Daily Market Report | Nov. 17, 2020
US FINANCIAL MARKET
S&P 500, Dow drop from record levels as coronavirus cases spike – Reuters, 11/17/20
- Wall Street’s main indexes fell on Tuesday with the S&P 500 and the Dow retreating from record closing highs hit a day earlier, following disappointing retail sales data and a spike in coronavirus cases across the country.
- The Dow notched an all-time closing high on Monday, finishing about 50 points shy of 30,000 after Moderna’s promising COVID-19 vaccine data boosted hopes of an economic recovery, overshadowing spiking coronavirus cases across the country.
- New Jersey, California and Iowa imposed fresh restrictions as the pandemic reached its most perilous point yet in the United States, threatening to worsen as the colder weather sets in.
- Latest data showed U.S. retail sales increased less than expected in October and could slow further due to spiraling new infections and a lack of fiscal support.
- Financials, industrials and energy stocks gave back some gains made over the last week as positive updates from U.S. vaccine trials encouraged investors to diversify into value stocks on hopes they will benefit from a pickup in the economy.
- Amazon.com rose 1.2% after it launched an online pharmacy for delivering prescription medications in the United States.
- Drug retailers such as Walgreens Boots Alliance tumbled 8.7%, while CVS Health fell 7.5% on the news.
- Walmart posted a bigger-than-expected increase in quarterly same-store sales.
- However, its shares fell 0.8% after rallying 28% this year.
- The number of newly reported Covid-19 cases in the U.S. increased drastically from a day earlier, and the number of those hospitalized also rose, hitting another record.
- The country reported more than 166,000 new cases for Monday, according to data compiled by Johns Hopkins University, up from more than 133,000 a day earlier.
- The number of coronavirus-related hospitalizations as of Monday also jumped, to 73,014, according to the Covid Tracking Project. That number has stayed above 61,000 for the past week, hitting a record every day but one.
- The number of people with Covid-19 in intensive care units increased from a day earlier to 14,313, according to Covid Tracking’s data, a number not seen since late April, when the U.S. was seeing its first surge of cases.
- At least 10 states logged record numbers of newly reported infections for Monday, including Tennessee, Pennsylvania, Nebraska, Connecticut and Vermont, according to Johns Hopkins data, and numerous others have hit records in the past few days.
- U.S. hospitals, weighing high demand and tight supplies, said they may limit use of a new Eli Lilly antibody drug to COVID-19 patients with multiple risk factors for serious illness or to those whose immune systems have not begun to fight the infection.
- The treatment, bamlanivimab, was given U.S. emergency use authorization (EUA) last week by the Food and Drug Administration for helping newly-diagnosed, high-risk patients avoid hospitalization.
- The federal government has paid $1,250 per dose for 300,000 doses of bamlanivimab, which experts estimate may only be enough for one weeks’ worth of Americans becoming infected, based on the FDA label identifying appropriate patients.
- Home Depot reported strong sales growth in its latest quarter as the retailer continues to thrive from people spending more time on home-improvement projects during the coronavirus pandemic.
- In the third fiscal quarter, the company’s revenue rose to $33.54 billion, up 23% from a year earlier, a similar pace to the second quarter. Analysts surveyed by FactSet were expecting revenue of $31.83 billion.
- Same-store sales grew by 24.1% year-over-year overall, and by 24.6% in the U.S.
- The number of customer transactions for Home Depot in the third quarter rose by 13% year-over-year to more than 453 million, with an average ticket size of $72.98. Sales per retail square foot increased by more than $100 to $552.85.
- Home Depot’s quarterly net profit was $3.43 billion, or $3.18 a share, compared with a profit of $2.77 billion, or $2.53 a share, in last year’s third quarter. Analysts had forecast a profit of $3.13 a share.
- The company also said it would permanently raise compensation for front-line workers in a program that will cost approximately $1 billion a year.
Walmart’s Sales Gains Slow as Pandemic Drags On – Wall Street Journal, 11/17/20
- Walmart’s quarterly sales rose at a slower pace than earlier in the coronavirus pandemic even as shoppers continued to buy up food and cleaning supplies and the retailer pushed early holiday deals.
- Walmart reported total revenue of $134.71 billion for the quarter ended Oct. 31, up 5.2% from the year ago quarter.
- Comparable U.S. sales, those at stores or digital channels operating for at least 12 months, rose 6.4% in the quarter ended in late October. It was a third consecutive quarter of strong growth, though below the prior two quarters.
- E-commerce sales in the U.S. jumped 79% and accounted for much of the latest quarter’s gains.
- In the U.S., shopper traffic decreased 14.2%, while the value of the average shopping trip increased 24%.
- It had a profit of $5.14 billion, compared with $3.29 billion last year. The latest period included $400 million in additional Covid-related expenses, a loss on the Argentina unit sale and a gain on the value of its stake in China’s JD.com.
Kohl’s posts bigger-than-expected decline in same-store sales – Reuters, 11/17/20
- Kohl’s posted a bigger-than-expected decline in quarterly same-store sales on Tuesday, as lower traffic at department stores due to the COVID-19 pandemic hammered demand for footwear and apparel.
- Net sales fell about 13% to $3.78 billion in the quarter ended Oct. 31.
- Same-store sales at Kohl’s decreased 13.3% in the third quarter, even as Kohl’s said digital sales growth remained strong.
- Analysts on average had expected an 11.39% decline, according to IBES data from Refinitiv.
- Kohl’s reported a net loss of $12 million, or 8 cents per share, compared with a profit of $123 million, or 78 cents per share, a year earlier.
- Kohl’s also said it plans to reinstate its quarterly dividend in the first half of 2021 after a COVID-19-led pause.
Tesla to Be Added to S&P 500 Index – Wall Street Journal, 11/17/20
- Tesla Chief Executive Elon Musk has taken another step to turning the Silicon Valley electric-vehicle maker into a mainstream car maker, parking the company in the S&P 500 index.
- It marks a milestone for the company that over the course of its 17 years has sought to overcome cash flow problems and defy skeptics from Wall Street and Detroit.
- S&P Dow Jones Indices on Monday said Tesla would join the index on Dec. 21. Tesla will replace an S&P 500 company that will be named closer to the effective date.
- Chinese companies with shares traded in America would be required to use auditors overseen by U.S. regulators or face being kicked off exchanges under a plan being drafted by regulators, according to people familiar with the matter.
- The proposal, which is likely to be issued for public comment in December, would address the disparate treatment that applies to Chinese companies going public in the U.S.
- The firms have long been able to sell shares here, yet their auditors violate a key investor protection: China hasn’t allowed their work to be inspected.
- China has said it is worried about auditors revealing strategic secrets held by domestic firms, some of which are majority-owned by the Chinese government.
- The SEC is moving fast to propose key elements of the plan before the departure of Chairman Jay Clayton, who announced Monday that he plans to leave by the end of December.
Amazon Launches Online Pharmacy – Wall Street Journal, 11/17/20
- Amazon.com said Tuesday customers can buy prescription medications through a new store on its platform, a move that comes as more people grow increasingly accustomed to shopping online.
- Amazon said Amazon Pharmacy customers will still need a prescription for medicines from their health-care provider.
- The service also doesn’t deliver certain controlled medications, which encompasses many opioids, Amazon said.
- The company also said that customers can add their insurance information.
- Members of its Amazon Prime service will be able to save money paying for medications without health insurance.
- When not paying with insurance, Prime members can save as much as 80% on generic medications, the company said.
- They can save as much as 40% off name brands.
Supermarket chain Costco declares special dividend of $10 per share – Reuters, 11/16/20
- Membership-only supermarket chain Costco Wholesale on Monday declared a special dividend of $10 per share as it benefits from consumers stocking up essentials due to the COVID-19 pandemic, sending its shares up about 2% after the bell.
- The dividend totaling $4.4 billion would be funded through existing cash.
- It will be paid on Dec. 11 and is the company’s fourth such payout in eight years.
- Higher demand for fresh produce, appliances and gardening and sporting goods has helped the warehouse chain record growing sales and traffic at its stores, where customers typically buy items in bulk at lower prices.
House to vote on FAA reform bill after Boeing 737 MAX crashes – Reuters, 11/17/20
- The U.S. House of Representatives is set to vote on Tuesday on bipartisan legislation to reform the Federal Aviation Administration’s (FAA) aircraft certification process after two fatal Boeing 737 MAX crashes killed 346 people.
- The House bill requires an expert panel to evaluate Boeing’s safety culture and recommend improvements, and mandates that aircraft manufacturers adopt safety management systems and complete system safety assessments for significant design changes.
- It also requires that risk calculations be based on realistic assumptions of pilot response time, and that risk assessments are shared with regulators.
- The House Transportation and Infrastructure Committee approved the measure unanimously on Sept. 30.
HBO Max Is Finally Coming to Amazon Devices – Wall Street Journal, 11/16/20
- AT&T reached a deal to offer its HBO Max streaming service through Amazon.com, removing a distribution barrier that has checked the app’s growth since its launch.
- The telecom company said existing HBO apps on Amazon Fire dongles and tablets will automatically upgrade to HBO Max starting Tuesday.
- Viewers who subscribe to HBO through Amazon Prime Video Channels, the e-commerce company’s TV portal, will also get upgrades.
- Terms weren’t disclosed.
US ECONOMY & POLITICS
U.S. Retail Sales Gains Slowed in October – Wall Street Journal, 11/17/20
- U.S. shoppers boosted their buying in October for the sixth month in a row, but the pace of growth slowed considerably amid rising coronavirus cases and uncertainty ahead of the U.S. presidential election.
- Retail sales increased a seasonally adjusted 0.3% in October from a month earlier, the Commerce Department said Tuesday.
- That fell short of economists’ expectations for a 0.5% rise, and was well below the 1.6% gain in September.
- Sales dipped in a number of key categories. Grocery-store sales dropped 0.4%, bar and restaurant receipts declined 0.1%, and both sporting goods and clothing sales fell 4.2%.
- Sales increased 3.1% from the prior month at nonstore retailers, which accounts for online merchants.
- JPMorgan Chase said Friday its tracker of 30 million credit and debit cardholders recorded a 7.4% decline in spending from a year earlier in the week through Nov. 9, the weakest reading since early September.
U.S. Industrial Production Rose 1.1% in October – Wall Street Journal, 11/17/20
- U.S. industrial production rose last month, as output continued its slow climb back from deep declines last spring due to pandemic-related shutdowns.
- The Federal Reserve on Tuesday said its index of industrial production—a measure of output at factories, mines and utilities—rose a seasonally adjusted 1.1% in October, following a revised 0.4% decline in September.
- Output remains 5.6% below where it was in February, before the coronavirus pandemic hit, the Fed said.
- Manufacturing, the biggest component of production, rose 1%, after a 0.1% increase in September.
- Utility production rose 3.9%, the Fed said. Mining output fell 0.6% and remains 14.4% below its level a year ago.
- Capacity utilization, a measure of slack in the industrial economy, rose to 72.8% in October from a revised 72% in September.
- Economists had expected capacity utilization to reach 72.2% in October.
U.S. business inventories increase further in September – Reuters, 11/17/20
- U.S. business inventories increased slightly more than expected in September, likely as wholesalers and businesses stocked up for the holiday season, which could help to support economic growth in the fourth quarter.
- Business inventories rose 0.7% in September after gaining 0.3% in August, the Commerce Department said on Tuesday.
- Economists polled by Reuters had forecast business stocks to advance 0.6% in September.
- Retail inventories surged 1.7% in September instead of 1.6% as estimated in an advance report published last month. That followed a 0.5% increase in August.
- Wholesale inventories rose 0.4% in September. Stocks at manufacturers were unchanged.
- Business sales increased 0.6% in September after rising 0.9% in August. At September’s sales pace, it would take 1.32 months for businesses to clear shelves, unchanged from August.
- In November, builder confidence in the construction market for single-family homes soared to its third record high in as many months.
- Overall builder sentiment hit 90 on the monthly National Association of Home Builders’ Wells Fargo Housing Market Index.
- Of the index’s three components, current sales conditions rose 6 points to 96.
- Sales expectations in the next six months increased 1 point to 89 and buyer traffic rose 3 points to 77.
- Regionally, on a three-month moving average, homebuilder sentiment in the Northeast increased 2 points to 83.
- In the Midwest it jumped 6 points to 80. In the South it rose 4 points to 86, and in the West, it climbed 4 points to 94.
- Congress appeared nowhere close to passing another coronavirus relief bill Tuesday as infections surge across the country and new public health restrictions threaten businesses and jobs.
- On Monday, Senate Minority Leader Chuck Schumer said he and House Speaker Nancy Pelosi have not heard from Senate Majority Leader Mitch McConnell in about two weeks since the Kentucky Republican said he would take the lead for the GOP in the next round of talks.
- Democrats have pushed for a package that costs at least $2.2 trillion, while Republicans want a roughly $500 billion bill.
- McConnell has insisted in recent days that the pace of economic recovery means Congress needs only to pass a targeted, narrow plan to get the country through the next few months. On Tuesday, he said Republicans “want to pass more coronavirus relief” but blamed Democrats for blocking bills the GOP tried to pass in recent weeks.
- The legislation would include a $300 per week enhanced unemployment benefit, more Paycheck Protection Program loans for small businesses and liability protections for companies. It would not send a second direct payment to most Americans.
Hundreds of Companies That Got Stimulus Aid Have Failed – Wall Street Journal, 11/17/20
- About 300 companies that received as much as half a billion dollars in pandemic-related government loans have filed for bankruptcy, according to a Wall Street Journal analysis of government data and court filings.
- Many of the companies, which employ a total of about 23,400 workers, say the funds from the Paycheck Protection Program weren’t enough to keep them going as the coronavirus and lack of additional stimulus payments weighed on their businesses.
- The total number of companies that failed despite getting PPP loans is likely far higher. The Journal only analyzed the big borrowers from the program, which accounted for about half of the overall loans though only about 13.5% of the total participants.
- And many small businesses simply liquidate when they run out of cash rather than file for bankruptcy.
U.S. Drawing Up Plans to Withdraw Troops from Iraq, Afghanistan – Wall Street Journal, 11/17/20
- President Trump is expected to order the Pentagon to withdraw more forces from Iraq and Afghanistan, furthering his promise to end U.S. involvement in world conflicts and defying many Republicans who believe a precipitous withdrawal would amount to a strategic stumble.
- The orders, which could come by Tuesday, would call for the U.S. military to draw down the number of troops in both countries to roughly 2,500 each by Jan. 15, five days before President-elect Joe Biden’s inauguration.
- There are currently about 5,000 troops in Afghanistan and more than 3,000 in Iraq. There are no current plans to draw down the force of about 1,000 troops from Syria, officials said.
EUROPE & WORLD
- In Europe, new restrictions come into force this week as some countries struggle to bend the curve of coronavirus infections while in others new cases continue to plateau or fall.
- Sweden, which had rejected lockdowns since the beginning of the pandemic, introduced its first mandatory restrictions on Monday amid a record surge in new cases, a steady growth in deaths and a hospitalization rate that is now the highest in Europe.
- Public gatherings involving more than eight people are now banned, with offenders facing imprisonment.
- In a speech on Monday, Prime Minister Stefan Lövfen asked the public to avoid all interactions.
- German Chancellor Angela Merkel held inconclusive talks with the country’s state premiers on Monday about future restrictions and will reconvene on Nov. 25 to discuss what measures should follow the one-month lockdown that started on Nov. 2nd.
- Germany’s new confirmed cases on Tuesday came below last week’s number as it also did on Monday. The daily case count stood at 14,419 against 15,332 a week ago, according to the Robert Koch Institute for infectious disease.
- Ms. Merkel said Monday that new cases needed to fall from 140 per 100,000 inhabitants a week, down to 50 in order for hospitals and testing centers to function normally.
Baidu revenue beats estimates; to buy JOYY’s China live-streaming unit – Reuters, 11/16/20
- Chinese search engine leader Baidu booked a 1% rise in quarterly revenue, beating market estimates, and said it will buy streaming platform YY Live from social media firm JOYY for about $3.6 billion to help diversify revenue sources.
- Overall, Baidu’s July-September revenue hit 28.23 billion yuan ($4.29 billion).
- That compared with the 27.45 billion yuan analyst estimate average, showed IBES data from Refinitiv.
- Baidu also benefited from a 7% on-year increase in membership revenue at streaming affiliate iQIYI, where subscriber numbers touched 104.8 million in September.
- The firm said it expects October-December revenue of 28.6 billion yuan to 31.3 billion yuan, versus analyst estimates of 28.98 billion yuan.
Japan, Australia Forge Closer Military Ties to Counter China – Wall Street Journal, 11/17/20
- Japan and Australia cleared the way for their militaries to work more closely together, the latest sign of coordination between U.S. allies in response to China’s rising assertiveness.
- The leaders of the two countries said they would remove legal and administrative barriers to their militaries entering the other country, allowing for more joint training and quick military support in a crisis.
- Earlier this month, Japan and Australia took part in naval exercises with the U.S. and India after foreign ministers from the four countries met in Tokyo. China has accused the four countries of forming a “mini-NATO” targeted at Beijing.
Factmonster – TODAY in HISTORY
- Queen Elizabeth I of England ascended to the throne upon the death of her half-sister Queen Mary. (1558)
- Congress met in Washington, DC, for the first time. (1800)
- President Nixon said “I am not a crook.” (1973)
- Arnold Schwarzenegger was sworn in as governor of California. (2003)
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