Daily Market Report | Oct. 23, 2020

US FINANCIAL MARKET

Stocks on Track to Snap Three-Week Winning Streak – Wall Street Journal, 10/23/20

  • The S&P 500 ticked higher Friday but remained on track to finish the week with declines, snapping a three-week winning streak.
  • Money managers say stocks are likely to lack clear direction in the coming weeks as investors avoid placing big bets ahead of the Nov. 3 election. They are looking instead to a flurry of economic and corporate-earnings reports for a clearer picture of the economic outlook, as rising coronavirus cases threaten to slow the recovery.
  • White House officials and Democratic leaders are continuing negotiations over a nearly $2 trillion coronavirus-relief package, which many investors view as crucial to maintaining the economic recovery.
  • Reported coronavirus cases in the U.S. have risen to their highest level since July.
  • Investors are increasingly optimistic that a second dose of stimulus will be delivered, even if many think the odds of a deal before the election are slim.
  • Stocks in sectors that are sensitive to the outlook for the economy, including energy and banks, have outperformed this week. Information-technology stocks have faltered.
  • In Europe, the economic outlook is gloomier amid a large second wave of coronavirus infections that has prompted governments to restrict travel and leisure.
  • Data firm IHS Markit said Friday its composite purchasing managers index for the eurozone fell to 49.4 in October, indicating a decline in manufacturing and services activity.
  • More than a quarter of companies on the S&P 500 had reported through Thursday, and 83% of them had beaten analysts’ forecasts for earnings-per-share, according to FactSet.

U.S. New Coronavirus Case Count Breaks 70,000, Highest Since July – Wall Street Journal, 10/23/20

  • The daily number of Covid-19 cases reported in the U.S. rose to its highest level since July, as data show cases spreading nationwide.
  • The U.S. reported 71,671 cases on Thursday, according to data compiled by Johns Hopkins University—the most in a single day since July 24, when it hit 73,107, and the third-highest single-day total overall.
  • The U.S. seven-day moving average, which smooths out irregularities in the data, stood at 59,990 as of Wednesday, and the 14-day average was 56,168.
  • Some of this is attributable to a significant expansion of testing, which rose to a record Monday when more than 1.2 million tests were performed, according to data for the Covid Tracking Project.
  • However, the percentage of those tests that are positive, known as the positivity rate, has also been rising, climbing to 5.6% Wednesday from 4.6% about a month ago.
  • The number of Covid-19 patients hospitalized, climbing since Sept. 20, is now 41,010, according to the Covid Tracking Project. That is the highest since Sept. 20, up 33% since Oct. 1.
  • New York: Data drawn from the NYU Langone Health system show the Covid-19 mortality rate dropped to 7.6% in August from 25.6% in March among the 5,121 patients hospitalized.
  • France: Prime Minister Jean Castex said a curfew in Paris and eight other cities would be extended to cover 38 additional areas, adding that a second wave of the virus had now arrived in Europe. “The situation is very serious,” Mr. Castex said Thursday. France reported a daily record of over 41,000 new coronavirus cases.
  • India: The country reported 54,366 cases on Friday, bringing its total to 7.76 million, data from the federal health ministry showed.

Intel Hit as Consumers Flock to Lower-Cost Laptops, Datacenter Chips – Wall Street Journal, 10/23/20

  • Chip giant Intel may be seeing an end to the work-from-home boost it enjoyed during the pandemic, with earnings hit by consumers gravitating to cheaper laptops and data-center sales softening.
  • The company on Thursday said revenue dropped 4% to $18.3 billion after it enjoyed strong sales in the first half of the year.
  • Analysts projected sales of around $18.24 billion.
  • Mr. Davis said Intel’s cloud business had performed well, though could moderate in the current quarter as customers absorb a prolonged spending spree. He also said demand in the third quarter among other kinds of customers that operate datacenters—companies and governments—fell 47% after an increase in the first half of the year.
  • That spurred a 7% drop in Intel’s data-center revenue to $5.9 billion, the company said, falling short of what analysts surveyed by FactSet forecast. Revenue for the personal-computer-focused business rose 1% to $9.8 billion.
  • The company’s memory division, most of which it agreed this week to sell to South Korea’s SK Hynix for $9 billion, also reported lower sales.
  • Despite the mixed results, the company raised its full-year guidance, predicting its top line would increase 5% this year and reach $75.3 billion, a record. Intel now projects $4.55 in earnings per share for the year.
  • It previously forecast $75 billion in sales and $4.53 in earnings per share.

AmEx profit misses as consumer spending falters – Reuters, 10/23/20

  • American Express missed third-quarter profit estimates on Friday, as its customers spent less during the COVID-19 fueled economic slowdown and it set aside money for potential payment defaults, sending its shares 3% lower.
  • Total revenue, excluding interest expense, fell 20% to $8.8 billion.
  • The credit card issuer said consolidated loss provisions in the third quarter ended Sept. 30 stood at $665 million, down 24% from a year earlier.
  • The company reported a nearly 40% slump in profit to $1.07 billion, or $1.30 per share, missing analysts’ average estimates of $1.35 per share, according to IBES data from Refinitiv.
  • “While credit remains strong, with delinquencies and net write-offs at the lowest levels we have seen in a few years, we remain cautious about the direction of the pandemic and its impacts on the economy, which is reflected in our reserve levels,” Chief Executive Officer Stephen Squeri, said.

Holiday Inn owner shows signs of improvement as new curbs weigh – Reuters, 10/22/20

  • InterContinental Hotels signaled recovery from pandemic lows with rising occupancy levels and improving hotel room revenues, as the travel and hospitality industry faces renewed pressure from new lockdowns and restrictions.
  • The company, whose brands include Holiday Inn, the Crowne Plaza, Regent and Hualuxe hotel chains, on Friday posted a 53.4% fall in third-quarter revenue per available room (RevPAR), compared to the 75% drop reported in the previous quarter.
  • Occupancy also improved to 44% from 25% in the second-quarter.
  • IHG said capital spending is expected to be around $150 million in 2020, about a $100 million lower when compared to 2019.

FTC Mulls Facebook Lawsuit as Staffers Support Antitrust Case – Wall Street Journal, 10/23/20

  • Federal Trade Commission staff members are recommending that the agency bring an antitrust case against Facebook, according to people familiar with the matter, but commissioners haven’t yet reached a decision.
  • The five-member FTC met privately via videoconference Thursday to discuss next steps, without taking action, the people said.
  • The FTC has spent more than a year looking into complaints that Facebook has been using its powerful market position to stifle competition, part of a broader effort by U.S. antitrust authorities to examine the conduct of big technology companies.

Uber and Lyft Must Classify Drivers as Employees, Appeals Court Says – Wall Street Journal, 10/23/20

  • Uber Technologies and Lyft must comply with an order that requires them to reclassify their drivers as employees, a California appeals court said Thursday, siding with a lower-court ruling from August that threatened to upend the companies’ business models.
  • Uber and Lyft would need to comply with the reclassification within 30 days of a formal ruling, which could take several weeks.
  • The companies, along with DoorDash, Postmates and Instacart have raised more than $189 million for a ballot initiative on Nov. 3, asking that voters exempt them from such a reclassification. That result would supersede any court rulings.

Walmart Files Pre-Emptive Lawsuit Against Federal Government in Opioid Case – Wall Street Journal, 10/22/20

  • Walmart sued the federal government in an attempt to strike a pre-emptive blow against what it said is an impending opioid-related civil lawsuit from the Justice Department.
  • The retail giant said in a lawsuit filed Thursday that the Justice Department and Drug Enforcement Administration are seeking to scapegoat the company for the federal government’s own regulatory and enforcement shortcomings in combating the opioid crisis. Walmart said the government is seeking steep financial penalties against the retailer for allegedly contributing to the opioid crisis by filling questionable prescriptions.
  • Walmart’s lawsuit is an unusual and aggressive tactic for a company in high-stakes talks with the department.

US ECONOMY & POLITICS

Negotiators Defend Continuing Talks on Coronavirus-Aid Deal – Wall Street Journal, 10/23/20

  • Both House Speaker Nancy Pelosi (D., Calif.) and White House officials defended Thursday their continuing negotiations over a coronavirus-relief package amid signs it has no path to becoming law before the election.
  • Mrs. Pelosi said Thursday that she and Mr. Mnuchin continued to chip away at their differences.
  • Mrs. Pelosi said the two sides were still sorting out differences on funding for schools, as well as on funding for state and local governments, which President Trump has characterized as a bailout for states run by Democratic governors.
  • Still, in the face of Senate opposition and the tight calendar, many lawmakers and aides felt the negotiations were continuing in part just because walking away would look callous so close to an election.

Officials Call for Quick Stimulus Deal to Forestall Lackluster U.S. Economic Recovery – Wall Street Journal, 10/23/20

  • Federal Reserve officials and some other policy makers are stepping up calls for a quick jolt of stimulus spending as recent economic data point to uneven growth.
  • Their concern: Even if the current recovery is self-sustaining, a delay could lead to a repeat of the lackluster rebound from the 2008 financial crisis, when a burst of spending was followed by an abrupt reversal.
  • If the White House and Mrs. Pelosi reach an agreement, a vote would likely have to wait until after the Nov. 3 election, which could imperil the passage of more stimulus for months if the election results change the political calculus for either party.
  • Another cliff looms as the enhanced unemployment benefits Congress approved in March for millions of contract workers and long-term unemployed will expire Dec. 31.

Donald Trump, Joe Biden Clash Over Covid, Ethics in Calmer Presidential Debate – Wall Street Journal, 10/23/20

  • President Trump and Democrat Joe Biden offered starkly differing views of the administration’s handling of the coronavirus pandemic, traded accusations about their personal ethics and questioned each other’s records on economic and racial-justice issues in the final debate before the Nov. 3 election.
  • Thursday night’s meeting was less combative than the pair’s first, three weeks earlier, as their microphones were muted at times.
  • It came after more than 47 million Americans—more than a third of the total 2016 vote—already had cast ballots.
  • The former vice president offered stark predictions about potential challenges ahead for the nation from the pandemic, saying many more people would die without a change in strategy.
  • The president said the country cannot remain locked up, adding “we can’t close up our nation or you’re not going to have a nation.”

Hunter Biden’s Ex-Business Partner Alleges Father Knew About Venture – Wall Street Journal, 10/23/20

  • An ex-business partner of Hunter Biden, in a news conference organized by the Trump campaign, alleged that former Vice President Joe Biden was part of discussions around his son’s efforts to form an investment venture with a Chinese oil company.
  • In a statement to reporters Thursday, Anthony Bobulinski said that in 2017 Hunter Biden consulted his father about a planned venture with Chinese oil company CEFC China Energy to invest in the U.S. and elsewhere. Mr. Bobulinski was also a partner.
  • In the correspondence provided by Mr. Bobulinski, an email he received from Mr. Gilliar in May 2017 proposed a possible equity arrangement for the five partners.
  • The email references “10 held by H for the big guy?” Mr. Bobulinski said the “H” referred to Hunter Biden and the “big guy” was Joe Biden.
  • The venture—set up in 2017 after Mr. Biden left the vice presidency and before his presidential campaign—never received proposed funds from the Chinese company or completed any deals, according to people familiar with the matter.
  • Corporate records reviewed by The Wall Street Journal show no role for Joe Biden.

Tight Iowa Race Takes Center Stage in Fight for Senate Control – Wall Street Journal, 10/23/20

  • It has been 36 years since Iowans last unseated an incumbent senator. Now the Hawkeye State’s Sen. Joni Ernst is one of the most endangered Republicans running for re-election.
  • Polls show her race against Democrat Theresa Greenfield has become one of the closest Senate contests in the country, as voters assess whether the incumbent has lived up to her image of a tough, motorcycle-riding political outsider, and how she stacks up against a challenger who emphasizes her own local roots and casts Ms. Ernst, 50, as a creature of Washington.
  • Nonpartisan political analysts with Larry Sabato’s Crystal Ball at the University of Virginia this week shifted the Iowa race from “tossup” to “leans Democratic,” picking Ms. Greenfield, a 57-year-old businesswoman, as a narrow favorite and pinpointing Iowa as the seat most likely to tip the Senate to Democratic control.
  • The other GOP-held seats rated as leaning Democratic this cycle are Colorado, Arizona and Maine.

U.S. business activity picks up in October: IHS Markit

  • U.S. business activity increased to a 20-month high in October, but the pace of new business growth and new orders eased slightly amid the lingering COVID-19 pandemic and caution ahead of the Nov. 3 presidential election.
  • Data firm IHS Markit said on Friday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, rose to a reading of 55.5 this month.
  • The survey’s flash composite new orders index dipped to 54.3 this month from a reading of 54.8 in September.
  • The survey’s flash manufacturing PMI inched up to a reading of 53.3 from 53.2 in September.
  • A measure of new orders received by factories increased to a reading of 54.2 from 53.6 in September.
  • The survey’s flash services sector PMI rose to 56 this month, a 20-month high, from a reading of 54.6 in September.A measure of new businesses in the services sector dropped to 54.3 from a reading of 55.0 in September.

EUROPE & WORLD

Second Coronavirus Wave Destabilizes European Recovery – Wall Street Journal, 10/23/20

  • The second wave of the coronavirus now sweeping Europe is threatening to halt the region’s economic recovery, leaving many of its businesses and workers uncertain about their future and prolonging the time it will take for the continent to heal from the worst economic crisis in decades.
  • European governments have responded to the sharp rise in coronavirus infections with new restrictions on people and businesses, but have stopped short of the draconian lockdowns of the spring, hoping to protect the region’s economic recovery.
  • But fresh evidence suggests the second wave of infections is already interrupting Europe’s comeback from what was the deepest contraction the region has experienced in peacetime.
  • Data firm IHS Markit said Friday its composite Purchasing Managers Index for the eurozone fell to 49.4 in October from 50.4 in September.

Daimler lifts profit forecast as China snaps up luxury cars – Reuters, 10/22/20

  • Daimler raised its profit outlook for 2020 on Friday after a record 24% jump in Chinese demand for its Mercedes-Benz cars boosted margins in the third quarter, though it warned that a spike in COVID-19 infections made forecasting hard.
  • In the third quarter, Daimler’s adjusted EBIT rose to 3.48 billion euros ($4.1 billion) from 3.14 billion a year earlier.
  • Margins recovered despite a jump in sales of less profitable plug-in hybrid and electric vehicles (EVs) to 45,000 cars.
  • Deliveries of Mercedes Benz cars and vans were down 4% in the quarter as the pandemic continued to weigh on demand, prompting Daimler to reiterate that it expects overall sales and revenue in 2020 to be significantly lower than last year.
  • The German car and truck maker said it now expected full-year earnings before interest and taxes (EBIT) to match last year’s levels, whereas it had previously forecast a drop in earnings. In 2019, EBIT came in at 10.3 billion euros.

Huawei ekes out third-quarter revenue growth as U.S. restrictions bite – Reuters, 10/23/20

  • Huawei Technologies eked out a gain in third-quarter revenue as the impact of the COVID-19 pandemic added to supply-chain difficulties brought about by U.S. restrictions on doing business with the Chinese firm.
  • Hinting at an end to at least four years of double-digit growth, revenue grew 9.9% in January-September versus the same period a year earlier to 671.3 billion yuan ($100.4 billion), the private company said in a statement on Friday without providing a segment breakdown.
  • Revenue for the third quarter alone rose 3.7% on year to 217.3 billion yuan, Reuters’ calculations showed.
  • Net profit margin for the nine months was 8.0%, versus 8.7% over the same period a year earlier, Huawei said.
  • The figure comes a day after the telecommunications equipment maker announced its latest flagship smartphone, potentially its last in the high-end Android segment most dependent on U.S. technology.

Airbus tells suppliers: plan now for post-crisis output hike – Reuters, 10/23/20

  • Airbus has asked suppliers to be ready to support a conditional 18% increase in production of its best-selling single-aisle A320 jet family once demand recovers from the coronavirus crisis, the European planemaker said on Thursday.
  • It is among the first visible moves by aerospace firms to prepare for a possible bounce back from the pandemic and comes days after a major buyer, Wizz Air, predicted a quick rebound for the strongest budget carriers.
  • Airbus said it had asked suppliers to “protect” a production rate of 47 A320-family jets a month, up from 40, meaning it wants suppliers to be ready to support that rate when needed.
  • It indicated the earliest such a switch could take place would be July 2021, adding no decision had been taken.

Factmonster – TODAY in HISTORY

  • The United Nations General Assembly convened in New York for the first time. (1946)
  • President Richard Nixon agreed to turn White House tape recordings requested by the Watergate special prosecutor over to Judge John J. Sirica. (1973)
  • Chechen rebels seized a crowded Moscow theater, taking hundreds hostage. Russian forces stormed the building the next day. (2002)

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