US FINANCIAL MARKET
U.S. Stocks Waver After Selloff – Wall Street Journal, 10/27/20
- U.S. stocks wobbled Tuesday, attempting to stabilize after worries about the coronavirus pandemic sent markets tumbling to start the week.
- Rising Covid-19 infection levels around the world are compounding worries about the global economic outlook. The seven-day average of new cases in the U.S. reached an all-time high Monday, while a number of countries in Europe, including Italy, Spain and Russia, tightened restrictions on activity to try to curb the spread of the virus.
- Orders for long-lasting factory goods increased for the fifth consecutive month in September, Commerce Department data showed Tuesday. Orders rose 1.9% in September compared with August.
- Some investors are also betting that authorities will avoid the stringent lockdown measures put in place in the spring, which brought the global economy to a jarring halt.
- Shares of Eli Lilly slipped 5.1% after the drugmaker lowered its profit guidance for 2020.
- The company left previous forecasts for revenue and adjusted earnings unchanged.
- Results from Microsoft, due after the closing bell, may give investors additional cues on the strength of the largest U.S. technology firms. Those companies have been responsible for much of the stock market’s strength this year.
Europeans refocus on new curbs as COVID surges across continent – Reuters, 10/27/20
- European governments moved on Tuesday to set new curbs in motion to try to rein in a fast-growing surge of coronavirus infections and provide economic balm to help businesses survive the pandemic.
- The United States, Russia, France, Sweden, Poland and other countries have registered record numbers of infections in recent days as autumn turns to winter in the Northern Hemisphere and people socialize indoors where the risk of infection is higher.
- Hundreds of protesters took to the streets across Italy on Monday to vent their anger at the latest round of restrictions, including early closing for bars and restaurants, with demonstrations in some cities turning violent.
- Prime Minister Giuseppe Conte was expected to approve measures to help companies hit by the new curbs introduced at the weekend after daily infections increased eight-fold in less than a month.
- In France, Interior Minister Gerald Darmanin warned the country to prepare for “difficult decisions” after some of the strictest restrictions currently in place anywhere in Europe have failed to halt the spread of the disease.
- The Czech government will ask lawmakers to extend its emergency powers until Dec. 3, Prime Minister Andrej Babis said on Tuesday, as it tries to stem one of the strongest surges in infections in Europe.
- There have been at least 8.54 million reported infections and 251,000 deaths caused by coronavirus in Europe so far, according to latest Reuters data. The continent registered a record 230,892 new cases on Oct. 26, up from 67,739 on Oct. 1.
- New infections in Belgium, among the hardest-hit countries in Europe, hit a high of more than 18,000 on Oct. 20, almost a 10-fold increase from the high of a spring wave of the pandemic.
- The country is expected to decide by this weekend whether a return to a nationwide lockdown is required.
- Even Germany, widely praised for its initial response to the pandemic, signaled concern on Tuesday over rising infections, with Economy Minister Peter Altmaier saying the country was likely to reach 20,000 cases a day by the end of this week.
- In the United States, the number of hospitalized COVID-19 patients is at a two-month high, straining health care systems in some states.
Study Shows Covid-19 Antibodies Waning Over Time, Suggesting Immunity Might Wear Off – Wall Street Journal, 10/27/20
- A large English study showed the number of people with Covid-19 antibodies declined significantly over the summer, suggesting that getting the virus might not confer long-lasting immunity from future infection.
- The survey of 365,000 adults in England who tested themselves at home using a finger-prick test showed the proportion of people testing positive for Covid-19 antibodies declined by 26.5% between June 20—12 weeks after the peak of infections in the country—and Sept. 28.
- The results also suggested that people who didn’t display symptoms were likely to lose detectable antibodies before those who had showed symptoms.
- The findings showed 18-24-year-olds lost antibodies at a slower rate than those aged 75 and over. The smallest decline of 14.9% was of people aged between 18 and 24 years, and the largest decline of 29% was of people aged 75 and over.
AMD Agrees to Buy Rival Chip Maker Xilinx for $35 Billion – Wall Street Journal, 10/27/20
- Advanced Micro Devices plans to buy rival chip maker Xilinx in a $35 billion deal, adding momentum to the consolidation of the semiconductor industry that has only accelerated during the pandemic.
- AMD and Xilinx on Tuesday said the companies reached an all-stock deal that would significantly expand their product range and markets and deliver a financial boost immediately on closing.
- Along with the transaction, AMD on Tuesday reported a jump in third-quarter profit, propelled by the same pandemic-fueled demand for videogame consoles and computer processors that has underpinned its stock much of the year.
- The company said it had $2.8 billion in sales in the quarter, up 56% from the year prior.
- It generated 32 cents in earnings per share, almost triple the year-ago figure.
- Both sales and per-share earnings topped Wall Street estimates according to analysts surveyed by FactSet.
- AMD said it expects to have about $3 billion in sales in the current quarter, also ahead of Wall Street expectations.
Raytheon profit beats estimates on cost controls – Reuters, 10/27/20
- U.S. aero parts maker Raytheon Technologies reported a better-than-expected quarterly profit on Tuesday, as cost savings helped it combat weak demand from airlines during the COVID-19 pandemic.
- Revenue rose about 30% to $14.75 billion.
- Excluding items, Raytheon earned 58 cents per share in the quarter, above the Wall Street’s average expectation of 50 cents per share, according to IBES estimates from Refinitiv.
- Raytheon said it achieved $700 million of cost reduction and $1.9 billion of cash conservation in the third quarter.
- However, Raytheon reaffirmed its projection for a positive cash flow of about $2 billion for the full year, thanks to its defense unit that contributes to more than half of the company’s overall sales.
Twilio posts surprise profit on remote-work boost – Reuters, 10/26/20
- Twilio on Monday posted a surprise third-quarter profit and forecast sales above estimates for the fourth, as a switch to remote working and learning due to the COVID-19 pandemic boosted demand for cloud services.
- The company’s revenue jumped over 50% to about $448 million in the third quarter and beat estimates of $409.9 million, according to IBES data from Refinitiv.
- Twilio’s active customer accounts rose 21% to 208,000 as of Sept. 30.
- Excluding items, Twilio posted a profit of 4 cents per share for the third quarter, while analysts had expected a loss of 3 cents per share.
- Twilio, which earlier this month said it would buy customer data platform Segment for $3.2 billion in an all-stock deal, expects sales for the current quarter in the range of $450 million to $455 million. Analysts were expecting $437.4 million.
- The cloud communications company, however, expects to post a loss of 8 cents to 11 cents per share for the current quarter.
- Analysts on average were expecting a profit of 2 cents.
JetBlue Airways eyes booking uplift after 76% revenue slide – Reuters, 10/27/20
- JetBlue Airways’ third-quarter revenue plunged by 76% as the COVID-19 pandemic hammered travel demand but the New York-based budget carrier expects an upturn in bookings for the Thanksgiving and Christmas holiday season, it said on Tuesday.
- JetBlue reported a net loss of $393 million, or $1.44 per share, for the quarter, against a $187 million profit a year earlier.
- Daily cash burn is expected to hover between $4 million and $6 million per day in the fourth quarter.
- That compares with about $6.1 million per day in the third quarter, which the company said was better than forecast thanks to a modest improvement in demand and cost savings.
- The airline said the quarterly revenue decline is expected to narrow to 65% in the final three months of the year, though uncertainties remain in light of the evolving coronavirus crisis.
- The company, which expects fourth-quarter capacity to be down about 45% from a year earlier, said it reached a second deal with Airbus SE AIR.PA this month to defer additional jet deliveries and payments over the next few years.
3M profit beats estimates on healthcare product boost – Reuters, 10/27/20
- U.S. industrial conglomerate 3M topped Wall Street estimates for quarterly profit on Tuesday, as the maker of N95 masks benefited from robust demand for its healthcare products during the COVID-19 pandemic.
- Net sales rose 4.5% to $8.35 billion.
- Sales in its healthcare unit, which also makes surgical supplies and dental products, jumped 25.5%, and accounted for more than a quarter of the company’s total sales.
- However, the company said end markets for healthcare and oral care elective procedures continued to post year-on-year declines, mainly hit by the pandemic.
- Sales at 3M’s transportation and electronics division, which also sells auto parts, fell 7.4%.
- Net income attributable to 3M fell to $1.41 billion, or $2.43 per share, in the third quarter ended Sept. 30, from $1.58 billion, or $2.72 per share, a year earlier.
Harley profit beats as shipments rise from pandemic lows, costs fall – Reuters, 10/27/20
- Harley-Davidson beat profit expectations on Tuesday as shipments improved from pandemic lows and it reined in costs as part of Chief Executive Officer Jochen Zeitz’s restructuring plan, sending its shares up 9% before the bell.
- Motorcycles and related product revenue fell to $964 million from $1.07 billion a year earlier.
- Declines in shipments improved to 6%, or 43,000 motorcycles, from a year earlier and compared with a 59% slump in the prior quarter, indicating a rise in demand for the maker of large cruisers.
- Retail sales in its biggest market, the United States, where Harley has not recorded a sales rise for the past six years, fell 10% from a year earlier, but was much less than the 27% slide in the second quarter.
- Net income rose to $120 million, or 78 cents per share, in the third quarter ended Sept. 30, from $87 million, or 55 cents per share, a year earlier.
Caterpillar earnings dive as economy woes deter equipment purchases – Reuters, 10/27/20
- Caterpillar on Tuesday reported lower quarterly earnings as equipment sales fell across all of its three primary segments, reflecting a slow and uneven recovery in global economic activity from coronavirus lockdowns.
- Revenue was down an annual 23%.
- The heavy equipment maker reported a third-quarter profit of $1.22 per share, down 54% from a year ago.
- Analysts surveyed by Refinitiv had on average expected earnings of $1.16 per share.
- Chief Financial Officer Andrew Bonfield said while customers are still wary of making big equipment purchases, a fast economic recovery in China as well as an improvement in residential activity in North America are expected to lift retail sales in the current quarter.
- China is a “bright spot in our revenues”, Bonfield told Reuters, adding the world’s second-largest economy led a 14% year-on-year increase in construction machine sales in Asia-Pacific in the latest quarter.
Merck raises annual profit outlook as Keytruda drives profit beat – Reuters, 10/27/20
- Merck & Co posted a quarterly profit that beat estimates on Tuesday and raised its adjusted earnings forecast for the full year, as it expects a majority of the blow from the ongoing COVID-19 pandemic to now be behind it.
- Sales of the drugs increased by 2% to $11.3 billion during the third-quarter, driven primarily by growth in its cancer drugs like blockbuster immunotherapy Keytruda and certain hospital acute care products.
- Sales of Keytruda, which is an approved treatment for cancers including non-small-cell lung cancer, rose 21% to $3.7 billion, above analysts estimates of $3.66 billion, according to six analysts polled by Refinitiv.
- Excluding items, Merck earned $1.74 per share, beating analysts’ average estimates of $1.44 per share, according to IBES data from Refinitiv.
- For 2020, Merck now expects an unfavorable impact to revenue of about $2.35 billion due to the pandemic, up from $1.95 billion it had initially estimated.
- Merck said it now expects full-year adjusted profit of between $5.91 and $6.01 per share, compared with its prior forecast of between $5.63 to $5.78 per share.
Lilly profit hit by COVID-19 drug development costs, weak demand – Reuters, 10/27/20
- Eli Lilly fell short of analysts’ expectations for third-quarter profit on Tuesday due to increased costs to develop COVID-19 therapies and lower demand for some its major drugs, including diabetes treatment Trulicity.
- Revenue rose 5% to $5.74 billion in the quarter ended Sept. 30, but came in below the average estimate of $5.88 billion.
- Excluding items, the drugmaker earned $1.54 per share, below analysts’ average estimate of $1.71 per share, according to IBES estimates from Refinitiv.
- Lilly said it still anticipates 2020 revenue to be between $23.7 billion and $24.2 billion.
- It, however, cautioned that achieving the higher end of the range would likely require the inclusion of moderate revenue from potential COVID-19 treatments, which is possible but not certain at this point.
HCA Healthcare expects to treat COVID-19 patients throughout 2021 – Reuters, 10/27/20
- Hospital operator HCA Healthcare said on Monday it expects to treat COVID-19 patients throughout 2021 and that the patients will make up 4%-5% of total admissions in the year.
- HCA sales rose 4.8% to $13.31 billion, beating estimates of $12.86 billion.
- Revenue per same-facility equivalent admission, a measure of sales per patient staying overnight at a hospital and those treated on an outpatients basis, rose 14.8% in the quarter ended Sept. 30 from a year earlier.
- The company said higher revenue from COVID-19 patients, who typically need more medical assistance, during the quarter helped more than offset losses due to a decline in overall patient admissions.
Burger King parent beats profit forecasts, plans drive-thru expansion – Reuters, 10/27/20
- Burger King parent Restaurant Brands International on Tuesday reported a bigger-than-expected quarterly profit, powered by the success of fried chicken sandwiches at Popeyes and demand for food delivery as consumers stay at home.
- For the third quarter, comparable sales at Popeyes, the popular chain that gathered a huge social media audience and long lines at stores last year, rose 17.4%.
- But comparable sales at Burger King fell 7% and slumped 12.5% at Tim Hortons, as fewer people bought their morning cups of coffee at cafes amid the work-from-home orders.
- Net income attributable to the company’s shareholders fell 27.8% to $145 million for the three months ended Sept. 30 as operating costs and expenses rose.
Shopify to partner with TikTok in bid to woo more merchants to site – Reuters, 10/27/20
- Canadian e-commerce company Shopify said on Tuesday it will partner with TikTok to help its one million-plus merchants more easily advertise their products on the video-sharing app, as it looks to grow its customer base.
- The link-up with Shopify, which provides an e-commerce platform and distribution services to mostly small and medium-sized businesses, comes as a proposal for Walmart to buy a stake in the Chinese-owned firm is stuck in limbo.
- Shopify said the partnership will allow its merchants to sell product in the form of shoppable video ads, where TikTok users can click on an ad to buy the product.
- TikTok, which reaches 100 million U.S. users a month, said it was always looking for new ways to connect brands with its users.
- “Shopify is a perfect partner to help us grow and expand our commerce capabilities globally,” Blake Chandlee, Vice President, Global Business Solutions at TikTok, said in an emailed statement.
- In June, Walmart also partnered with Shopify to expand its online marketplace business and capture a bigger slice of the coronavirus-driven surge in online sales.
US ECONOMY & POLITICS
U.S. core capital goods orders increase solidly in September – Reuters, 10/27/20
- New orders for key U.S.-made capital goods rose more than expected in September, wrapping up a quarter of potentially record growth in business spending and the economy, thanks to fiscal stimulus aimed at softening the blow from the COVID-19 pandemic.
- Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, increased 1.0% last month.
- Data for August was revised higher to show these so-called core capital goods orders increasing 2.1% instead of 1.9% as previously estimated.
- Shipments of core capital goods gained 0.3% last month. They increased 1.5% in August.
- Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, jumped 1.9% in September after rising 0.4% in August.
- Durable goods orders were driven by a 4.1% rebound in orders for transportation equipment, which followed a 0.9% decline in August.
U.S. consumer confidence dips in October – Reuters, 10/27/20
- U.S. consumer confidence fell in October, in line with expectations that economic activity would slow in the fourth quarter as the boost from fiscal stimulus fades.
- The Conference Board said on Tuesday its consumer confidence index slipped to reading of 100.9 this month from 101.3 in September.
- Economists polled by Reuters had forecast the index rising to a reading of 102.0 in October.
U.S. Home-Price Growth Accelerated in August – Wall Street Journal, 10/27/20
- The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 5.7% in the year that ended in August, up from a 4.8% annual rate the prior month.
- Sales of previously owned homes, which make up the bulk of the housing market, rose 2% in August from a month earlier, according to the National Association of Realtors, as low mortgage-interest rates and a desire for more space lured buyers into the market.
- The Case-Shiller 10-city index gained 4.7% over the year ended in August, compared with a 3.5% increase in July. The 20-city index rose 5.2%, after an annual gain of 4.1% in July.
- A separate measure of home-price growth by the Federal Housing Finance Agency also released Tuesday found a 8% increase in home prices in August from a year earlier.
Struggling Rental Market Could Usher in Next American Housing Crisis – Wall Street Journal, 10/27/20
- A housing crisis centered on the vast apartment and home-rental markets is emerging in the U.S., threatening to send millions of renters into eviction and leave landlords short billions of dollars.
- A study of unemployed workers released last week by the Federal Reserve Bank of Philadelphia calculated outstanding rent debt would reach $7.2 billion before the close of 2020.
- Moody’s Analytics estimates that it could reach nearly $70 billion by year-end if there is no additional stimulus spending.
- The economic-research firm calculated that 12.8 million Americans would then owe an average of $5,400 from missed payments.
- Even the larger figure would be far less than what was lost when the $1.3 trillion subprime-mortgage bubble burst, leading to a national wave of defaults and foreclosures.
- But the tens of millions of people potentially caught in a web of home-rental debt and eviction would far exceed the 3.8 million homeowners who were foreclosed on in 2007-2010.
Amy Coney Barrett Sworn In as Supreme Court Justice – Wall Street Journal, 10/27/20
- Amy Coney Barrett was sworn in as the 115th Supreme Court justice Monday evening, elevating a disciple of the late Justice Antonin Scalia to succeed the late liberal icon Ruth Bader Ginsburg and establishing a broad conservative majority for the first time since the 1930s.
- The vote to confirm Justice Barrett was 52-48, with only one GOP senator, Susan Collins of Maine, joining Democrats in voting against the nominee.
- Justice Barrett will take the judicial oath on Tuesday, when it will be administered at the Supreme Court by Chief Justice John Roberts. She can then begin participating in court decisions.
Pompeo Touts U.S.-India Defense Deal, With an Eye on China – Wall Street Journal, 10/27/20
- Increased U.S.-Indian military and strategic cooperation will help the two countries manage China’s growing influence in Asia, top U.S. diplomats said Tuesday.
- The agreement will give India access to advanced American map and satellite imagery, enhancing the accuracy of automated weapons, drones and missiles. The pact is known as the Basic Exchange and Cooperation Agreement, or Beca.
- Mr. Pompeo and Mr. Esper met with Indian Prime Minister Narendra Modi and discussed the importance of ties between the world’s oldest democracy and the world’s largest one and how they should cooperate more to battle Covid-19 and promote a free and open Indo-Pacific region.
Rubio unveils bill to kick blacklisted Chinese firms out of U.S. markets – Reuters, 10/27/20
- Top Republican Senator Marco Rubio has introduced legislation to block access to U.S. capital markets for Chinese companies that have been blacklisted by Washington, threatening a blow against Chinese firms that rely on U.S. investors for funding.
- The bill, which Rubio submitted late on Monday, would bar U.S. investment firms, retirement funds, and insurance companies from taking stakes in Chinese companies that have been placed on a trade black list overseen by the Commerce Department or added to a list of firms backed by the Chinese military according to the Pentagon.
- If the legislation is approved, blacklisted Chinese companies would also be banned from trading on U.S. exchanges after a year-long grace period.
EUROPE & WORLD
South Korean Economy Returns to Growth – Wall Street Journal, 10/27/20
- South Korea’s economy expanded quarter-on-quarter, as Asian economies shake off the pandemic’s worst effects and return to growth.
- South Korea, during the July-to-September period, reported its gross domestic product rose 1.9% from the previous quarter, aided by a strong recovery in the country’s exports of cars and memory chips.
- South Korea’s better-than-expected performance comes after China reported this month that its third-quarter GDP had expanded 4.9% from the prior year.
- Vietnam, which has kept coronavirus cases low throughout the pandemic and never reported an economic dip, experienced 2.6% growth over last year’s third-quarter.
- Taiwan, another Covid-19 success, is expected to post year-over-year GDP expansion of 2.2% later this week, according to Barclays, after a decline the previous quarter.
BP swings back to profit, epidemic uncertainty weighs – Reuters, 10/27/20
- BP swung back to a small profit in the third quarter but warned the pace of recovery from the pandemic remains uncertain and continued to weigh on fuel demand and refining profits.
- The London-based company said that while fuel demand in Asia, particularly in China, was recovering, global consumption remained weak so far in the fourth quarter.
- BP’s refining margin of $6.20 per barrel was up slightly from the previous quarter but less than half of what it was a year earlier.
- BP reported a $86 million underlying replacement cost profit, the company’s definition of net income, for the three months to Sept. 30, beating analysts’ expectations of a loss of $120 million.
- It followed a record $6.7 billion loss in the previous quarter, when it also halved its dividend.
- BP plans to increase its renewable power capacity 20-fold by 2030 while reducing its oil output by 40% and diverting more funds to low-carbon investments.
- The London-based company also plans to lay off around 10,000 employees, or roughly 15% of its global workforce at a cost of around $1.4 billion spread over the next few quarters.
Hyundai Motor swings to quarterly loss as engine issues batter earnings – Reuters, 10/27/20
- South Korea’s Hyundai Motor said on Monday it swung to a net loss for July-September, missing market estimates by a wide margin, as costs related to engine quality issues and recalls smashed what would otherwise have been strong earnings.
- Revenue rose 2.3% on year to 27.6 trillion won.
- Operating loss for the third quarter was 314 billion won. Excluding quality costs, the figure would have been 1.8 trillion won profit.
- Hyundai, the world’s fifth-biggest automaker when combined with affiliate Kia Motors Corp, reported a net loss of 336 billion won ($297.72 million).
- The automaker said it booked 2.1 trillion won to cover charges related to engine defects that increased the risk of stalling and fire.
Novartis lifts profit outlook as hospitals cope better with COVID – Reuters, 10/27/20
- Novartis nudged up its operating profit guidance on Tuesday, as the Swiss drugmaker predicted healthcare systems would navigate a second COVID-19 wave better than the first and keep drug sales flowing.
- Sales rose 1% to $12.3 billion, missing the $12.7 billion forecast.
- Third-quarter core net income climbed 8% to $3.47 billion, above analysts’ average forecast of $3.32 billion in a Refinitiv poll.
- The company now expects 2020 operating income growth in a low-to-mid double-digit percentage range, compared with a low double-digit rate forecast previously. Sales are seen rising by a mid single-digit percentage, unchanged from previous guidance.
Lufthansa braces for very slow recovery in passenger demand – Reuters, 10/27/20
- German airline Lufthansa expects a very slow demand recovery in the face of the resurgent COVID-19 pandemic and now hopes to reach roughly half of its pre-crisis capacity over the course of next year, a board member told Reuters.
- First-quarter capacity is expected to be up to 25% of pre-crisis levels, unchanged from the current quarter and well short of the 50% previously envisaged by the end of this year, said Harry Hohmeister, who is responsible for the group’s Lufthansa, Austrian, Swiss and Brussels airlines.
- “Maybe a recovery to 50% of the pre-crisis level could be possible next year, and maybe even to 60% with business trips coming back in autumn 2021,” Hohmeister said, emphasising that those hopes are based on the assumption that the pandemic can be tackled with vaccines and broad testing early next year.
- Reliable forecasts remain impossible for the time being, but advance bookings for private trips in June next year are close to pre-crisis levels and already above them on certain days in September.
- The first of the Federalist Papers, which called for the ratification of the U.S. Constitution, was published. (1787)
- Du Pont announced that it would name its new synthetic yarn nylon. (1938)
- Egyptian President Anwar Sadat and Israeli Prime Minister Menachem Begin were named winners of the Nobel Peace Prize for their work toward a Middle East accord. (1978)