the Russell 2000. The VIX remained near its post-pandemic lows around 15.

The Treasury curve steepened slightly, with the 2-year yield falling to 44 basis points while the long bond yield hit 2.08%.

WTI crude futures touched $85.00 per barrel early yesterday but ended the day 0.1% lower at $83.73/bbl. Natural gas futures jumped 12.0% to $5.88/MMBtu.

Stocks to Watch

Shares of Tesla (TSLA) cruised more than 12% higher yesterday, joining the trillion-dollar market cap club, following the announcement of its biggest-ever order from rental car company Hertz (HTZ). The deal, which has been estimated at around $4.2 billion in revenue for Tesla, is for 100K EVs as Hertz begins to offer them to their customers.

Bezos, met Bond. The UK spy agencies, GCHQ, MI5, and MI6, have contracted AWS, Amazon’s (AMZN) cloud computing division, to host classified material. Does this mean Alexa will be replacing Q?

Before U.S. equity markets open this morning, 3M (MMM), Archer-Daniels (ADM), Corning (GLW), General Electric (GE), Hasbro (HAS), JetBlue Airways (JBLU), Polaris Industries (PII), Sensata Tech (ST), Sherwin Williams (SHW), and UPS (UPS) will be among the horde of companies expected to report their quarterly results.

Facebook reported better than expected September quarter EPS despite reporting revenue for the quarter of $29.0 billion vs. the expected $29.5 billion. For the quarter, DAUs were 1.93 billion on average for September, up 6% YoY, while Monthly Active Users hit 2.91 billion exiting the quarter, also up 6% YoY. Facebook issued downside revenue guidance of $31.5-$34 billion vs. the $34.8 billion consensus. The company’s outlook reflects “the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple's iOS changes, and macroeconomic and COVID-related factors. In addition, we expect non-ads revenue to be down year-over-year in the fourth quarter as we lap the strong launch of Quest 2 during last year's holiday shopping season.”

Shares of PetMed Express (PETS) fell in aftermarket trading last night following the company reporting quarterly revenue that fell 10.7% YoY, leading it to miss consensus expectations.

Sweetgreen (SG) filed an S-1 for its planned IPO, which can be read here.

M&A Activity

Digital Realty (DLR) and Pembani Remgro Infrastructure Fund announced today the formation of a joint venture to acquire Medallion Data Centres, Nigeria's leading colocation and interconnection provider.

Indie Semiconductor (INDI) announced it will purchase Symeo GmbH, Analog Devices’s (ADI) Munich-based radar division consisting of ~35 team members specializing in radar hardware and software development for emerging safety system applications.

TransUnion (TRU) announced it will acquire Sontiq, which provides solutions to proactively protect against identity theft and cyber threats, including identity monitoring, restoration, and response products and services. At the same time, TransUnion also announced it sold TransUnion Healthcare to Clearlake Capital Group for $1.735 billion in cash.

After Today’s Market Close

Alphabet (GOOG, GOOGL), Boyd Gaming (BYD), Digital Realty Trust (DLR), F5 Networks (FFIV), Microsoft (MSFT), Robinhood Markets (HOOD), Twitter (TWTR), and Visa (V) are among the companies slated to report their quarterly results. Those looking to get a jump on the earnings reports in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

  • October 27: Durable Goods Orders, Wholesale Inventories, Durable Goods, Goods Trade Balance
  • October 28: Q3 GDP (advance estimate), Weekly Jobless Claims, Pending Home Sales
  • October 29: Personal Income & Spending, PCE Price Index, Employment Cost Q3, Chicago PMI, Michigan Consumer Sentiment
  • November 1: Markit and ISM Manufacturing PMIs, Construction Spending
  • November 2: Total Vehicle Sales, IBD/TIPP Economic Optimism, API Crude Oil Stock
  • November 3: ADP Employment Change, Markit Services & Composite PMIs, ISM Non-Manufacturing & Composite PMIs, Factory Orders, Federal Reserve Interest Rate decision
  • November 4: Balance of Trade, Unit Labor Costs, Nonfarm Productivity, weekly jobless claims
  • November 5: Non-Farm Payrolls, Unemployment Rate
  • November 9: PPI, API Crude Oil stock change
  • November 10: Inflation, Weekly jobless claims, Wholesale inventories, EIA Crude and Gasoline stocks, Monthly budget statement
  • November 12: JOLTs report, Michigan Consumer Sentiment

Thought for the Day

“Invite some people into your life. You better learn how to do that. And there’s only one way you do that - you’ve got to open the doors.” ~ Bruce Springsteen

Disclosures

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' 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

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.

Read Mark's Bio