Daily Markets: September Quarter Earnings Kick Off Amid Stimulus Stalemate

Today’s Big Picture

Equities in Asia started the week off mostly higher, led by the 2.2% and 2.6% moves higher in Hong Kong’s Hang Seng and China’s Shanghai Composite, respectively. By mid-day trading, European equities were mostly higher as well, and U.S. futures point to a flat market at the open. The U.S. bond market is closed today.

There are four main drivers of equities this week:

  • First is the ongoing fiscal stimulus talks in the U.S., which in our view, look increasingly less likely to result in a deal before the 2020 U.S. presidential election on November 3.
  • The second will be the onslaught of corporate earnings reports this week, particularly for financial firms and large banks. Comments surrounding loan growth, consumer borrowing levels, and the like will be a keen focus as investors revisit growth prospects for the second half of 2020 and consumer spending prospects ahead of the year-end holiday shopping season.
  • The third will be Apple’s (AAPL) “Hi, Speed” event slated for tomorrow, October 13, at which it is widely expected to unveil the 5G iPhone.
  • The fourth is Amazon’s (AMZN) 2020 Prime Day event, which was postponed from its usual time thanks to the pandemic.

As for earnings, Data from FactSet sees the S&P 500 constituents delivering EPS of $33.30 for the September quarter, up dramatically from $28.22 in the June quarter but down considerably from the $42.21 earnings in the September 2019 quarter. With the coronavirus resurgence, we suspect investors will be closely scrutinizing and parsing management comments to determine if the rebound in corporate earnings for the December quarter will materialize as expected. That answer will help shape the next move in equities.

Data Download


According to a study published last Friday of 1,062 patients in the New England Journal of Medicine, Gilead’s (GILD) antiviral drug remdesivir cut patient recovery by five days compared to those receiving a placebo, one day faster than had been indicated in preliminary data. For those patients already on oxygen, recovery time was reduced by seven days compared to those receiving placebo. While the results of the overall study indicated a possibility of reduced mortality rates, the benefits were not statistically significant. That said, looking only at those patients who received oxygen, the treatment appeared to reduce the risk of death by 72% on day 15 and 70% on day 29.

Friday saw a record high for new cases in six U.S. states (Missouri, Montana, North Dakota, Oklahoma, and West Virginia) and worldwide. Coronavirus cases have nearly doubled over the past two weeks in New Mexico, New Hampshire, and Vermont.

The Head of the U.S. Operation Warp Speed, Moncef Slaoui, expects drugmakers to file with the FDA for emergency authorization of a coronavirus vaccine by late November. Mr. Slaoui further added that “Between November and January, we will have enough vaccines to immunize, I would say, 80 million to 100 million people, which represents all the elderly people, the health care workers, the first-line workers. After that, we start to immunize the less risky populations. If you look at it over a period of six, seven months, between November and June, we will be immunizing a very large number of people, month on month, every month, starting with the most risky, the most impacted toward the least impacted people.”

International Economy

The Bank of England is looking into the potential impact of negative rates on the country’s banking sector. The current BoE policy rate sits at 0.1%. This comes at the government is looking at a three-tiered system of lockdowns that will be implemented at the local level in an attempt to better manage the virus by the start of 2021.

India’s government plans to inject around $10 billion into its faltering economy that has been devastated by the pandemic. Markets were unimpressed as the consensus appears to be that the funds are going to end up in the hands of those least affected by the crisis. The nation has seen an additional 1 million cases, and nearly 13,000 deaths added in less than two weeks.

On a more positive note for the global economy, Japan reported its second consecutive month of rising machinery orders with private-sector orders (excluding those for ships or electric power companies) rose 0.2% MoM in August after rising 6.3% in July. Orders remain down 15.2% YoY, but that’s an improvement from July’s -16.2% and better than the expected rise to -15.6%. Bank lending rose 6.4% YoY in September while the Producer Price Index (PPI) fell 0.2% MoM in September after rising 0.1% in August and is now down 0.8% YoY – inflation remains elusive.

Signs of inflation certainly aren’t in Germany either, with Wholesale Prices down 1.8% YoY, remaining flat YoY, but are higher than the 2.2% contraction in August.

Domestic Economy

Yesterday the White House called for Congress to release nearly $140 billion in unspent aid from the CARES act to small businesses after its latest nearly $1.9 trillion stimulus proposal was rebuffed, but progress remains challenging at best. Friday, Majority Leader Mitch McConnell said a deal is “unlikely in the next three weeks.”

Sunday, House Speaker Nancy Pelosi sent a letter to House Democrats arguing that the administration’s new offer provided inadequate funding and no national plan for testing, contact tracing, and treatment. She wrote, “This past week, the president demonstrated very clearly that he has not taken the war against the virus seriously, personally or nationally. This attitude is reflected in the grossly inadequate response we finally received from the administration on Saturday. Until these serious issues are resolved, we remain at an impasse.”

Sunday, White House Chief of Staff Mark Meadows and Treasury Secretary Mnuchin sent a letter to members of Congress arguing for the passage of legislation to help small businesses while negotiations continue with Mrs. Pelosi, arguing that, “The all-or-nothing approach is an unacceptable response to the American people.”


The old adage markets hate uncertainty decidedly did not ring true last week. The markets were able to shake off the accelerating rise in coronavirus cases worldwide, the number of top U.S. government officials being infected, the decreasing likelihood of more stimulus getting passed before the election, and election uncertainty. The small-cap Russell 2000 rose 6.4% on the week, its best performance since June, and the S&P 500 gained 3.8%, its best since July, moving above its 50-day moving average and surpassing its highs from last February and is now just 3% below its all-time high. Friday, the Dow rose 0.6%, the S&P 0.9%, and the Nasdaq Composite 1.4%.

Stocks to Watch

International Airlines Group (IAG) has reported that Alex Cruz will be stepping down as Chief Executive and Chairman of British Airways immediately and that Sean Doyle, Chief Executive of Aer Lingus, will take over the role. Mr. Cruz had held the role since 2016.

One day ahead of Amazon’s 2020 Prime Day event, Walmart (WMT) is having its own blowout sale that runs through Thursday, October 15. Amazon’s Prime Day begins at midnight tonight.

Data published by Canalys says global PC shipments hit the highest level in a decade during the September quarter, rising 13% YoY to 79.2 million units. Per the report, notebook shipments totaled 64 million, just shy of the Q4 2011 record of 64.6 million; desktop and desktop workstations were the weak spot with shipments down 26% on the year. Top vendors by market share were Lenovo (LNVGY), HP (HPQ), Dell (DELL), Apple, and Acer.

General Motors (GM) reported growth in its China vehicle sales for the first time in two years during the September quarter. In aggregate, the company’s China vehicle sales for the quarter rose 12% YoY with its Buick brand up 26% YoY, Cadillac jumped 28%, and Wuling grew 26% while Chevy sales plunged 20%, and the Baojun brand fell 19% YoY.

Bandwidth Inc. (BAND) will acquire international cloud communications company Voxbone for an enterprise value of €446 million. Voxbone’s 2020 revenue is expected to be more than $85 million and up more than 25% year-over-year, and upon close, will be accretive to Bandwidth.

Forbes reports Twilio (TWLO) agreed to acquire customer data infrastructure company Segment for $3.2 billion.

PG&E Corp. (PCG) shared it may need to cut power this week in parts of Northern California to reduce the chances of its equipment starting blazes as the risk of wildfires is expected to return to the state.

Politico reports federal and state prosecutors who are investigating Google (GOOGL) for alleged antitrust violations are considering whether to force the company to sell its Chrome browser and parts of its advertising business. The Department of Justice also is said to be preparing a separate antitrust suit accusing Google of abusing its control on the online search market, which could be filed as soon as next week.

Shares of telecommunications company Royal KPN (KPN) are up in pre-market trading following reports the company is considering a takeover bid.

After today’s market close, there are no corporate earnings reported expected. Investors looking to get a jump on the September quarter earnings season and the sea financial institutions set to report their quarterly results this week should visit Nasdaq’s earnings calendar page.

On the Horizon

    • October 13: NFIB Small Business, CPI, Real Hourly Earnings, Budget Statement
    • October 13-14: Amazon’s (AMZN) 2020 Prime Day event
    • October 14: MBA Mortgage Applications, PPI
    • October 15: Initial Jobless Claims, Bloomberg Comfort, Empire Manufacturing, Import/Export Prices, Philly Fed Outlook
    • October 16: Options Expiration Day, Retail Sales, Industrial Production, Business Inventories, University of Michigan Consumer Sentiment, TIC Flows
    • October 19: Home Builder Sentiment
    • 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

“Nothing vast enters the life of mortals without a curse.” -Sophocles


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

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