Daily Market Report | Oct. 26, 2020
US FINANCIAL MARKET
Stocks Drop on Coronavirus Uptick, Fading Stimulus Hopes – Wall Street Journal, 10/26/20
- U.S. stocks and oil prices fell Monday as coronavirus cases surged in the U.S. and Europe, adding to worries about the economic outlook after Congress and the White House failed to agree on a much-anticipated fiscal stimulus deal.
- The U.S. reported 60,789 new cases Sunday, down from recent record-setting levels, but up from a week earlier.
- Scientists had been expecting cooler weather to lead to a second wave of the disease, but it is coming earlier than many had anticipated. That is prompting fresh concerns about tighter lockdown restrictions and the effect on the economy.
- Investors are watching this week’s talks in Congress for any indication on advances in the negotiations for a fiscal stimulus deal.
- House Speaker Nancy Pelosi told CNN on Sunday that she was expecting more answers on Monday and that an agreement could be reached this week among lawmakers.
- But Democrats and White House officials are blaming each other for the lack of progress after the two sides went into the weekend without a deal, dimming hopes for an agreement before Nov. 3.
- Coronavirus cases are accelerating in Europe. France reported more than 52,000 new infections Sunday, a daily high.
- Italy is trying to rein in the spread with new rules, such as the mandatory closure of restaurants and bars at 6 p.m.
- Spain declared a state of emergency, as it did in March.
- Among European equities, business-software maker SAP plunged nearly 20% after cutting its outlook for the year and reporting a decline in quarterly sales and profit. The company said businesses are being more cautious about spending and investment.
Average daily new coronavirus cases in U.S. hit all-time high, expert warns of ‘exponential spread’ – CNBC, 10/26/20
- The average number of new daily cases of coronavirus in the United States is at a record — stressing local hospital systems and forcing new curfews and other restrictions in some parts of the country.
- Over the past seven days, the country reported an average of about 68,767 new cases every day, the highest seven-day average recorded yet, according to a CNBC analysis of Johns Hopkins University data.
- About 6.2% of tests were positive on Sunday based on a seven-day average, according to Hopkins, up from 5.2% a week earlier.
- The U.S. reported an all-time high single-day spike in cases on Friday, when the country reported 83,757 new cases, according to Hopkins data.
- More than 20 states reported record-high numbers of average daily new cases, and cases are rising by 5% or more in 40 states, according to CNBC’s analysis.
- The worrying rise in new cases come after White House chief of staff Mark Meadows acknowledged on Sunday that the U.S. is not going to control the pandemic.
Hasbro revenue beats estimates as families splurge on board games – Reuters, 10/26/20
- Hasbro beat analysts’ estimates for quarterly revenue and profit on Monday, boosted by demand for Monopoly and other board games from stuck-at-home parents looking to keep their children entertained.
- The company’s net revenue rose 12.8% to $1.78 billion in the quarter ended Sept. 27, beating analysts’ average estimate of $1.75 billion, according to IBES data from Refinitiv.
- Total revenue from all of its gaming brands including Monopoly, Scrabble and Dungeons & Dragons jumped 21% to about $543 million in the third quarter.
- Net earnings attributable to the company rose 3.7% to $220.9 million from a year earlier.
- Hasbro said it was positioned well for a “good” holiday but stopped short of providing a sales forecast, unlike Mattel, which last week said it expected mid-single-digit growth in gross sales for the crucial shopping season.
Oil Drops on Covid-19 Resurgence, Extra Libyan Crude – Wall Street Journal, 10/26/20
- Oil prices fell Monday after new coronavirus restrictions in Europe and the speedy return of production in Libya threatened to undermine efforts to chip away at a global glut of crude.
- Futures for Brent crude, the benchmark in international energy markets, fell 2.1% to $40.88 a barrel in London. Contracts tied to West Texas Intermediate, the main grade of U.S. crude oil, slipped 2.2% to $38.96 a barrel in New York.
- The resurgence of the coronavirus in the U.S.—which reported more than 60,000 new cases Sunday—also has the potential to squeeze oil consumption.
- The return of Libyan crude is also adding pressure to oil prices. The country’s central government agreed with rebel commander Khalifa Haftar to lift a nine-month oil blockade last month, after the two sides resolved a dispute over oil-revenue distribution.
Facebook Moves into Cloud Gaming – Wall Street Journal, 10/26/20
- Facebook has become the latest tech heavyweight betting that the future of videogaming is in the cloud.
- The social-media company is adding Netflix-like streaming of games to its Facebook Gaming platform at no cost to players, a move expanding its content library to include more-complex and multiplayer titles. Its free-to-play model is in contrast to the paid, subscription cloud-gaming services that rivals such as Alphabet’s Google and Microsoft have introduced.
- Six games including auto-racing title “Asphalt 9: Legends” will be available for users to play in some parts of the U.S. on Facebook’s Android app and desktop website, the company said Monday. Facebook plans to add more cloud games and expand geographic access to them over time.
Dunkin’ Brands in Talks to Be Acquired by Arby’s Parent – Wall Street Journal, 10/26/20
- The parent of Dunkin’ and Baskin-Robbins said it has held early talks to go private in an acquisition by Inspire Brands Inc., whose portfolio includes Arby’s, Buffalo Wild Wings and Jimmy John’s chains.
- Dunkin’ Brands Group on Sunday said there was no certainty any agreement will be reached, and that it wouldn’t comment further unless the two companies reached an agreement or terminated discussions.
PG&E Cuts Power to Hundreds of Thousands – Wall Street Journal, 10/26/20
- PG&E Corp. said it was pre-emptively cutting power to about 361,000 customers in northern and central California in an effort to prevent wildfires, marking the largest such shut-off it has reported this year.
- The blackouts affect customers in portions of 36 counties where a forecast windstorm and dry humidity levels pose a high risk of causing active power lines to spark catastrophic wildfires.
- PG&E said it would check its power lines for damage and begin turning power back on after the storm subsides, with service expected to be restored for most customers within 12 daylight hours after the severe weather ends.
China to Sanction U.S. Weapons Makers Over Taiwan Sales – Wall Street Journal, 10/26/20
- China said it will sanction three American defense contractors over proposed arms sales to Taiwan, retaliating against U.S. efforts to deepen security ties with the island democracy that Beijing claims as its territory.
- Chinese Foreign Ministry spokesman Zhao Lijian said Monday that Beijing has decided to impose sanctions on Lockheed Martin, Boeing ’s defense division and Raytheon Technologies, as well as other U.S. entities involved in the planned $1.8 billion weapons package.
- The U.S. State Department last week approved proposals to sell missiles, rocket artillery, aerial reconnaissance sensors and related gear to Taiwan—the Trump administration’s latest effort to put pressure on China through closer defense ties with Taipei.
- China “firmly opposes” and condemns U.S. arms sales to Taiwan, which “severely damage Chinese sovereignty and security interests,” Mr. Zhao said at a routine briefing on Monday, calling on Washington to cease weapons deals and military cooperation with Taipei.
US ECONOMY & POLITICS
U.S. new home sales unexpectedly fall in September – Reuters, 10/26/20
- Sales of new U.S. single-family homes unexpectedly fell in September, but the housing market remains supported by record low interest rates.
- The Commerce Department said on Monday new home sales fell 3.5% to a seasonally adjusted annual rate of 959,000 units last month.
- August’s sales pace was revised down to 994,000 units from the previously reported 1.011 million units.
- Economists polled by Reuters had forecast new home sales, which account for about 14% of housing market sales, rising 2.8% to a rate of 1.025 million units.
Senate likely to confirm Barrett to U.S. Supreme Court, cementing conservative majority – Reuters, 10/26/20
- The Republican-controlled U.S. Senate is expected on Monday to confirm President Donald Trump’s nominee, Amy Coney Barrett, as the next justice to the Supreme Court, a move that will tilt the country’s highest court further to the right for years to come.
- With Republicans controlling the chamber 53-47 and no indication of an internal revolt against the conservative appeals court judge succeeding liberal Justice Ruth Bader Ginsburg, Barrett looks almost certain to take up a lifetime appointment on the bench over universal Democratic opposition.
- No nominee to the Supreme Court has ever been confirmed by the Senate this close to a presidential election, with more than 58 million ballots already cast ahead of Election Day on Nov. 3.
U.S. early voting tops 60 million as historic pace continues – Reuters, 10/26/20
- More than 60 million Americans have cast ballots in the U.S. presidential election with eight days to go, a record-breaking pace that could lead to the highest voter turnout in over a century, according to data from the U.S. Elections Project on Monday.
- Overall, Democrats hold roughly a two-to-one advantage in early voting numbers.
- The high level of early voting has led Michael McDonald, the University of Florida professor who administers the U.S. Elections Project, to predict a record U.S. voter turnout of about 150 million, representing 65% of those eligible to vote, the highest rate since 1908.
- U.S. voters have already cast more early votes during this presidential campaign than they did in all of 2016 when they passed the 47 million mark earlier this month, data shows.
Four in ten supporters of Biden, Trump would not accept election defeat – Reuters, 10/26/20
- More than four in ten supporters of both President Donald Trump and his Democratic challenger, Joe Biden, said they would not accept the result of the November election if their preferred candidate loses, Reuters/Ipsos poll found.
- The survey, conducted from Oct. 13-20, shows 43% of Biden supporters would not accept a Trump victory, while 41% of Americans who want to re-elect Trump would not accept a win by Biden.
- Smaller portions would take action to make their displeasure known: 22% of Biden supporters and 16% of Trump supporters said they would engage in street protests or even violence if their preferred candidate loses.
- The latest Reuters/Ipsos poll shows Biden leads Trump by 8 percentage points nationally: 51% of likely voters say they are backing the Democratic challenger while 43% are voting for the president.
- Biden also is ahead in Wisconsin and Michigan, but the race appears to be much closer in other battleground states including Pennsylvania, Florida, Arizona and North Carolina.
China’s purchases of U.S. farm goods at 71% of target under trade deal: U.S. – Reuters, 10/26/20
- China has substantially increased purchases of U.S. farm goods and implemented 50 of 57 technical commitments aimed at lowering structural barriers to U.S. imports since the two nations signed a trade deal in January, the U.S. government said on Friday.
- In a joint statement, the U.S. Trade Representative’s (USTR) office and the U.S. Department of Agriculture (USDA) said China had bought over $23 billion in U.S. agricultural goods to date, or about 71% of the target set under the so-called Phase 1 deal.
- The report showed outstanding sales of U.S. corn to China were at an all-time high of 8.7 million tons, while U.S. soybeans sales for marketing year 2021 to China were at double the levels seen in 2017.
- U.S. exports of sorghum to China from January to August 2020 totaled $617 million, up from $561 million for the same period in 2017, it said.
- In addition to these products, USDA expects 2020 sales to China to hit record or near-record levels for other U.S. agricultural products including pet food, alfalfa hay, pecans, peanuts, and prepared foods.
EUROPE & WORLD
Europe Imposes New Covid-19 Restrictions as Second Wave Accelerates – Wall Street Journal, 10/25/20
- Europe’s second wave of the coronavirus pandemic is accelerating, forcing countries to impose ever-more social-distancing rules in a bid to avoid a return to full-blown lockdowns.
- France announced a daily record for coronavirus infections, with confirmed infections reaching over 52,000 on Sunday, compared with nearly 84,000 confirmed cases in the U.S. on Saturday, whose population is around five times bigger.
- Italy, struggling with an explosive rise in infections, imposed the toughest restrictions on its population since ending its lockdown, including the closure of all bars and restaurants at 6 p.m.
- In Spain, the government announced a state of emergency, as it did in March, giving national authorities greater powers to impose social-distancing and emergency health-care policies.
- Detected cases have also risen strongly in the U.K., Poland and even Germany, which had until recently kept the virus under better control than other major European countries.
- So far, however, deaths from Covid-19’s second wave are a fraction of Europe’s heavy death toll in March and April. Many recently infected people have no or only light symptoms.
Software Maker SAP’s Profit and Sales Declined – Wall Street Journal, 10/26/20
- SAP, the business-software maker, on Sunday said profit and sales declined in the three months through Sept. 30, as the economic fallout of the global response to the coronavirus pandemic hit core business units.
- The Walldorf, Germany-based software maker said total revenue fell 4% to €6.54 billion, equivalent to $7.76 billion, in the third quarter, and operating profit slipped 1% to €2.07 billion.
- Cloud revenue rose 10% to €1.98 billion, and revenue from software and cloud services combined fell 2% to €5.5 billion.
- As the pandemic continues to weigh on the economy and the threat of new lockdowns arises during a resurgence of Covid-19 infections, business customers are becoming more cautious about spending and investment, affecting core business units.
- As a result of the weaker business in the third quarter and uncertainty from the pandemic, SAP cut its outlook on earnings and revenue for the full year.
- SAP said it now expects adjusted operating profit of up to €8.5 billion, down from a previous estimate of up to €8.7 billion. The company cut its revenue forecast to up to €27.8 billion, down from a previous forecast of up to €28.5 billion.
Russia’s Mail.ru third-quarter revenue jumps 19.9% helped by gaming – Reuters, 10/26/20
- Russian internet group Mail.ru on Monday reported a 19.9% rise in third-quarter revenue as lockdowns boosted gaming though growth slowed from the second quarter as restrictions eased.
- The London-listed company reported total revenue of 26.37 billion roubles ($344.90 million).
- Gaming revenue jumped 33.8%, easing from a rise of 47.7% in the second quarter.
- Advertising revenue increased 5% year-on-year with activity gradually recovering in the third quarter, it said.
- Net profit fell 19.5% year-on-year to 2.84 billion roubles.
- The company expects 2020 revenue to reach 103 billion roubles, within the range it forecasted prior to the pandemic.
- Mail.ru expects gaming revenue to grow by about 30% in 2020, as it expands the segment.
Fiat, PSA to win EU approval for $38 billion merger: sources – Reuters, 10/26/20
- Fiat Chrysler and PSA are set to win EU approval for their $38 billion merger to create the world’s No.4 carmaker, people close to the matter said, as they strive to meet the industry’s dual challenges of funding cleaner vehicles and the global pandemic.
- The green light from the European Commission would formalize the creation of Stellantis, a carmaking group that could tap hefty profits from selling Ram pickup trucks and Jeep SUVs to U.S. drivers to fund the expensive development of zero-emission vehicles for sale in Europe and China.
- The all-share merger announced late last year would unite brands such as Fiat, Jeep, Dodge, Ram and Maserati with the likes of Peugeot, Opel and DS – while targeting annual cost cuts of 5 billion euros ($6 billion) without closing factories.
- To allay EU antitrust concerns, PSA has offered to strengthen Japanese rival Toyota Motor Corp, with which it has a van joint venture, by ramping up production and selling it vans at close to cost price, the people said.
- FCA and PSA have said they hope to complete the merger in the first quarter of 2021.
Rolls-Royce seeks $2.6 billion in make-or-break share issue – Reuters, 10/26/20
- Aero-engine maker Rolls-Royce will ask shareholders on Tuesday for 2 billion pounds ($2.6 billion) in a make-or-break attempt to survive the COVID-19 pandemic, which has stopped planes flying and hammered its finances.
- At stake is the future of a company which has been at the heart of manufacturing in Britain for more than 100 years, making engines that powered World War Two bombers and still drive the country’s fighter jets and nuclear submarines.
- Investors are expected to back the rights issue, supporting CEO Warren East’s plan to cut 9,000 jobs and close factories to adjust to a lower level of demand from airline customers that fly with Rolls engines on Boeing 787s and Airbus 350s.
- Rolls accounts for 2% of all UK goods exported and is one of the country’s biggest spenders on research and development.
Bayer to Buy Gene-Therapy Firm AskBio for Up to $4 Billion – Wall street Journal, 10/26/20
- Bayer said Monday it would pay as much as $4 billion for U.S. biotech firm Asklepios BioPharmaceutical to strengthen the German company’s drugmaking arm, as Bayer continues to reel from its acquisition of crops giant Monsanto.
- The latest deal—for which Bayer will pay $2 billion now and as much as a further $2 billion based on future success milestones—is a bet on cutting-edge gene therapy, in which a functional gene is inserted to counter the effects of a disease caused by a missing or faulty gene.
- The German company’s biggest pharmaceutical acquisition since its purchase of domestic rival Schering AG in 2006 is also an attempt to tackle one of a series of challenges that has been plaguing the inventor of aspirin, especially since its 2018 acquisition of U.S.-based Monsanto.
Japan’s ANA to cut 3,500 jobs in 3 years as it anticipates prolonged virus woes: Yomiuri – Reuters, 10/24/20
- ANA Holdings plans to cut about 3,500 jobs in three years as Japan’s largest airline operator braces for its biggest-ever annual loss due to a plunge in demand driven by the coronavirus pandemic, the Yomiuri daily reported.
- The job losses are part of ANA’s broader business restructuring plan to be announced on Tuesday, as it scrambles to cut fixed costs in anticipation of a prolonged downturn in travel demand, the Yomiuri said on Sunday.
- As short-term measures, ANA is considering temporarily dispatching some of its workforce to several other firms including Toyota Motor and selling 30 of its costly wide-body aircraft, the Yomiuri added.
- Forecast to suffer a net loss of around 500 billion yen ($4.8 billion) for this fiscal year to March, ANA has turned to billions of dollars in loans and a government tourism campaign to weather the slump in air travel.
Factmonster – TODAY in HISTORY
- The First Continental Congress adjourned in Philadelphia. (1774)
- South Korean president Park Chung Hee was killed by the head of the Korean Central Intelligence Agency. (1979)
- Prime Minister Yitzhak Rabin of Israel and Prime Minister Abdel Salam Majali of Jordan signed a peace treaty in a ceremony attended by President Clinton. (1994)
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.
All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.
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.