Daily Market Report | Oct. 19, 2020

US FINANCIAL MARKET

U.S. Stocks Rise on Stimulus Talks, China’s Growth – Wall Street Journal, 10/19/20

  • U.S. stocks rose Monday as investors assessed the potential for a fresh stimulus package and China’s economic recovery.
  • Stocks eked out muted gains last week as investors reckoned with persistently high Covid-19 cases, uncertainty surrounding the presidential election, and a tug of war over further fiscal stimulus measures from Washington.
  • Over the weekend, House Speaker Nancy Pelosi told the White House it had until Tuesday to reach a deal with Democrats.
  •  If the deadline passes without a deal, ongoing talks would be increasingly unlikely to produce sweeping relief legislation worth trillions of dollars within the next two weeks, her aide suggested.
  • Mrs. Pelosi and Treasury Secretary Steven Mnuchin spoke Saturday night, but a number of differences remain.
  • Chinese officials said Monday that gross domestic product expanded by 4.9% in the third quarter from a year earlier, putting China’s economy back toward its pre-coronavirus trajectory half a year after the pandemic gutted its economy.
  • The U.S. corporate earnings season will pick up pace this week, with Netflix, Tesla and AT&T among the major companies reporting in the coming days. Technology giant IBM will report after the market closes.
  • 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 Fall Below 50,000 for First Time in Six Days – Wall Street Journal, 10/19/20

  • New U.S. coronavirus infections fell below 50,000, the lowest in nearly a week, as deaths approached 220,000 and moving averages suggested the spread is picking up steam.
  • The U.S. reported more than 48,000 new infections on Sunday, according to data compiled by Johns Hopkins University, down from 50,719 Saturday and 69,156 Friday.
  • The South and the Midwest are being hit hardest, contributing 72% of the nation’s daily new cases, according to seven-day moving average data compiled by the Covid Tracking Project.
  • On Friday, 10 states—including Idaho, Minnesota, New Mexico and North Carolina—marked records for new daily confirmed cases, according to a Wall Street Journal analysis of Johns Hopkins data.
  • But the number of people hospitalized because of the disease declined Sunday to 36,428 after four straight days above 37,000, according to the Covid Tracking Project. Saturday’s figure of 37,404 was the highest since late August.
  • U.K.: The government of Wales said it would begin a two-week lockdown beginning Friday to stem the spread of the virus.
  • British authorities, meanwhile, are continuing to negotiate a support package for the Manchester area in northwest England to enter the highest Tier-3 alert level already applied in Liverpool and Lancashire. The U.K. as a whole reported 16,982 new cases on Sunday, up from Saturday.
  • France: Health authorities reported 29,837 new confirmed infections Sunday, down from just over 32,000 on Saturday. A 9 p.m. to 6 a.m. curfew was introduced in Paris and eight other cities last week to slow the virus’s spread.
  • Italy: Italian Prime Minister Giuseppe Conte on Sunday authorized local town mayors to shut down town squares from 9 p.m. in the evening to discourage gatherings and slow infection rates.
  • Israel: Another of the world’s most stringent lockdowns is easing, as Israel’s daily infection rate has fallen to 1,500, from more than 8,000 when the deeply unpopular restrictions took effect in mid-September.
  • India: The nation with the second-highest infection total after the U.S. reported its fewest fatalities in three months on Monday, saying 579 people had died the day before. A total of 114,610 people have now died in India. The country added 55,722 new infections in the past day, pushing its total to 7.55 million.

Halliburton posts fourth straight quarterly loss as oil rout drags demand – Reuters, 10/19/20

  • Halliburton posted its fourth straight quarterly loss on Monday, as the world’s second-largest oilfield services firm struggled with a plunge in demand and lower oil prices.
  • Total revenue fell 46.4% to $2.98 billion.
  • Halliburton, which last year recorded more than half of its business from North America, saw revenue from the region drop 66.6% to $984 million in the third quarter.
  • Revenue from its completion and production business was $1.57 billion for the quarter, compared with $3.51 billion a year ago, a decline of roughly 55%.
  • Net loss attributable to the company was $17 million, or 2 cents per share, in the quarter ended Sept. 30, compared with a profit of $295 million, or 34 cents per share, a year earlier.

ConocoPhillips to Buy Shale Rival Concho for $9.7 Billion – Wall Street Journal, 10/19/20

  • ConocoPhillips has agreed to buy Concho Resources for $9.7 billion in what would be the largest U.S. oil deal since the coronavirus pandemic began roiling global energy markets.
  • The combined company would easily be the largest U.S. oil independent, with output in the prolific Permian Basin of Texas and New Mexico, second only to Occidental Petroleum, according to a JPMorgan Chase & Co. analysis of Enverus data.
  • The all-stock acquisition values Concho at a 15% premium to its closing price on Oct. 13 and would give shareholders 1.46 shares of ConocoPhillips stock for each share of Concho common stock.

American Airlines plans to return Boeing 737 Max to service at year-end – Reuters, 10/18/20

  • American Airlines plans to return Boeing 737 Max jets to service for passenger flights by the end of this year depending on certification of the aircraft from the Federal Aviation Administration (FAA), it said on Sunday.
  • The airline said it will operate a daily 737 Max flight between Miami and New York from Dec. 29 to Jan. 4, with flights available for booking from Oct. 24.
  • The FAA in a statement Sunday reiterated it has no timeline for approving the plane’s return to service and said it “will lift the grounding order only after FAA safety experts are satisfied that the aircraft meets certification standards.”

Qatar Airways expects to keep A380s parked for years – Reuters, 10/19/20

  • Qatar Airways does not expect to use its Airbus A380s for at least the next two years, its chief executive said on Monday, longer than a previous projection for the superjumbos to possibly return to service in 2021.
  • The state-owned airline has parked its 10 A380s due to the devastating impact of the coronavirus crisis on travel demand.
  • The A380s would return once the airline saw the growth rate of 2019, before the pandemic struck, Baker said.

US ECONOMY & POLITICS

Homebuilder sentiment sets another record high in October – CNBC, 10/19/20

  • The nation’s homebuilders are seeing no fall chill in demand from buyers, and that has the industry more confident than ever.
  • Builder sentiment set a record high for the second month in a row, jumping to 85 in October on the NAHB/Wells Fargo Housing Market Index. September and October are the first two months the index has ever been above 80.
  • All three components of the index either set records or matched their highest readings.
  • Current sales conditions rose 2 points to 90. Sales expectations in the next six months increased 3 points to 88, and buyer traffic was unchanged at 74.

Pelosi Tells White House It Has Until Tuesday to Reach Relief Deal Before Election – Wall Street Journal, 10/18/20

  • House Speaker Nancy Pelosi (D., Calif.) told the White House it had until Tuesday to reach a deal with Democrats, or legislation to provide additional coronavirus relief to struggling households and businesses couldn’t be passed before the election.
  • The two sides have remained entrenched in disagreements over significant policy issues, including how much funding to provide state and local governments and whether to include legal protections for businesses and other entities operating during the pandemic.
  • If Tuesday evening passes without reaching an agreement, negotiations could continue, but would be unlikely to produce sweeping relief legislation worth trillions of dollars within the next two weeks, an aide to Mrs. Pelosi said.

U.S. Budget Gap Tripled to Record $3.1 Trillion in Fiscal 2020, Treasury Says – Wall Street Journal, 10/16/20

  • The U.S. budget deficit tripled to a record $3.1 trillion in the fiscal year that ended Sept. 30 as the government battled the global coronavirus pandemic that plunged the country into a recession, has taken more than 217,000 American lives and thrown millions out of work.
  • Federal revenue totaled $3.4 trillion, Friday’s Treasury report showed, down 1% from the previous year, with much of that occurring since March, when the virus began spreading across the country.
  • Spending rose 47% to a record $6.5 trillion as the government distributed emergency loans for small businesses, enhanced jobless benefits and stimulus payments for American households.
  • As a share of economic output, the budget gap in fiscal year 2020 hit roughly 16.1%, the largest since 1945, the Treasury Department said Friday, when the country was financing massive military operations to help end World War II.
  • Federal debt totaled 102% of gross domestic product, the first time it has exceeded the size of the economy for the full fiscal year in more than 70 years, according to estimates from the Committee for a Responsible Federal Budget.
  • To cover the budget shortfall, the Treasury has sold a flood of new securities, boosting total government debt held by the public to $21 trillion, a 25% increase from the beginning of the fiscal year.

Coronavirus Tanked the Economy. Then Credit Scores Went Up. – Wall Street Journal, 10/18/20

  • Millions of Americans lost their jobs and skipped debt payments this year.
  • You wouldn’t know it looking at consumer credit scores.
  • The average FICO credit score stood at 711 in July, up from 708 in April and 706 a year earlier, according to Fair Isaac, the score’s creator.
  • Early estimates suggest the average score has held steady through mid-October at the July level, which is the highest since FICO began keeping track in 2005.
  • The increase is largely thanks to the unprecedented financial assistance the government and lenders rolled out to consumers after the pandemic took hold in the U.S. Stimulus payments and expanded unemployment benefits helped many borrowers keep up with their bills and, in some cases, even pay down their debt.
  • Widespread payment holidays on mortgages, auto loans and student loans freed up funds and kept credit reports clean.

U.S. to Offer Loans to Lure Developing Countries Away from Chinese Telecom Gear – Wall Street Journal, 10/19/20

  • The U.S. government is embarking on a push to persuade developing countries to shun Chinese telecommunications equipment, offering financial assistance to use alternatives that Washington says are safer and have fewer strings attached.
  • The U.S. is ready to offer loans and other financing, potentially worth billions of dollars in total, to countries to buy hardware from suppliers in democratic countries rather than from China, said Bonnie Glick, the deputy administrator at the U.S. Agency for International Development, which is spearheading the effort.
  • The agency, better known for providing food assistance than technology, will dispatch staff to meet politicians and regulators in the developing world, she said, aiming to persuade them that using telecom equipment from two Chinese giants, Huawei Technologies and ZTE, is a bad idea.

Trump’s payments to farmers hit all-time high ahead of election – Reuters, 10/19/20

  • U.S. President Donald Trump is assuring a bumper year for farmers as the Nov. 3 election approaches, with record government subsidies projected to make up more than a third of farm income in 2020.
  • With the latest $14 billion farm aid package announced in Wisconsin on Sept. 17, federal payments to farmers are expected to reach a record $51.2 billion this year.
  • The government’s share of farmers’ net cash income will also rise to 39.7%, the biggest in 20 years.
  • Net cash income is a closely watched indicator of farm health that calculates the amount of money a farmer gets to keep after expenses.
  • The Agriculture Department forecast net farm income would rise 4% in 2020 from last year even before the most recent aid announcement.
  • The aid programs could be key to Trump’s chances of success in swing states such as Wisconsin, Ohio, Iowa and Minnesota.

EUROPE & WORLD

China Economy Grows 4.9% as Rest of World Struggles with Coronavirus – Wall Street Journal, 10/18/20

  • Chinese officials said Monday that gross domestic product expanded by 4.9% in the third quarter from a year earlier, putting China’s economy back toward its pre-coronavirus trajectory half a year after the pandemic gutted its economy.
  • The expansion builds on the second quarter’s 3.2% growth, which follows a historic contraction of 6.8% in the first three months of the year, when authorities locked down the central Chinese city of Wuhan in a bid to curb the fast-spreading virus.
  • The 4.9% growth figure for the third quarter fell short of expectations but brings China’s trajectory closer in line with forecasts made at the beginning of the year for 2020 growth of between 5.5% and 6%—forecasts made before the pandemic swept across the globe, killing more than a million people and crushing the global economy.
  • China’s headline unemployment figure, the urban surveyed jobless rate, fell to 5.4% in September, lower than August’s 5.6% rate and Beijing’s target of around 6%.

China Adds New Export Restrictions in Latest Trade-Dispute Move – Wall Street Journal, 10/19/20

  • A new law will allow China to ban exports to protect national security, adding a versatile weapon to Beijing’s arsenal as it fights a war over trade and technology with the U.S.
  • The law, approved by China’s legislature over the weekend, authorizes tight restrictions on the sale abroad of dual-use goods with both civilian and military applications, nuclear materials and equipment, and other products and services that touch on national security.
  • Set to go into effect Dec. 1, the new legislation mirrors regulations the U.S. and other countries use to limit sensitive exports.
  • It has been in the works for two years, but the timing of its passage means the Chinese leadership could use it to target exports to the U.S. as the two superpowers trade blows over everything from social media to semiconductors, said China-focused lawyers.

Alibaba Takes on Walmart in China With $3.6 Billion Investment in Hypermarket Chain – Wall Street Journal, 10/19/20

  • Chinese e-commerce giant Alibaba said it would pay $3.6 billion to take control of China’s largest big-box retailer and a major rival to Walmart in the world’s most populous nation.
  • Alibaba, currently China’s most valuable company with a market capitalization in excess of $800 billion, said Monday it plans to double its stake in Sun Art Retail Group, which operates more than 480 large supermarket-department stores in China.
  • Following the latest deal, Alibaba will own about 72% of the business, which had revenue of 95.4 billion yuan, equivalent to $14.2 billion, in 2019.
  • In the first half of this year, Sun Art’s revenue grew 5% to 53.2 billion yuan ($7.9 billion) from the same period in 2019.

Factmonster – TODAY in HISTORY

  • British General Cornwallis surrendered to General George Washington at Yorktown, Va., bringing an end to the last major battle of the American Revolution. (1781)
  • French troops under Napoleon Bonaparte began their retreat from Moscow. (1812)
  • The stock market crashed on what came to be known as “Black Monday.” Stocks dropped a record 508 points, or 22.6%, topping the drops on October 28 and 29 in 1929 that ushered in the Great Depression. (1987)

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. Any economic forecasts set forth may not develop as predicted.

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Material presented is excerpts derived from third party content and you may need a subscription to access the full the content. The views and opinions expressed are those of the authors and do not necessarily reflect the views of Pence Wealth Management or LPL Financial.

Prior to making any investment decision please consult your financial advisor regarding your specific situation.

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