Daily Market Report | Nov. 19, 2020

US FINANCIAL MARKET

U.S. Stocks Drop Amid Fresh Lockdowns – Wall Street Journal, 11/19/20

  • U.S. stocks fell Thursday as new restrictions imposed to curb rising coronavirus infection levels weighed on the economic outlook.
  • The U.S. logged more than 170,000 newly reported Covid-19 cases for the second time on Wednesday, and the death toll crossed the quarter-million mark.
  • States are implementing a patchwork of new restrictions to combat its spread. Kentucky, Minnesota, Wisconsin and Illinois are adopting measures including extended mask mandates, bar and restaurant closures and limits on private gatherings.
  •  Pfizer’s plans to seek authorization for its Covid-19 vaccine within days sparked optimism in markets earlier in the week.
  • But a resurgence of virus cases prompted New York City authorities to temporarily close public schools starting Thursday, stoking concerns that local governments will be forced to shut down portions of the economy.
  • Jobless claims figures showed a jump last week, with initial claims for unemployment benefits rising to 742,000.
  • The report came amid signs the economic recovery is continuing, but losing steam after rebounding strongly in the third quarter from the pandemic-induced downturn this spring.
  • Meanwhile, sales of previously owned homes rose to a new 14-year high in October and median home prices again hit new highs.

Coronavirus Live Updates: U.S. Daily Cases Top 170,000 for Second Time – Wall Street Journal, 11/19/20

  • The U.S. logged more than 170,000 newly reported Covid-19 cases for the second time, as the death toll crossed the quarter-million mark.
  • The nation reported 170,161 new cases for Wednesday, according to data compiled by Johns Hopkins University, more than any day but Friday, when it reported 177,224 new cases.
  • Hospitalizations hit another record, their ninth in a row, with 79,410 people hospitalized because of the disease as of Wednesday, according to the Covid Tracking Project.
  • The number of people in intensive care also hit a record high of 15,350.
  • New York City Mayor Bill de Blasio said Wednesday that schools in the nation’s largest school district would temporarily close Thursday, at least through the end of the month.
  • In France, the number of Covid-19 patients in hospital declined by 328 on Wednesday, suggesting the country’s second wave may have peaked.
  • The country remains far from ending lockdown rules, though some rules could be “adapted” on Dec.1, government spokesman Gabriel Attal said Thursday.
  • Belgium extended its nighttime curfew, from 10 p.m. to 6 a.m., until Dec. 13, the current end-date for restrictions imposed last month.

Nvidia shares dip on predicted decline in data center sales – Reuters, 11/18/20

  • Nvidia shares declined nearly 3% on Wednesday after company executives said data center chip sales would fall slightly in the fourth quarter.
  • Nvidia also beat revenue expectations for the third quarter as gaming business revenue jumped 37% to $2.27 billion from a year earlier, beating FactSet estimates of $2.06 billion.
  • Revenue from the data center segment more than doubled to $1.9 billion, compared with FactSet estimates of $1.84 billion.
  • But Chief Financial Officer Colette Kress said that “industry-wide capacity constraints” meant it could be months before supplies of Nvidia’s newest line of gaming chips could catch up with demand.
  • The company said revenue from Mellanox, the Israeli networking chip firm it acquired last year, contributed “approximately a third” of data center segment revenue in the third quarter, but that some of the growth came from sales to an unnamed Chinese customer that would not repeat in the fourth quarter.
  • Earnings per share were $2.91, above analyst estimates of $2.57, according to Refinitiv data.
  • The chipmaker said it expects current-quarter revenue of $4.80 billion, plus or minus 2%, compared with analysts’ average estimate of $4.42 billion, according to IBES data from Refinitiv.

Macy’s Reports Loss, but Results Improve from Earlier Quarters – Wall Street Journal, 11/19/20

  • Macy’s net sales fell more than 20% in the third quarter, while the company reported its third quarterly loss in a row, as the Covid-19 pandemic continues to ding retailers’ financial results.
  • Net sales were $3.99 billion and fell 23% from a year earlier. Analysts polled by FactSet expected them to be $3.91 billion.
  • Comparable sales—which tend to measure sales at stores open at least a year at retailers—fell about 20% during the quarter that ended Oct. 31.
  • Macy’s said it had a loss of $91 million, or 29 cents a share, and said its adjusted loss was 19 cents a share.
  • That was a much smaller loss than Wall Street expected. Profit a year prior was $2 million, or a penny a share.

L Brands results beat on home fragrances, lingerie demand – Reuters, 11/19/20

  • L Brands posted better-than-expected quarterly results on Wednesday, helped by record sales growth at Bath & Body Works and higher demand for Victoria’s Secret lingerie, sending the company’s shares 16% higher in extended trading.
  • Net sales rose 14% to $3.06 billion, easily exceeding expectations of $2.67 billion.
  • A sharper focus on hygiene standards during the COVID-19 pandemic has boosted sales of soaps, lotions and sanitizers at Bath & Body Works, with consumers staying indoors also spending on scented candles.
  • The business posted a 56% jump in comparable sales in the third quarter.
  • L Brands also saw a 4% rise in comparable sales at Victoria’s Secret, as the business benefited from the relaunch of its “Body by Victoria” lingerie line and higher demand for sleepwear from customers “nesting” at home.
  • Net income came in at $330.6 million, or $1.17 per share, for the three months ended Oct. 31, compared with a loss of $252 million, or 91 cents per share, a year earlier, when it recorded some impairment charges.

United Airlines says cancellations are rising due to spiking COVID-19 cases – Reuters, 11/19/20

  • United Airlines said on Thursday it has seen an uptick in cancellations and a decrease in bookings for the week ended Nov. 18, due to a recent spike in COVID-19 cases in the United States.
  • The carrier said it continues to expect total revenue to be down by about 67% in the fourth quarter of 2020, compared with a year earlier.

Nasdaq to Buy Anti-Financial Crime Firm Verafin for $2.75 Billion – Wall Street Journal, 11/19/20

  • Nasdaq will buy Verafin, a software company that uses artificial intelligence to help banks detect money laundering and fraud, for $2.75 billion, the companies said Thursday.
  • If completed, the Verafin acquisition would be New York-based Nasdaq’s largest deal in more than a decade and its latest effort to diversify away from its core exchange business into technology.
  • Verafin’s anticrime technology tools are used by more than 2,000 financial institutions in North America, according to a press release from the two companies. Many of them are smaller banks and credit unions.

Amazon sacks dozens of staff at drone project, taps new manufacturers: FT – Reuters, 11/19/20

  • U.S. online retailer Amazon.com has laid off dozens of R&D and manufacturing staff from its delivery drone project, Amazon Prime Air, the Financial Times reported on Thursday.
  • The company has reached tentative deals with two external manufacturers to build component parts of its long-awaited drone, the newspaper said, adding that more deals with third parties could be finalized soon.
  • The full terms of the agreements with Austria’s FACC Aerospace and Spain’s Aernnova Aerospace were still being finalized, the FT report said, citing a person familiar with Amazon’s plans.

Starbucks to hike U.S. employee pay at least 10%: memo – Reuters, 11/19/20

  • Starbucks will hike pay for baristas, shift supervisors and cafe attendants at its U.S. outlets by at least 10% effective Dec. 14, according to an internal memo seen by Reuters.
  • The world’s largest coffee chain will also boost starting pay by 5% in order to help attract and retain employees.
  • Employees with the company for three years or more will get at least an 11% pay hike, and the company will increase the premium it already pays above minimum wage in every market, it said.

Model Y drags down Tesla’s ranking in annual reliability survey by Consumer Reports – Reuters, 11/19/20

  • Tesla’s newly introduced Model Y crossover, which has had body-hardware and paint issues, dragged down the electric-car maker’s standing in Consumer Reports magazine’s annual reliability study.
  • Owners of the Model Y, which began production in January, have reported misaligned body panels that had to be fixed and mismatched paint including, in one case, human hair stuck in the paint, according to Consumer Reports.
  • Tesla’s ranking slipped two spots to No. 25 out of 26 brands rated in the U.S. market, ahead of only Ford Motor’s Lincoln luxury brand, according to the annual survey released on Thursday.
  • Tesla’s ranking would have risen a few spots if not for the Model Y’s performance, said Jake Fisher, senior director of auto testing at Consumer Reports.

Judge in Google Antitrust Case Eager to Set Initial Schedule – Wall Street Journal, 11/19/20

  • The judge overseeing the Justice Department’s antitrust lawsuit against Google said he hoped to set an initial schedule for the case in December, while a government lawyer indicated the department had more than 100 potential witnesses.
  • The Justice Department sued Google, a unit of Alphabet, on Oct. 20, alleging the company uses anticompetitive tactics to preserve a monopoly for its flagship search engine and related advertising business.
  • The parties are set to make some initial disclosures to one another on Friday.
  • Separately, Justice Department lawyer Kenneth Dintzer told the judge that a bipartisan group of state attorneys general will decide soon whether to file their own antitrust lawsuit against Google.

US ECONOMY & POLITICS

U.S. Unemployment Claims Rise Amid Coronavirus Surge – Wall Street Journal, 11/19/20

  • The number of applications for unemployment benefits rose sharply last week, indicating continued challenges for the U.S. economic recovery as coronavirus infections increased around the country.
  • Initial claims for jobless benefits, a proxy for layoffs, rose to a seasonally adjusted 742,000 last week, up from the 711,000 filed a week earlier.
  • At present levels, initial jobless claims are still higher than they were in any other recession on record.
  • The number of people collecting unemployment benefits through regular state programs, which cover most workers, fell to 6.4 million for the week ended Nov. 7 from 6.8 million a week earlier, on a seasonally adjusted basis, according to the Labor Department.
  • Some who have exhausted their state benefits are now collecting money through a federal program that provides an extra 13 weeks of benefits.
  • About 4.4 million people were receiving aid through this extended-benefits program in the week ended Oct. 31, up from 4.1 million a week earlier, Labor Department data show.

U.S. Home Sales Rose to 14-Year High in October – Wall Street Journal, 11/19/20

  • Sales of previously owned homes rose to a new 14-year high in October while median home prices again hit new highs.
  • Existing-home sales rose 4.3% in October from September to a seasonally adjusted annual rate of 6.85 million, the highest level since February 2006, the National Association of Realtors said Thursday.
  • The October sales marked a 26.6% increase from a year earlier.
  • The median existing-home price rose 15.5% from a year earlier to $313,000, a record high nominally and adjusted for inflation, NAR said.

Fed’s Williams Says Lack of Fiscal Aid Could Challenge Economy – Wall Street Journal, 11/19/20

  • Federal Reserve Bank of New York President John Williams said Wednesday that if elected leaders don’t deliver new aid for the economy, the path of the recovery will likely be slower than if help were provided.
  • Fiscal aid has “been a critical part of why the economy has recovered as well as it has,” Mr. Williams said in a virtual appearance at an event held by the Society for Advancing Business Editing and Writing, a journalists’ association.
  • Without a renewal of this aid, the economy will face additional challenges in the coming months, Mr. Williams said.
  • He did add, however, that news of effective coronavirus vaccines gives him hope for the economic outlook.

Lawmakers Set to Give Infrastructure a Fresh Look in 2021 – Wall Street Journal, 11/19/20

  • Facing the possibility of another two years of divided government, Democrats and Republicans are eyeing a familiar topic as a possible area of bipartisan compromise under the Biden administration: infrastructure.
  • Lawmakers see an infrastructure bill as a way both to stimulate an economy recovering from the coronavirus pandemic and to address an infrastructure system that experts say is deficient.
  • The House passed a $1.5 trillion infrastructure bill over the summer, with about $500 billion aimed at highways, bridges, roads and public transit.
  • The measure also sends funds toward housing, public schools and broadband internet access.
  • President-elect Joe Biden has proposed a similar $2 trillion plan that funds transportation infrastructure as part of his efforts to combat climate change, including overhauling the energy grid, retrofitting buildings and conducting research.

Nancy Pelosi Backed by House Democrats to Serve Fourth Term as Speaker – Wall Street Journal, 11/19/20

  • House Democrats backed Nancy Pelosi on Wednesday for another term as speaker, after a tumultuous two years in which she helmed the party’s efforts to remove President Trump from office but lost seats in the recent election.
  • Mrs. Pelosi ran unchallenged for the position.
  • Majority Leader Steny Hoyer (D., Md.) and Whip Jim Clyburn (D., S.C.) also are running unopposed.
  • New York Rep. Hakeem Jeffries, the caucus chairman and whom many Democratic lawmakers see as a future speaker, is unchallenged as well.
  • After securing the support of the Democrats this week, the more difficult challenge for Mrs. Pelosi will be reaching a simple majority on the floor in January, which could be tough given Democrats will have a narrower majority next year.

EUROPE & WORLD

China Borrows at Negative Rates for the First Time – Wall Street Journal, 11/19/20

  • Superlow interest rates in Europe helped China to sell its first negative-yielding debt, as it raised about $4.7 billion in a three-part deal in euros.
  • The debt sale drew robust demand, aided by China’s rapid return to economic growth after tackling the coronavirus and the relative scarcity of Chinese bonds denominated in the common currency.
  • The deal was worth €4 billion, the equivalent of $4.74 billion, and split between 5-, 10- and 15-year bonds.
  • The 5-year bonds were priced late Wednesday to yield negative 0.152%, while the 10- and 15-year securities were sold with positive yields of 0.318% and 0.664%, respectively.
  • Investors placed total orders of about €18 billion, said Samuel Fischer, head of China onshore debt capital markets at Deutsche Bank, one of the banks that handled the deal.

Engineering group ABB’s divestment plan receives cool market reception – Reuters, 11/19/20

  • Engineering group ABB’s plan to offload three of its most profitable businesses, announced on Thursday, was met with disappointment by analysts who described the strategy as unambitious.
  • ABB said it was “exploring all options” to exit its turbocharging, mechanical power and power conversion divisions, which have combined annual sales of $1.75 billion, or 6% of group sales.
  • The businesses could collectively be worth in the region of 3-4 billion Swiss francs ($3.3 to 4.4 billion), according to two people familiar with the industry.
  • The three business are among ABB’s most profitable, with profit margins well above the group margin target of 14% to 16%.
  • Analysts also expressed disappointment about the company’s plans to increase research and development spending to 5% of revenues, up from 4.7% at present, a figure below the 8.1% level at Siemens, a big rival and among the industry’s leaders.

Covid-19 Vaccine Progress Gives Tokyo Olympics a Tailwind – Wall Street Journal, 11/19/20

  • Breakthroughs in Covid-19 vaccine trials are giving a boost to the organizers of next summer’s Tokyo Olympics, who are looking into vaccine suppliers and planning to encourage athletes to get their shots.
  • Still, local organizers remain publicly cautious about whether enough vaccines will be available in time, and they are leaving room for the Games to proceed regardless. If vaccines are in short supply, it would be hard to justify prioritizing young athletes with low risk of serious illness.
  • Despite talk of vaccines, there is no guarantee the Olympics will take place. A fresh wave of Covid-19 cases around the world is also hitting Japan, which has reported new daily records of infections recently, although at far lower levels than in the U.S. and Europe. On Thursday, Tokyo reported its first daily total of more than 500 new infections.

Trade Restrictions Relax After Early Pandemic Surge – Wall Street Journal, 11/19/20

  • A surge in new trade restrictions that began in 2017 has waned over the course of 2020, as governments eased some of the barriers they put up early in the coronavirus pandemic.
  • In the early weeks of the outbreak, a number of governments rushed to protect their supplies of medical equipment and food, imposing a series of restrictions on exports.
  • But in a twice-yearly report on trade measures taken by the Group of 20 leading economies, the World Trade Organization said governments took fewer actions to either ease or restrict trade than in the previous six-month period, while most of the actions they did take were intended to free the movement of goods across borders.
  • The WTO said G-20 members had announced 133 trade measures that were specifically related to the pandemic.
  • Of those, it judged 84 to be intended to facilitate trade, and 49 to restrict trade.

Factmonster – TODAY in HISTORY

  • Lincoln delivered his Gettysburg Address at the dedication of the national cemetery on the Civil War battlefield of Gettysburg, Pa. (1863)
  • Ronald Reagan and Mikhail Gorbachev met for the first time in Geneva. (1985)

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