Today’s Big Picture

All eyes are on the White House to discern if a stimulus package is possible before the November election. If it doesn’t happen before then, it is highly unlikely that one would be passed prior to the arrival of the newly elected on Capitol Hill in early 2021, which would mean the economy is on its own for the next six months or so. Raising the stakes and adding to renewed concerns over the speed of the economy is the continued resurgence in the coronavirus, which has prompted New York Governor Andrew Cuomo to confirm that non-essential business will close certain hot spot zones of New York City.

The major equity indices in Asia recovered from their earlier losses to close mostly in the green today following late-night tweets from Trump that seemed to reverse course from his declaration yesterday that negotiations for a stimulus bill would be on hold until after the election. Hong Kong’s Hang Seng rose 1.1%, Australia’s ASX 200 rose 1.3%, South Korea’s Kospi closed up 0.9%, while Japan’s Nikkei was mostly unchanged.

By midday trading, the main European equity indices were all in the red, albeit only slightly, while U.S. futures point to positive moves at the open after yesterday’s slide.

Data Download

International Economy

The Australian Industry Group Australian Performance of Services Index fell to 36.2 in September from 43.5 in the previous month, the tenth consecutive contraction in the services sector that was at a faster pace than in July as renewed coronavirus-induced restrictions weighed heavily on business activity.

Japan’s economy continues to show signs of improvement. The nation’s Coincident Index (preliminary) rose slightly to 79.4 from 78.4 in July. This was the highest reading since March for the index that consists of a range of data including factory output, employment, and retail sales. The Leading Economic Indicator Index (preliminary), a gauge of the economy a few months ahead and is compiled using data such as job offers and consumer sentiment, rose to 88.8 from 86.7 in July. This was the highest reading since February.

Germany’s Industrial Production dropped unexpectedly by 0.2% MoM in August versus expectations for an increase of 1.5%. This was the first decline in output since April. IP fell 9.6% YoY.

Spain’s Industrial Production rose 0.4% MoM but fell 5.7% YoY in August, matching expectations. This was this smallest decline in the past six months.

Retail Sales in Italy rose 8.2% MoM in August and are down just 0.8% YoY, up from July when they were down-7.1% YoY. This was the first gain in retail sales since February.

Domestic Economy

While last Friday’s payroll report showed some concerning trends for the state of the job market, yesterday’s August JOLTS report was quite promising. The layoff and discharge rate was still falling relative to the labor force but remains elevated. Quit rates continued to improve, indicating that at least some find jobs plentiful. Openings remained strong, in the 94th percentile of the historical range as a percent of the labor force. Layoffs overall were in the 22.5th percentile, but in the 88th for Mining and Logging, the 85.9th for Arts, Entertainment, and Recreation, and the 80th for Transportation, Warehousing, and Utilities. Hires overall were in the 98th percentile, 100th percentile for Transportation, Warehousing, and Utilities, and 99th percentile for Leisure and Hospitality. The bottom line is that August showed considerable signs of improvement; September’s numbers will be key to understanding if this trend can continue into the fall.

Despite President Trump’s focus on trade, the U.S. trade deficit was the widest in 14 years, rising to $67 billion in August, according to data from the U.S. Census Bureau.

Investors charting the economic data flow will have the weekly reports for the MBA Mortgage Applications Index and the EAI Crude Oil Inventories to look forward to today. The real focus, however, will be on the Fed’s September FOMC Meeting Minutes as well as the August Consumer Credit data that will be released this afternoon.

Markets

Yesterday the S&P 500 was up as much as 0.7% until just before 3 pm ET, when President Trump tweeted, “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business,” taking the wind out of the sails of stimulus hopes. Stocks immediately turned negative with the Down closing down 1.3%, the S&P 500 down 1.4%, the Nasdaq Composite fell 1.6%, while the small-cap Russell 2000 closed down just 0.3%.

A total of 401 of the S&P 500 components closed down and ten out of its eleven sectors closed in the red, with the safety of Utilities the only one to gain ground on the day. In the coming days, we will learn if Trump’s tweet was genuine or another one of his negotiating tactics. His tweets later Tuesday night gave the impression that perhaps this is more of a tactic.

Stocks to Watch

The House Subcommittee on Antitrust, Commercial, and Administrative Law of the Committee of the Judiciary released a report on large technology companies, including Apple (AAPL), Amazon (AMZN), Facebook (FB), and Google (GOOGL), finding that while “these firms have delivered clear benefits to society, the dominance of Amazon, Apple, Facebook, and Google has come at a price.” The report goes on to say, “the totality of the evidence produced during this investigation demonstrates the pressing need for legislative action and reform.” Now to see what, if anything, happens next…

The Supreme Court hears oral arguments today in Google v. Oracle (ORCL), a case that some say boils down to whether companies can use copyright law as a weapon to limit interoperability.

The European Commission announced Broadcom (AVGO) will scrap its exclusivity deals with TV and modem makers in a deal with EU antitrust regulators aimed at ending a year-long investigation without a finding of wrongdoing.

Levi Strauss (LEVI) reported August quarter EPS that crushed the consensus forecast of -$0.22 despite revenue for the quarter falling 26.5% YoY but still significantly ahead of expectations. The bright spot for the company was the 52% YoY in e-commerce growth that mitigated the impact of the pandemic on the company’s brick & mortar business during the quarter.

Haverty Furniture (HVT) reported its 3Q20 sales increased 3.9% YoY to $217.5 million, missing the $230 million consensus.

Medical technology company Masimo (MASI) reported preliminary September quarter product revenue in the range of $274-$278 million, up 19.7%-21.4% YoY.

Biological testing company Luminex (LMNX) upped its outlook for the September 2020 quarter to revenue of ~$106 million vs. the $105 million consensus. Of note, the company’s Molecular Diagnostics revenue for the quarter is expected to be ~ $60 million, up almost 100% vs. YoY.

Online advertising and monetization solutions company Perion Networks (PERI) increased its guidance for 2H20, driven by a faster recovery of its advertising business. The company now sees revenue for the second half of 2020 in the range of $164-$174 million vs. its prior guidance of $150-$160 million.

Integra Lifesciences (IART) sees revenue of $368-$370 million vs. the $342.8 million for the September quarter.

Bloomberg reports Howard Stern is nearing a new deal with Sirius XM (SIRI) worth a reported $120 million per year.

According to The New York Post, AT&T (T) is moving forward with plans for an auction of DirecTV even though a first-round drew bids less than a third of what the telecom giant paid for the satellite broadcaster five years ago. Reportedly, Dish Network (DISH) isn’t taking part in the bidding.

Ping Identity (PING) announced the acquisition of ShoCard, a leader in technology designed to transform the way users manage their identity and engage with companies. Ping also announced the launch of PingOne Services, a suite of stand-alone cloud services that provide identity and access management capabilities.

Honeywell International (HON) now expects 7,300 new business jet deliveries, worth $235 billion, during the 2021 to 2030 period, which is down 4% from the 10-year forecast provided last year.

Apple will hold an online event on Oct. 13 that’s expected to bring the launch of its new family of iPhones. The October virtual event will kick off at 1 PM ET and Apple is using the tagline “Hi, Speed.” The company has stopped selling speakers and headphones made by other companies recently, suggesting it may be coming out with devices of its own. Shares of Logitech International (LOGI) and Sonos (SONO) fell 6.1% and 7.0% respectively yesterday on fears that Apple may be entering their competitive fray.

Royal Caribbean (RCL) announced it will be extending the suspension of sailings to include those departing on or before Nov. 30, 2020, excluding sailings from Hong Kong.

Casual dining restaurant chain Ruby Tuesday (RT) has filed for bankruptcy citing the “unprecedented impact” of the COVID-19 pandemic.

And for the first time in eight years, beginning October 28 McDonald’s (MCD) will add new baked goods to its core menu: Apple Fritter, Blueberry Muffin, and Cinnamon Roll.

After today’s market close, Resource Connection (RGP) will report its quarterly results. Investors looking to get a jump on the expected quarterly earnings reports in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

    • October 8: Initial Jobless Claims, Bloomberg Comfort
    • October 9: Wholesale Inventories, Wholesale Trade Sales
    • October 13: NFIB Small Business, CPI, Real Hourly Earnings, Budget Statement
    • October 13: Apple (AAPL) “Hi, Speed” online event
    • 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

“Every saint has a past, every sinner has a future.” ~ Oscar Wilde

Disclosures

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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