Daily Markets: Equities Rise as Congress to Stay Until a Deal is Done

Today’s Big Picture

The major equity indices in Asia-Pacific closed mostly in the green yesterday after U.S. equities rose on optimism for more stimulus. Japan’s Nikkei 225 rose 0.3%, South Korea’s Kospi added 0.5%, China’s Shanghai closed unchanged for the day and Hong Kong’s Hang Seng rose 1.0%. By midday trading, the major European indices were all in the green and the euro rose to its strongest level versus the U.S. dollar since April 2018 on better-than-expected PMIs, (more on that in the Data Download). U.S. equity futures indicate positive moves at the open.

As the eastern U.S. preps for one of the biggest snowstorms in recent years, investors will want to dig into the November Retail Sales report at 8:30 AM ET and subsequently revisit U.S. equity futures. Soon after the U.S. equity markets open, the IHS Markit Flash November PMI data for the U.S. will be published, and while that could influence today’s trading, odds are investors will continue to focus on the progress being made in Washington for a pandemic stimulus bill. One could think that because Congress has agreed not to leave Washington until a deal is reached, we could see something before too long. This afternoon brings the conclusion of the Fed’s latest monetary policy meeting, and while we expect Fed Chairman Powell will stick to the Fed script for 2020, investors, economists, and pundits will once again be parsing his words carefully.

Data Download

International Economy

South Korea’s Unemployment Rate fell to 4.1% in November from 4.2%, still well above the 3.6% in November 2019. The labor force participation rate rose from 62.4% to 62.7%.

Japan’s Balance of Trade fell to ¥366.8 billion in November from ¥872.9 billion in October, coming in well below expectations for a decrease to ¥529.8 billion. Exports fell 4.2% YoY from -0.2% in October and compared to expectations for an increase of 0.5%. Imports fell 11.1% YoY from a 13.3% decline in October, versus expectations for an increase to -10.5%. The Jibun Bank Manufacturing Flash PMI for December rose slightly to 49.7 from 49 while Service PMI fell to 47.2 from 47.8 putting the Composite down slightly to 48.0 from 48.1. All remain in contraction - anything below 50 is contraction.

The UK saw headline inflation was weaker than expected, slowing to 0.3% YoY in November from 0.7% in October from which it was expected to decelerate to just 0.6%. Core Inflation also slowed more than expected, dropping to 1.1% YoY from 1.5% previously, from which it was expected to decelerate to 1.4%. The PPI for Core Output rose to 0.9% YoY from 0.7% while PPI Output rose to -0.8% YoY from -1.4%. PPI Input rose to -0.5% YoY from -1.2%. Retail Price Index fell to 0.9% YoY from 1.3% where it was expected to remain.

This morning brought a slew of flash Markit PMI’s that were both improvements and stronger-than-expected in the EU and UK, with the exception of UK Services, which improved, but less than expected.

• France’s Manufacturing rose to 51.1 from 49.5, beating expectations for a rise to just 50.1. Services rose to 49.2 from 38.8, still in contraction, but much better than the expected increase to 40.0. Composite was much stronger than expected at 49.6 from 40.6, well above the expected 42.9
• Germany’s Manufacturing rose to 58.6 from 57.8, well above expected 56.4. Services rose to 47.7 from 46.0, still in contraction, but much better than expected decline to 44. Composite came in at 52.5 from 51.7, above expected 50.4.
• UK Manufacturing rose to 57.3 from 55.6, much better than expected slight improvement to just 55.9. Service rose to 49.9 from 47.6, but weaker than expected rise to 50.5. Composite at 50.7 from 49.0, weaker than expected increase to 51.3.

Industrial Orders in Italy rose 1.2% YoY in October, slowing from the prior 3.3% increase while Industrial Sales fell 1.7% YoY, a contraction, but less so than the prior 4.5% YoY contraction.

Domestic Economy

Import Prices in the U.S. fell 1.0% YoY in November after falling 1.0% in October. On a MoM basis, prices rose 0.1% in November after falling -0.1% in October, missing expectations for a 0.3% increase. Export Prices fell 1.1% YoY from falling 1.6% in October.

The NY Empire State Manufacturing Index revealed fell to 4.9 from 6.3 versus expectations for an increase to 6.9. This was the lowest print since August.

Industrial Production in the U.S. fell 5.5% YoY after a 5.3% contraction in October. Manufacturing Production fell 3.7% YoY in November from a 3.9% contraction in October. Capacity Utilization sat at 73.3% in November, up slightly from 73% previously, but still well below the 75.7 from pre-Covid February.

Today brings the Retail Sales for November, Markit Manufacturing PMI for December, Business Inventories for October, NAHB Housing Market Index for December, the usual EIA Energy Stocks report, and the Federal Reserve’s FOMC Economic Projections & Press Conference.

Markets

Yesterday’s comments from the FDA on the Moderna vaccine, coupled with hopes for more fiscal stimulus, helped boost equities, with the Dow gaining 1.1% with the Nasdaq Composite and the S&P 500 both added. 1.3%. The Russell 2000 added another 2.4% and is now up over 27% since October 30. That’s the second strongest performance for the index over that number of trading days in its history. Gold added more than 1% while silver rose 2.5% and Crude oil hit a nine-month high of $47.5.

Stocks to Watch

MSCI (MSCI) announced it will delete securities of Chinese companies referenced in the U.S. Executive Order 13959 dated November 12, 2020, from its Global Investable Market Indexes. A list of those securities can be found here.

Bloomberg reports Canadian cannabis producers Aphria Inc. (APHA) and Tilray Inc. (TLRY) are in advanced talks to combine, with an announcement possible as early as this week.

Microsoft (MSFT) is monitoring a dynamic threat environment surrounding the discovery of a sophisticated attack that included compromised binaries from legitimate software. These binaries, which are related to the SolarWinds Orion Platform, could be used by attackers to remotely access devices.

Just a day after reporting an outage that hit virtually all of its services, last night Google (GOOGL) acknowledged a new outage for Gmail that affected a “significant subset” of its users.

Verizon Business (VZ) and Walgreens Boots Alliance (WBA) announced a multi-year strategic partnership where Verizon will deploy their Network as a Service (NaaS) to more than 9,000 Walgreens and Duane Reade retail locations across the U.S.

Facebook (FB) shared it would lift a temporary post-election ban on political ads in Georgia beginning today given the U.S. state prepares for runoff elections next month that will determine which party controls the Senate. The company shared it is also building a new video product, called Super, that will let creators, entrepreneurs, or celebrities host live, interactive video events. Viewers can tip creators by buying them digital gifts or pay to “appear” alongside a creator during the live stream to ask a question or take a selfie.

Camping World (CWH) and Lordstown Motors (RIDE) will work together to build an electric motorhome and Lordstown also plans to use Camping World for nationwide service locations for the Endurance electric pickup truck.

Southwest Airlines (LUV) continues to experience significant year-over-year negative impacts to passenger demand and bookings due to the COVID-19 pandemic. Following several months of modest improvements in close-in leisure passenger demand, the Company experienced a deceleration in improving revenue trends in November 2020 due to a spike in COVID-19 cases, as well as renewed quarantine requirements, travel restrictions, and related government orders. Southwest added that it continues to experience softness in leisure passenger demand and bookings for December 2020, as well as elevated levels of trip cancellations for December travel. China Southern Airlines (ZNH) reported November passenger capacity decreased by 21.36% YoY while China Eastern Airlines (CEA) shared its passenger transportation capacity decreased by 34.52% YoY. Copa Holdings (CPA) saw its revenue passenger miles drop 74.6% in November.

Because of recent dining room restrictions and COVID-19 related impacts, Brinker International (EAT), the home of Chili’s Bar & Grill and Maggiano’s, is withdrawing its financial guidance for the current quarter. We would not be surprised to see other restaurant companies do the same in the coming days.

Quest Diagnostics (DGX) boosted its outlook for the current year, eyeing EPS of at least $10.75 vs. the $9.90 consensus and its prior guidance of $8.22-9.22 as COVID-19 molecular testing volumes have been significantly higher than reflected in the previous outlook.

RingCentral (RNG) has joined the video conferencing league of Zoom Video (ZM), Microsoft (MSFT) Teams, and others with RingCentral Glip, a free, unlimited, video and audio-conferencing tool that includes pre-meeting, in-meeting, and post-meeting capabilities.

Twitter (TWTR) will shut down the live-streaming app Periscope, which it bought in 2015, due to declining usage over the past couple of years and high supporting costs.

IBM (IBM) has acquired fintech company, Expertus Technologies to augment its end-to-end digital payments solution capabilities and its hybrid cloud and AI strategy. Expertus payments and cash management solutions modernize payment operations such as real-time cross-border payment processing.

GoDaddy (GDDY) will acquire payments processor Poynt for $365 million. Poynt's product suite includes point-of-sale systems, payments, invoicing, loyalty and rewards programs, and transaction management across more than 100,000 merchants.

Oshkosh (OSK) has entered into a definitive agreement to acquire Pratt Miller, which specializes in advanced engineering, technology, and innovation across the motorsport and multiple ground vehicle markets, for a cash-free, debt-free purchase price of $115 million.

Honda Motor (HMC) is recalling nearly 1.8 million vehicles worldwide, including 1.4 million in the US in four separate campaigns, including some linked to reported fires.

ContextLogic (WISH) priced its IPO at $24, the upper end of the targeted $22-$24 range, raising ~ $1.1 billion. The company has more than 100 million monthly active users worldwide, selling about 2 million products daily on its e-commerce platform.

After today’s market close, ABM Miller (ABM), Herman Miller (MLHR), and Lennar (LEN) are expected to report their quarterly results. Investors looking to get a jump on those and other such reports to be had in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

• December 17: Weekly jobless claims, Building Permits, Housing Starts
• December 21: Chicago Fed National Activity Index
• December 22: Corporate Profits Q3, GDP Q3 Final, Existing Home Sales, API Crude Oil Stocks
• December 23: Personal Income & Spending, PCE Price Index, New Home Sales, Michigan Consumer Sentiment EIA Energy Stocks
• December 24: Durable Goods, Weekly Jobless Claims, and markets close early
• December 25: Ho ho ho
• December 28: CB Consumer Confidence, Dallas Fed Manufacturing Index
• December 29: S&P/Case-Shiller Home Price Index, API Crude Oil Stocks
• December 30: Goods Trade Balance, Wholesale Inventories, Chicago PMI, Pending Home Sales, EIA Energy Stocks
• December 31: Weekly Jobless Claims and good riddance to 2020!
• January 6: Joint session of Congress counts electoral votes and declares results
• January 20: Chief Justice Roberts swears in the President

Thought for the Day

"Christmas waves a magic wand over this world, and behold, everything is softer and more beautiful." – Norman Vincent Peale

Disclosures

• X is a constituent in the Tematica BITA Digital Infrastructure and Connectivity Index.
• IBM (IBM) is a constituent in the Foxberry Tematica Research Cybersecurity & Data Privacy Index.
• X is a constituent in the Foxberry Tematica Research Sustainable Future of Food Index

IBM (IBM), Microsoft (MSFT), Verizon (VZ), Walgreens Boots Alliance (WBA) are constituents in Tematica Research's Thematic Dividend All-Stars Index.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks Economy Coronavirus Politics