Daily Market Report | Oct. 16, 2020

US FINANCIAL MARKET

Wall Street climbs on vaccine hopes, upbeat retail sales data – Reuters, 10/16/20

  • Wall Street bounced back on Friday after three straight days of losses as Pfizer said it could apply for emergency use of its COVID-19 vaccine candidate as early as November, while data showed stronger-than-expected retail sales growth last month.
  • The drugmaker’s shares firmed 1.4% as it expects to provide safety data and file for authorization of the vaccine, which it is developing with Germany’s BioNTech SE, as soon as a safety milestone is achieved in the third week of November.
  • Latest data showed U.S. retail sales increased more than expected in September, though recovery from the recession is at a crossroads as government money runs out and new COVID-19 infections surge across the country.
  • Trading on Wall Street this week has been dictated by news about more federal aid to help businesses and households reeling from the impact of the COVID-19 pandemic, with the S&P 500 on track for its smallest weekly gains in three.
  • President Donald Trump and Democratic challenger Joe Biden will return to the campaign trail with visits to three battleground states, a day after the two contenders clashed from afar during dueling televised town halls.
  • Meanwhile, after a mixed start to the third-quarter earnings season from the big Wall Street lenders, investors will look next week to results from Netflix, one of the technology mega-caps that have benefited from stay-at-home demand during the pandemic.
  • Analysts’ expectations for S&P 500 companies’ earnings have improved to an 18.8% fall from a 25% tumble forecast three months earlier.

New U.S. Coronavirus Cases Top 60,000 for First Time in More Than Two Months – Wall Street Journal, 10/16/20

  • More than half a dozen states reported record numbers of new coronavirus cases, pushing the U.S.’s single-day total above 60,000 for the first time in more than two months.
  • Midwestern states were particularly hard hit, with Ohio, Wisconsin, Michigan and Indiana all reporting their highest single-day totals since the pandemic began, according to Johns Hopkins.
  • Ohio: Gov. Mike DeWine said Thursday the state hit a record number of new cases, 2,178, adding that nearly a month ago, on Sept. 20, the state had 762 new cases. “There is a red tide flowing all over the state of Ohio, and virtually everyone in Ohio is living in a high-incidence, high-rate-of-spread area,” he said.
  • Wisconsin: Gov. Tony Evers asked Wisconsin residents to put “science and public health before politics,” as cases climbed above 3,700 on Thursday. Before Sept. 9, new cases in Wisconsin rarely exceeded 1,000 on a single day.
  • Secretary-Designee Andrea Palm of the Wisconsin Department of Health Services said that in some parts of the state, intensive care units are more than 90% filled.
  • North Carolina: The state reported more than 2,500 new cases, a single-day record. Hospitalizations have topped 1,000 for 10 consecutive days, levels last seen in late August.
  • Nationwide, U.S. hospitalizations were at the highest level since Aug. 27 as of Thursday, reaching 37,308, according to the group.
  • France: New cases rose by 30,621 on Thursday, a record daily high. The sharp increase comes shortly before a 9 p.m. to 6 a.m. curfew takes effect in Paris and several other cities to curb the virus’s spread.
  • Spain: The country recorded more than 13,000 new infections as the region of Catalonia prepared to follow Madrid in adopting fresh restrictions, which will involve closing bars and restaurants for 15 days.
  • U.K.: Britain’s government added densely populated Lancashire to its list of areas under its highest-level restrictions Friday. The order bans people from visiting other households and forces the closure of pubs, among other measures.
  • Russia: Russia reported another record of new cases on Friday, recording 15,150 new infections as the virus continues to spread.
  • India: The country reported 63,371 new cases, taking the total to more than 7.37 million, according to the health ministry. India’s death toll rose by 895 to 112,161.

Pfizer Could Apply for Emergency Use of Covid-19 Vaccine by Late November – Wall Street Journal, 10/16/20

  • Pfizer said it could be ready to apply for emergency-use authorization of its Covid-19 vaccine by late November, assuming it receives positive efficacy and safety data from late-stage human trials, the first time it or any other leading Western vaccine developer provided such a specific timeline.
  • The drug giant, which is developing its vaccine candidate with German partner BioNTech, said it continues to expect to have data on the vaccine’s effectiveness—whether it protects at least a majority of vaccinated people from the disease—later this month. It then expects to have data on the drug’s safety by the third week of November.
  • Assuming positive results with both sets of data, Pfizer said it then plans to file for emergency-use authorization for the vaccine in the U.S. from the Food and Drug Administration soon after receiving the safety data.

Schlumberger posts third straight quarterly loss as oil rout hits services demand – Reuters, 10/16/20

  • Top oilfield services provider Schlumberger on Friday posted its third straight quarterly loss as this year’s prolonged slump in oil prices due to the COVID-19 pandemic compelled its major energy customers to shun drilling.
  • Total revenue plunged 38% to $5.26 billion.
  • North America has fared much worse than international services markets, with Schlumberger’s revenue from the region falling to $1.16 billion, from $2.85 billion a year earlier.
  • The company recorded charges of $310 million in the third quarter, adding to the over $12 billion it took in the previous two quarters.
  • Schlumberger reported a net loss of $82 million, or 6 cents per share, for the third quarter ended Sept. 30. The company reported a net loss of $11.38 billion, or $8.22 per share, a year earlier, due to impairment charges on some of the company’s past investments.

Ford’s third-quarter China sales rise 25% year-on-year to 164,352 vehicles – Reuters, 10/15/20

  • Ford on Friday said its China sales rose 25% over July to September from the same period a year earlier to 164,352 vehicles, attributing the increase to product launches and a localization strategy.
  • The result represents Ford’s second consecutive quarterly sales increase in the world’s biggest auto market following almost three years of decline.
  • On Monday, U.S. rival General Motors said its China sales grew 12% in July-September to 771,400 vehicles.
  • Overall vehicle sales in China grew 13% in September, 12% in August and 16% in July.

First Citizens, CIT Group to Merge – Wall Street Journal, 10/16/20

  • First Citizens BancShares and CIT Group will combine in an all-stock merger of equals, the bank companies said Friday.
  • Raleigh, N.C.-based First Citizens, the parent company of First-Citizens Bank & Trust Co., and New York City-based CIT, parent of CIT Bank N.A., said that the deal will create the 19th-largest bank in the U.S. by assets.
  • The combined company will take the First Citizens name and ticker symbol.
  • About 61% of the combined company will be owned by First Citizens stockholders, while CIT stockholders will own the remaining 39%. As of June 30, First Citizens had total assets of $47.9 billion and CIT had total assets of $61.7 billion.

Senate to Subpoena Twitter CEO Over Blocking of Disputed Biden Articles – Wall Street Journal, 10/15/20

  • The Senate Judiciary Committee plans to issue a subpoena on Tuesday to Twitter Inc. Chief Executive Jack Dorsey after the social-media company blocked a pair of New York Post articles that made new allegations about Democratic presidential nominee Joe Biden, which his campaign has denied.
  • The subpoena would require the Twitter executive to testify on Oct. 23 before the committee, according to the Republicans who announced the hearing.
  • GOP lawmakers are singling out Twitter because it prevented users from posting links to the articles, which the Post said were based on email exchanges with Hunter Biden, the Democratic candidate’s son, provided by allies of President Trump.
  • The Wall Street Journal hasn’t independently verified the Post articles.

US ECONOMY & POLITICS

U.S. retail sales beat expectations; outlook murky – Reuters, 10/16/20

  • U.S. retail sales rose more than expected in September, rounding out a strong quarter of economic activity, but the recovery from the recession is at a crossroads as government money runs out and new COVID-19 infections surge across the country.
  • Retail sales jumped 1.9% last month as consumers bought motor vehicles and clothing, dined out and splashed on hobbies, the Commerce Department said on Friday. That followed an unrevised 0.6% increase in August.
  • Excluding automobiles, gasoline, building materials and food services, sales increased 1.4% last month after a downwardly revised 0.3% drop in August.
  • Last month, sales at auto dealership surged 3.6% after rising 0.7 in August.
  • Receipts at restaurants and bars increased 2.1%, though the pace slowed from the 4.3% gain in August.
  • Online and mail-order retail sales rose 0.5%.
  • Furniture store sales gained 0.5%. Receipts at clothing stores jumped 11.0%.

U.S. Industrial Production Fell 0.6% in September – Wall Street Journal, 10/16/20

  • U.S. industrial production fell in September, snapping four months of growth, in another sign of a slowing recovery.
  • The Federal Reserve on Friday said its index of industrial production—a measure of output at factories, mines and utilities—fell a seasonally adjusted 0.6% in September, following an unrevised 0.4% rise in August.
  • Output remains 7.1% below where it was in February, before the pandemic hit, the Fed said.
  • Manufacturing, the biggest component of production, fell 0.3%, after rising 1.2% in August.
  • Utility production fell 5.6% due to a decline in air conditioning use, the Fed said. Mining output rose 1.7%.
  • Capacity utilization, a measure of slack in the industrial economy, fell to 71.5% in September from a revised 72% in August. Economists had expected capacity utilization to reach 71.8% in September.

U.S. consumer sentiment edges up in October – Reuters, 10/16/20

  • U.S. consumer sentiment inched up to a seven-month high in early October as an uptick in expectations for better economic prospects in the future outweighed a reversal in assessments of current conditions, a survey released Friday showed.
  • The University of Michigan’s Surveys of Consumers said its preliminary index reading for October climbed to 81.2 from a final September level of 80.4.
  • It was the highest level since March and modestly exceeded the median expectation of economists in a Reuters poll of 80.5.
  • The increase was led by a gain in the expectations index to 78.8, again the highest since March, from 75.6 in September. Economists were looking for a reading of 76.5.
  • The current conditions index, meanwhile, slid to 84.9 from 87.8 and was short of a Reuters estimate of 88.5.

Lack of Coronavirus Stimulus Deal Puts Pressure on Incumbents – Wall Street Journal, 10/16/20

  • The impasse between Congress and President Trump over another trillion-dollar-plus coronavirus relief package hasn’t been good news for incumbents trying to show voters they can deliver for them in Washington.
  • On Thursday, Senate Majority Leader Mitch McConnell (R., Ky.) said that the Senate GOP supported a number much smaller than what the Trump administration has discussed with House Speaker Nancy Pelosi (D., Calif.).
  • But President Trump, locked in his own re-election contest, said he would be willing to raise the White House offer even higher.
  • GOP Sen. Lindsey Graham of South Carolina, running neck and neck against Democrat Jaime Harrison, said Thursday he would support a stimulus package larger than the White House’s most recent $1.88 trillion proposal, even while few of his GOP colleagues agree.

Democratic Senate campaigns pull in more than $240 million in third-quarter fundraising – Reuters, 10/15/20

  • Democratic candidates running for the U.S. Senate in nine hotly contested races amassed more than $240 million in contributions during the third quarter, leaving their Republican opponents far behind in fundraising as the campaign entered its final weeks.
  • But as candidates approached a midnight filing deadline on Thursday, Federal Election Commission records and campaign announcements also showed some Republicans only marginally behind in cash at the end of the quarter, with a few ahead.
  • Democrat Jaime Harrison, who is running neck and neck against Republican Senator Lindsey Graham in South Carolina, raised a staggering $57.9 million during the three-month period ended Sept. 30, more than twice the $28 million reported by Graham’s campaign.
  • Democrat Mark Kelly collected nearly $39 million, besting a robust $23 million fundraising total for his Arizona opponent, Republican Senator Martha McSally. Kelly entered October with nearly $19 million in cash, vs. McSally’s $12.2 million.
  • In the key swing state of North Carolina, Democrat Cal Cunningham raised $28.3 million in the quarter, dwarfing Republican Senator Thom Tillis’ $6.6. million.
  • Montana Democratic Governor Steve Bullock raised $26.9 million, vs. $11.5 million for Republican Senator Steve Daines.
  • But Daines ended the quarter with $3.5 million in cash on hand, compared with Bullock’s $2 million.

EUROPE & WORLD

Europe’s Covid-19 Lockdowns Hit Region’s Stocks, Fuel-Demand Outlook – Wall Street Journal, 10/15/20

  • New coronavirus lockdown measures in Europe dragged the region’s stocks lower Thursday and threatened to hamper fuel demand, reigniting worries about slowing economic growth around the world.
  • The Stoxx Europe 600 index fell 2.1%, a third straight loss for the pan-European gauge and its biggest daily drop since Sept. 21.
  • Months after European authorities wrestled a measure of control over the spread of the novel coronavirus by imposing some of the Western world’s toughest restrictions, cases are once again soaring.
  • Governments have responded in recent days with curbs on travel and leisure designed to suppress a second wave.
  • The U.K. government on Thursday said London would be put on level two of the country’s three-tier alert system from Saturday, requiring people to stop mixing with other households indoors. Health Secretary Matt Hancock said infections in the British capital were doubling every 10 days.
  • France on Wednesday declared a state of emergency and imposed a nightly curfew for the Paris region and eight other metropolitan areas across the country.

China’s Economic Squeeze on Australia Extends to Cotton – Wall Street Journal, 10/16/20

  • China’s top economic-planning body is targeting Australian cotton, Australian industry groups say, the latest escalation in a diplomatic and trade row between the countries.
  • China buys around 65% of Australia’s cotton crop, according to industry figures, a trade worth some $600 million a year.
  • The cotton concerns come on the heels of similar suspicions that China is discouraging use of Australian coal.
  • A recent study by the Australian Strategic Policy Institute, a security think tank, found that of 27 countries subjected in recent years to what it calls Chinese coercive diplomacy—including state-issued threats as well as trade and tourism restrictions—Australia suffered the highest number of recorded cases, followed by Canada and the U.S.

Global Auto Markets Begin to Emerge from Pandemic Slowdown – Wall Street Journal, 10/16/20

  • New-car sales in Europe rose last month for the first time this year, a sign that the global auto industry is slowly beginning to pull out of its worst slump in decades.
  • The European Automotive Manufacturers’ Association said Friday that new-car registrations, a proxy for sales, totaled 1.3 million vehicles, an increase of 1.1% from the previous year.
  • That compares with an increase of 6.2% for the month in the U.S.
  • Over the entire quarter, European new-car sales were still down about 6% in the three months to Sept. 30, according to industry data. That compares with a decline of 9.6% in the U.S. and an increase of 7.9% in China, the first time new car sales in China grew on a quarterly basis in two years.

Daimler posts forecast-beating results as demand rebounds – Reuters, 10/15/20

  • Daimler shares surged 4.5% on Friday after the luxury carmaker posted forecast-beating third-quarter results, buoyed by a better-than-expected rebound in sales of luxury cars in September.
  • Daimler’s third-quarter earnings before interest and tax reached 3.07 billion euros ($3.59 billion), it said late on Thursday, beating the 2.14 billion euro Refinitiv consensus.
  • The Stuttgart-based company is due to publish further financial details on Oct. 23 and said it will publish updated guidance for the full year at that time.

Truckmaker Volvo third-quarter breezes past forecasts as recovery gains pace – Reuters, 10/15/20

  • Swedish truckmaker AB Volvo on Friday reported third-quarter core earnings well above forecasts and a big order intake jump as its recovery from a deep COVID-19-induced slump continued to gain pace.
  • Volvo said net order intake in the July-September quarter amounted to 57,530 trucks, up 61% from a year earlier.
  • Adjusted operating profit at the maker of trucks, construction equipment, buses and engines fell to 7.22 billion crowns ($813 million) from 10.89 billion a year earlier, but was well above the 5.82 billion expected, Refinitiv Eikon estimates showed.
  • Volvo said it expected European heavy truck market registrations to fall by 30% in 2020, but to grow by some 7% next year. It expects the U.S. market to fall by 35% this year and grow by 14% in 2021.

Apple assembler Foxconn aims to supply to about 3 million EVs by 2027 – Reuters, 10/15/20

  • Foxconn 2354.TW aims to provide components or services to 10% of the world’s electric vehicles (EVs) by between 2025 and 2027, and has been in talks with multiple car manufacturers for future cooperation, Chairman Liu Young-way said on Friday.
  • Foxconn will work with multiple auto makers to reach the goal of 10% global EVs, Liu added, representing around three million vehicles.
  • In January, automaker Fiat Chrysler said it has plans for a joint venture with Foxconn to build electric cars and develop internet-connected vehicles in China.
  • Foxconn is planning to launch its solid-state battery for EVs in 2024, which is a high-capacity energy storage device that improves on current batteries.

Factmonster – TODAY in HISTORY

  • The Cuban Missile Crisis began. (1962)
  • China detonated its first atomic bomb. (1964)
  • The White House announced that North Korea had disclosed the existence of a secret nuclear weapons program. (2002)

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