Daily Markets: Omicron Provides Some Attractive Entry Points
Today’s Big Picture
While identification of the first Omicron exposure in the U.S. (more below) hit the markets yesterday, Asia seemed to shrug this news off as all but Japan and China closed up on the day. Korea and India led the way, posting gains of 1.57% and 1.35%, respectively while Taiwan’s TAIEX rose 0.79%, Hong Kong’s Hang Seng gained 0.55%. Japan’s Nikkei slid 0.65% and China’s Shanghai Composite was essentially flat, only down 0.09%.
Midday trading in Europe shows these markets selling off fairly strongly with most major markets currently down at least 1%. The continued spread of the new variant per data from the World Health Organization and growing re-imposition of restrictions is leading investors to once again question growth prospects in the near term. Following the body blows of the last few days, U.S. futures point to another attempted rebound today. Despite a relatively light earnings and for today, positive comments from General Motors (GM) on an improving auto chip supplies are counterbalanced by chemical company Dow (DOW) cutting its profit outlook due to higher input and freight costs. While some may see angst amid the renewed market volatility, medium to longer-term investors are likely eyeing shares of quality companies at prices we haven’t seen in some time.
Data Download
Coronavirus
Greece has announced vaccinations will now be mandatory for those aged 60 and above. Failure to be vaccinated by January 16 will result in a monthly fine of €100.
The World Health Organization (WHO) announced yesterday that 23 nations have so far reported cases of the omicron variant. The U.S. confirmed its first case yesterday in a San Francisco resident who was fully vaccinated and had recently returned from South Africa. The man’s symptoms are so far mild. Early next week, the United States will tighten pre-departure testing protocols by requiring all inbound international travelers to test within one day of departure globally, regardless of nationality or vaccination status. The Biden Administration will continue to require masking during international or other public travel -- as well as in transportation hubs such as airports or indoor bus terminals -- through March 18 as we continue to battle COVID-19 this winter.
International Economy
South Korea’s inflation rate unexpectedly rose to 3.7% YoY in November from 3.2% in October versus expectations for a decline to 3.1%. The nation’s GDP slowed to 4% in Q3 YoY from 6% in Q2.
The Eurozone’s unemployment rate ticked lower to 7.3% in October from 7.4% in September, matching the consensus forecast for the month.
Domestic Economy
Yesterday’s manufacturing data was generally weaker with the Markit manufacturing PMI for November revised down from the flash estimate and the ISM’s PMI data came in slightly weaker than expected. While below expectations, the ISM aggregate index did come in higher sequentially and is at high levels relative to historical norms. Supplier delivery times are continuing to lengthen, but at a slower pace. That said, manufacturers continue to report extremely low inventories at their customers, indicating that supply chains still have a way to go before they return to normal.
The ADP jobs report found that 534,000 private-sector jobs were added in November, surpassing expectations for 525,000 and marking the second consecutive strong jobs report.
Later today we will get the usual weekly jobless claims for the week ended November 27. Last week’s report saw initial jobless claims drop to a 52-year low.
Markets
It was a whiplash day in the markets on Wednesday, with the S&P 500 up nearly 2% before the news that a San Francisco resident, who had recently returned from South Africa, had been infected with the omicron variant. Stocks reversed course and kept sliding after the news, with the S&P 500 ending the day down 1.2%, its sharpest 1-day turnaround since early April 2020 and closing below its 50-day moving average for the first time in over six weeks. The Dow ended the day down 1.3% and the Nasdaq closed 1.8% lower, experiencing its largest turnaround since July 13, 2020, while the VIX rose 14% to end the day over 31. The Russell 2000 fell 1.6% after having gained 2.5% earlier in the day, its largest 1-day turnaround since March 20, 2020.
Stocks to Watch
After closing 8.6% lower yesterday, shares of Snowflake Inc (SNOW) rose more than 16% in extended trading after its third-quarter results came in better-than-expected. Revenue rose 110% YoY to $334.4 million, versus expectations for $305.6 million. The company’s net loss declined to $154.9 million from $168.9 million. The company provided fourth-quarter revenue guidance of $345 million to $350 million, well above consensus estimate of $315.9 million.
Effective December 10, the payments company Square (SQ) will change its corporate name to Block, following in the footsteps of Meta (FB) and Alphabet (GOOG).
A director of engineering in the Apple (AAPL) Special Projects Group that’s reportedly working on self-driving cars, Michael Schwekutsch, left to join electric air taxi start-up Archer as its senior VP of engineering, according to his LinkedIn page. This follows last week's announcement that Apple’s global head of battery development is headed to Volkswagen (VWAGY) and September’s notice that their head of car project left for Ford (F).
Chemical company Dow shared its EBITDA for the current quarter is poised to be $150-$200 million weaker than expected due to higher raw material costs and lower pricing for polyethylene and co-product pricing. The company sees supply chain issues easing in 200 but expects inflation and high freight rates to linger.
Citing strong pricing, consumer demand, and a better than expected supply of chips, General Motors goosed its 2021 earnings guidance to $14 billion vs. its prior guidance of $11.5$-$13.5 billion. The company is “very, very closely” monitoring impacts of the Covid omicron variant, but as yet has not factored any impact into its forecast.
Yesterday, Qualcomm (QCOM), the biggest chip supplier in Android phones, introduced a new Snapdragon G3x microchip for handheld consoles as it looks to compete with AMD (AMD) and Nvidia (NVDA) in the gaming market.
Moderna (MRNA) shares closed 11.9% lower yesterday after a U.S. Court of Appeals upheld a ruling against the company in a decision on patents that Arbutus Biopharma (ABUS) said it owns. The patents involve lipid nanoparticles which are used to deliver mRNA to cells safely.
Costco Wholesale (COST) reported its October net sales rose 19.2% YoY to $16.47 billion. Comparable sales for U.S., Canada, other international for the month came in at stood at 17%, 20.6%, and 17% respectively leading total company comp sales for the month to rise 17.5% YoY. The company’s e-commerce sales rose 16.5% YoY.
Earnings Announcements & Guidance
Before U.S. equities being trading, CIBC (CIBC), Cloudera (CLDR), Dollar General (DG), Kroger (KR), Signet Jewelers (SIG), and Toronto-Dominion Bank (TD) will issue their latest quarterly results.
IPOs
Near-term the IPO calendar is pretty thin and readers looking to dig more into it should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Asana (ASAN), DocuSign (DOCU), Marvell (MRVL), Smartsheet (SMAR), Smith & Wesson Brands (SWBI), and Ulta Beaty (ULTA) will be among those companies reporting their latest quarterly results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.
On the Horizon
- December 3: Non-Farm Payrolls, Markit and ISM Non-Manufacturing, Factory Orders
- December 7: Balance of Trade, Non-Farm Productivity, IBD/TIPP Economic Optimism
- December 8: JOLTs report
- December 9: Jobless claims, Wholesale Inventories
- December 10: Inflation, Michigan Consumer Sentiment, Federal Monthly Budget
- December 14: PPI
- December 15: Retail Sales, NY Empire State Manufacturing, Import/Export Prices, NAHB Housing Market, Business Inventories, Federal Reserve Interest Rate decision
Thought for the Day
“The best revenge is to be unlike he who performed the injury.” ~Marcus Aurelius.
Disclosures
- Marvell Technology (MRVL), Nvidia (NVDA), Qualcomm (QCOM) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
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 has, for over a decade, served as a founding partner of Calit Advisors, a boutique advisory firm specializing in mergers and acquisitions, private capital raise, and corporate finance with offices in Italy, Ireland, and California. She has previously served as the Chief Macro Strategist for Tematica Research, which primarily develops indices for Exchange Traded Products, co-authored the book Cocktail Investing, and is a regular guest on a variety of national and international investing-oriented television programs. 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