Daily Market Report | Oct. 20, 2020

US FINANCIAL MARKET

Wall Street climbs with focus on stimulus – Reuters, 10/20/20

  • Wall Street’s main indexes rose on Tuesday as investors hoped for more stimulus from Washington, with Senate Republicans preparing to vote on a bill to help small businesses hammered by the COVID-19 pandemic.
  • House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin will also talk again on Tuesday, after a 53-minute telephone conversation on Monday “continued to narrow their differences” about the coronavirus aid package, a Pelosi spokesman said on Twitter.
  • Uncertainty over the fiscal stimulus weighed on Wall Street’s main indexes on Monday and analysts expect market turbulence to increase with only two weeks left until Election Day.
  • Latest national opinion polls pointed to a victory for Democratic challenger Joe Biden, which would mean a cooling in global trade friction, but higher taxes for corporate America.
  • Meanwhile, the third-quarter earnings season has gathered momentum. Of the 50 S&P 500 companies that have reported results, 86% have topped expectations for earnings, according to Refinitiv IBES data.
  • The U.S. Justice Department and 11 states filed an antitrust lawsuit against Alphabet’s Google for allegedly breaking the law in using its market power to fend off rivals. Alphabet’s shares were up 0.9% in morning trading.

New U.S. Coronavirus Cases March Higher – Wall Street Journal, 10/20/20

  • The U.S. reported more than 58,000 new coronavirus infections, continuing an upward trend in recent days, as the national death toll exceeded 220,000.
  • The number of new infections reported Monday, according to data compiled by Johns Hopkins University, is higher than the 48,210 reported Sunday, and also higher than the 41,653 reported a week earlier.
  • The number of those hospitalized with Covid-19 is also surging nationwide, with 37,744 currently admitted, according to the Covid Tracking Project. That is the highest number since Aug. 26, when 38,401 were hospitalized.
  • New Jersey reported 1,191 new cases of Covid-19 on Monday following 1,275 cases the previous day. That daily case count hovered around 300 to 400 about a month ago.
  • New York: Covid-19 hot spots in Queens could have lockdown restrictions loosened later this week as infection rates have declined there, New York City officials said Monday.
  • France: France on Monday reported 146 deaths in hospitals from Covid-19 over the prior 24 hours, the highest toll since the country ended its lockdown in May. Over the last week, an average of more than 100 people have died a day, up 51% from the prior week.
  • The total number of people on life support for Covid-19 in France has now reached 2,099, the highest level since May 17.
  • U.K.: Britain reported 18,804 new coronavirus infections Monday, up from nearly 17,000 the day before, with 80 people dying within 28 days of testing positive for the virus.
  • Ireland: Non-essential businesses will close for six weeks from midnight on Wednesday as the government in Dublin tightens restrictions to slow the spread of virus.
  • India: The country reported 46,790 new cases on Tuesday, pushing up the total reported infections to 7.6 million, data from the federal health ministry showed.

Moderna CEO Expects Covid-19 Vaccine Interim Results in November – Wall Street Journal, 10/20/20

  • Moderna Chief Executive Stéphane Bancel said the federal government could authorize emergency use of the company’s experimental Covid-19 vaccine in December, if the company gets positive interim results in November from a large clinical trial.
  • Mr. Bancel, speaking during The Wall Street Journal’s annual Tech Live conference Monday, said if sufficient interim results from the study takes longer to get, government authorization of the vaccine may not occur until early next year.
  • Mr. Bancel’s comments suggest Moderna’s timetable isn’t far off from Pfizer’s, which said last week it expects to seek U.S. authorization of emergency use of its vaccine by late November.

Lockheed Martin Sets Modest Sales Expectations as Pandemic Weighs on Spending – Wall Street Journal, 10/20/20

  • Lockheed Martin said it expects sales to rise about 3% next year as the world’s largest defense company provided a first look at the impact of slowing military budget growth.
  • Sales rose to $16.5 billion from $15.2 billion.
  • Lockheed Martin’s third-quarter profit rose to $1.7 billion, from $1.6 billion a year earlier, and per-share earnings climbed to $6.28 from $5.70, above the $6.09 consensus among analysts polled by FactSet.
  • The company said Tuesday that it expects sales to be at or above $67 billion in 2021 as it reported forecast-beating quarterly earnings and boosted 2020 guidance following a rise in its order backlog to a record $150 billion.
  • Lockheed Martin said its 2021 guidance assumed it was compensated for pandemic-related costs, which analysts have estimated to be around $2.5 billion.

IBM posts double-digit cloud revenue growth; says customers deferring some projects – Reuters, 10/19/20

  • International Business Machines edged past Wall Street estimates for quarterly revenue on Monday, bolstered by higher demand for its cloud services, a business it is staking its future on as it prepares to spin off one of its legacy units.
  • IBM’s total revenue fell 2.6% to $17.56 billion in the reported quarter, but was slightly above analysts’ estimates of $17.54 billion, according to IBES data from Refinitiv.
  • Revenue from the cloud business, previously headed by Chief Executive Officer Arvind Krishna, rose 19% to $6 billion in the third quarter, offsetting weakness in much of its other businesses.
  • The global technology services segment, IBM’s biggest unit that caters to some of the world’s largest data centers, reported a 4% drop in revenue to $6.5 billion.
  • Excluding items, the company earned $2.58 per share, which was in line with analysts’ estimates.
  • IBM shares, however, fell 3% after the company stayed away from issuing a forecast for the current quarter, citing uncertainty around a global economic recovery due to the COVID-19 pandemic.

P&G and Reckitt Clean Up on Pandemic-Driven Hygiene – Wall Street Journal, 10/20/20

  • Procter & Gamble reported its biggest global sales increase in 15 years as the world’s consumers spent more to keep their homes and themselves clean during the coronavirus pandemic.
  • Overall, P&G said net sales for the quarter were $19.3 billion, up 9% versus the prior year.
  • P&G said organic sales, a measure that excludes currency moves, acquisitions and divestitures, rose 9% for the quarter ended Sept. 30 compared with a year earlier.
  • The biggest growth was in P&G’s home-care unit, where sales jumped 30%.
  • Net income was $4.31 billion, or $1.63 per diluted share, an increase of 20% from the prior year.
  • The company raised its guidance for profit gains as well as sales gains for the fiscal year ending in June 2021.

Intel Enters Deal to Sell NAND Memory Unit to SK Hynix – Wall Street Journal, 10/19/20

  • Intel has reached a deal to sell its flash-memory manufacturing business to South Korea’s SK Hynix for about $9 billion, in a move that would reorient the semiconductor giant away from an area of historical importance that has become increasingly challenged.
  • Under the deal reported earlier Monday by The Wall Street Journal, SK Hynix plans to buy most of Intel’s memory business, including the related memory manufacturing operations in Dalian, China, the companies said in a statement.
  • Intel will keep its Optane line of memory products, an advanced type of storage used heavily in data centers.
  • The operations being acquired by SK Hynix generated about $2.8 billion in sales in the first six months of this year, the companies said. That represents the lion’s share of Intel’s overall memory sales, which totaled around $3 billion during that period.

Justice Department Files Long-Awaited Antitrust Suit Against Google – Wall Street Journal, 10/20/20

  • The Justice Department filed an antitrust lawsuit Tuesday alleging that Google engaged in anticompetitive conduct to preserve monopolies in search and search advertising that form the cornerstones of its vast conglomerate.
  • The department alleged that Google, a unit of Alphabet, is maintaining its status as gatekeeper to the internet through an unlawful web of exclusionary and interlocking business agreements that shut out competitors.
  • The government alleged that Google uses billions of dollars collected from advertisements on its platform to pay mobile-phone manufacturers, carriers and browsers, like Apple’s Safari, to maintain Google as their preset, default search engine.
  • The long-anticipated case, filed in a Washington, D.C., federal court, marks the most aggressive U.S. legal challenge to a company’s dominance in the tech sector in more than two decades, with the potential to shake up Silicon Valley and beyond.

Goldman Sachs to Pay $2.8 Billion, Admit Wrongdoing to Settle 1MDB Charges – Wall Street Journal, 10/20/20

  • Goldman Sachs will pay the U.S. government about $2.8 billion and admit wrongdoing in a Malaysian bribery scandal, settling charges stemming from its work with a corrupt government investment fund.
  • A Goldman subsidiary in Asia tied to the misconduct is expected to plead guilty this week, according to people familiar with the matter.
  • The parent company will accept an agreement that requires it to admit fault but defers prosecution on the charges, the people said, avoiding a guilty plea that could have crippled its ability to do business.
  • The deal with the Justice Department calls for Goldman to pay a penalty of about $2.2 billion and pay back around $600 million in ill-gotten gains, although Goldman will be able to offset some of that amount with fines paid to other authorities and agencies, the people said.

Tesla third-quarter registrations in California drop 13% – data – Reuters, 10/20/20

  • Tesla’s vehicle registrations in the U.S. state of California dropped 13% in the third quarter compared with last year, according to data from Cross-Sell, a research firm that collates title and registration data.
  • The report released on Monday showed registrations in California, a bellwether for the electric-car maker and its largest U.S. market, recovered from a second-quarter low of roughly 9,800 vehicles to around 16,200 vehicles in the three months ended September.
  • But third-quarter numbers lagged some 13% behind last year’s due to a large drop in Model 3 registrations.
  • California registration for Tesla’s Model 3 mass-market sedan, which in the past accounted for more than half of total registrations, fell 60% on a yearly basis to 6,500.

GM’s official run for Tesla starts with its electric Hummer debut Tuesday night – CNBC, 10/20/20

  • As the Ford Bronco and Jeep Wrangler battle over traditional off-road supremacy next year, General Motors has its sights set on a new segment with a different competitor: Tesla.
  • The Detroit automaker resurrects the Hummer on Tuesday night as an all-electric “supertruck” that’s set to go on sale in roughly a year – likely ahead, of Tesla’s Cybertruck. It will be GM’s first real test as a competitor against Tesla.
  • It also will be the first vehicle with the company’s next-generation EV platform and batteries, known as Ultium.
  • The Hummer pickup is scheduled to be unveiled Tuesday at 8 p.m. ET during the World Series, “The Voice” and across a barrage of social media and streaming platforms.
  • Ford is scheduled to release an electric version of its F-150 pickup by mid-2022.

US ECONOMY & POLITICS

U.S. single-family homebuilding accelerates in September – Reuters, 10/20/20

  • U.S. single-family homebuilding surged in September, cementing the housing market’s status as the star of the economic recovery, thanks to record-low interest rates and a migration to the suburbs and low-density areas as Americans seek more room for home offices and schooling.
  • Overall, housing starts increased 1.9% to a seasonally adjusted annual rate of 1.415 million units last month.
  • Data for August was revised down to a 1.388 million-unit pace from the previously reported 1.416 million.
  • Single-family homebuilding, the largest share of the housing market, jumped 8.5% to a rate of 1.108 million units last month.
  • But starts for the volatile multi-family housing segment fell 16.3% to a pace of 307,000 units.
  • Permits for future homebuilding increased 5.2% to a rate of 1.553 million units in September. Single-family building permits rose 7.8% to a rate of 1.119 million units. Multi-family building permits slipped 0.9% to a rate of 434,000 units.

Trump pushes for major COVID-19 deal over Senate Republican objections – Reuters, 10/20/20

  • President Donald Trump on Tuesday pushed for a comprehensive COVID-19 relief package, saying he would accept a deal worth more than $2.2 trillion despite opposition to large spending measures among his fellow Republicans in the U.S. Senate.
  • But a senior Senate Republican, John Thune, expressed doubt Monday that there would be enough Senate Republican votes to pass a comprehensive bill as large as the White House proposal, let alone something larger than Pelosi’s.
  • Senate Republicans have repeatedly stated their opposition to additional COVID-19 relief spending near the $2 trillion mark and have focused instead on smaller initiatives.
  • Republicans prepared to bring up legislation on Tuesday to help small businesses slammed by the coronavirus pandemic, which has infected more than 8.2 million Americans, killed over 220,000 and thrown millions out of work.

Republicans running short on time and money to defend Senate majority – Reuters, 10/20/20

  • Republicans are running short of time, money and options to stop Democrats from winning a majority of seats in the U.S. Senate, and with them full control of Congress, in an election that is now only two weeks away.
  • President Donald Trump’s slide in opinion polls is weighing on Senate Republicans in 10 competitive races, while Democrats are playing defense over two seats, increasing the odds of Trump’s Republicans losing their 53-47 majority on Nov. 3.
  • Democrats have also reported a surge in late campaign donations, outraising Republicans in 12 competitive races by nearly $190 million – $315 million v. $128 million – during the third quarter, according to Federal Election Commission documents.
  • But Democrats had a smaller advantage in cash on hand, reporting about $106 million v. $83 million for Republicans.

U.S. Broadens Sanctions to Thwart Completion of Russian Gas Pipeline – Wall Street Journal, 10/20/20

  • The State Department broadened the scope of sanctions targeting an unfinished Russian-backed natural-gas pipeline that has been a source of tension between Germany, Russia and the U.S.
  • Sanctions enacted late last year focused on pipe-laying vessels for Nord Stream 2 and halted the $10.5 billion pipeline, which is designed to transmit Russian gas to Germany, 100 miles short of completion beneath the Baltic Sea.
  • Guidance the State Department published on its website Tuesday expands upon last year’s measure, saying sanctions would apply to companies providing services, facilities or funding for “upgrades or installation of equipment” for vessels that would work on Nord Stream 2.
  • U.S. officials are concerned that the pipeline will increase Russia’s leverage in Europe and allow it to bypass a pipeline network that runs through Ukraine, a U.S. partner.

EUROPE & WORLD

Logitech shares surge as COVID-19 boosts home-working – Reuters, 10/20/20

  • Logitech International shares led Europe’s gainers on Tuesday as the computer peripherals maker reported a big jump in second-quarter profit and again hiked its guidance amid a work-from-home boom.
  • During the three months to the end of September, Logitech sales rose 75% to $1.26 billion.
  • Net income rose to $266.9 million from $73 million a year earlier.
  • For the year to the end of March it expects non-GAAP operating income of between $700 million and $725 million, up from its previous forecast of $410 to $425 million.
  • It now expects annual sales to increase between 35% and 40% in constant currencies, up from its previous view for a 10% to 13% increase.

Sweden bans Huawei, ZTE from upcoming 5G networks – Reuters, 10/20/20

  • Sweden on Tuesday banned on security grounds the use of telecom equipment from China’s Huawei and ZTE in its 5G network ahead of a spectrum auction scheduled for next month, joining other European nations that have restricted the role of Chinese suppliers.
  • Telecoms regulator PTS said here the decision followed advice from the country’s armed forces and security service, which described China as “one of the biggest threats against Sweden”.
  • European governments have been tightening controls on Chinese companies building 5G networks, following diplomatic pressure from Washington, which alleges Huawei equipment could be used by Beijing for spying. Huawei has repeatedly denied being a national security risk.

Cathay Pacific to cut 6,000 jobs, axe Cathay Dragon brand: SCMP – Reuters, 10/20/20

  • Hong Kong’s Cathay Pacific Airways will cut around 6,000 jobs, or 18% of its workforce, and axe regional brand Cathay Dragon to help it weather the coronavirus pandemic, the South China Morning Post reported on Tuesday, citing sources.
  • The airline said in June it was reviewing its strategy in light of the travel downturn, with “tough decisions” to be announced during the fourth quarter and analysts expected it would announce major job cuts.
  • The South China Morning Post said the airline was expected to announce the job cuts on Wednesday, adding the figure had been reduced from 8,000 layoffs after government intervention.
  • Cathay had refrained from major job cuts but Singapore Airlines has announced plans to cut around 20% of positions, while Australia’s Qantas Airways has said it will cut nearly 30% of its pre-pandemic staff.

Factmonster – TODAY in HISTORY

  • The Senate ratified the Louisiana Purchase. (1803)
  • The U.S. House Un-American Activities Committee opened meetings about alleged Communist infiltration in the Hollywood film industry. (1947)
  • Muammar el-Qaddafi is killed by rebel troops in Surt, Libya, his hometown. (2011)

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