Daily Markets: Investors Await Election Results As States Continue to Count Votes

Today’s Big Picture

Markets in Asia closed mixed on the day as shares of Alibaba (BABA) were given the Heisman for its planned IPO of Ant Group which was suspended after the Chinese central bank and regulators issued new draft rules for online micro-lending, which could affect Ant Group. The IPO was expected to have been the world’s largest, raising just under $34.5 billion. Shares of Alibaba fell over 8%. The broader Hong Kong Hang Seng index closed down 0.2%, China’s Shanghai Composite rose 0.2%, Japan’s Nikkei 225 rose 1.7%, and South Korea’s Kospi gained 0.6% while Australia’s S&P/ASX 200 closed fractionally lower. By midday trading European markets where mixed and choppy as were U.S. futures.

Despite hopes for a clear decision, we are exactly where many expected - waiting for ballot counting in several key states that will determine the winner of the 2020 presidential election. Officials in Michigan and Pennsylvania say it could take "several days" to count all the ballots and despite President Trump's announcement that he wants "all voting to stop," it looks like the final decision will remain a ways off. It is 2020, after all, so nothing is going to be simple.

Data Download

International Economy

Retail sales in Australia fell 1.1% MoM in September after a 4% decline in August.

Today brought a global cornucopia of final service PMIs for October, which saw growth in China and India, but declines throughout Europe and the UK:

• China’s Caixin rose to 56.8 from 54.8, the second-fastest expansion since August 2010, bringing the Composite to 55.7 from 54.5. The pace of increases in new orders was the third-steepest since September 2010.
• India’s Markit rose to 54.1 from 49.8 (contraction).
• Spain’s Markit fell to 41.1 from 42.2, the fourth consecutive decline, putting the index well in contraction territory. 
• Italy’s IHS Markit fell more than expected to 46.7 from 48.8, versus expectations for a decline to just 47 and the 7th month in 2020 with the index in contraction. The Composite dropped into contraction at 49.2 from 50.4.
• France’s Markit dropped to 46.5 from 47.5 as expected, placing the composite at 47.5 from 48.5. This was the second consecutive contraction in Services and the steepest since May amidst the growing economic restrictions courtesy of the pandemic. 
• Germany’s Markit dropped into contraction at 49.5 from 50.6, but better than the expected decline to 48.9. This was the first contraction in Services in four months.
• Overall for the Euro Area, Markit fell deeper into contraction at 46.9 from 48.0, but better than the expected decline to 46.2. The Composite dropped to 50 from 50.4, slightly better than the 49.4 expected.
• The UK’s Markit/CIPS fell to 51.4 from 56.1 bringing the Composite to 52.1 from 56.5. This was the fourth consecutive month of growth in the Service sector, but each month has been at a slower pace.

Signs of inflation continues to be nonexistent in the Euro Area with its PPI for September increasing slightly to -2.4%YoY from -2.6% previously.

Domestic Economy

Yesterday brought Factory Orders for September which continues to see massive rebounds after the utter collapse in April. The rolling 3-month or 3-month annualized increase in total New Orders rose 72.3% in September. For Durable Goods New Orders, that number is even higher at 134.3%, but for Nondurables, just 29.8%. That sounds massive, but don’t forget the base effects from the lockdowns. Looking at inventory to sales ratios, Total Inventory to Sales was at 1.4 in September with Durable Goods Inventory to Sales at 1.7 and Nondurable at 1.1, all slightly higher than were they were before the pandemic. 

Before U.S. equity markets open, investors will get the weekly MBA Mortgage Applications Index, the October ADP Employment Change Report and September Trade Balance data. Soon after the market open, the October ISM Non-Manufacturing Index will be published as will the weekly EIA Crude Oil Inventories report. 

Markets

Yesterday, the S&P 500 advanced 1.8% while the Nasdaq Composite rose 1.9% and the Dow Jones Industrial Average moved higher by 2.1%. The leader on the day, however, was the small-cap heavy Russell 2000 that finished the day’s trading 2.9% higher. From a sector perspective, ten of the 11 S&P 500 sectors climbed day over day, each rising more than 1.0% led by the 2.9% move in industrials, 3.2% in financials and 2.0% in consumer discretionary. The only sector that finished lower was energy, which did so despite oil prices moving higher. 

The yield on the 10-year Treasury bond closed yesterday at the second-highest level since March, having been steadily rising since the end of September. The spread between the 2-year and 10-year also closed at a cycle high of 72.4 basis points, the widest gap since February 2018.

Stocks to Watch

Supermarket company Royal Ahold Delhaize (ADRNY) reported quarterly revenue growth of 6.8% YoY led by comps sales growth of 10.5% YoY. The company boosted its 2020 EPS outlook to the “high-20% range” and sees free cash flow of at least €1.7B, net of Q4 payment for a U.S. pension plan withdrawal, and capital expenditures of around €2.5B.

Hilton (HLT) reported September quarter EPS of $0.06 vs. the -$0.04 consensus as revenue for the quarter fell 61.0% YoY to $933 million, missing the $966.3 million consensus. System-wide comparable RevPAR decreased 59.9% YoY in the quarter on a currency neutral basis, a hair better than the -61.8% consensus. During the quarter, the company approved 17,400 new rooms for development bringing Hilton's development pipeline to 408,000 rooms exiting the September quarter. As of November 2, 97% of Hilton's system-wide hotels were open.

Cybersecurity company Radware (RDWR) reported top and bottom line September quarter results that edged out the respective consensus forecasts. Revenue growth of 24% for the company’s America region offset the 5% YoY decline at its Europe, Middle East and Africa business and the 27% YoY revenue drop at its Asia-Pacific region. 

Amusement park operator Cedar Fair (FUN) reported mixed September quarter performance with revenue that topped expectations while EPS fell short of the consensus forecast. On its earnings conference call, the management team shared it remains committed to reopening all of its properties for the 2021 season.

Shares of Uber (UBER) and Lyft (LYFT) should see some investor love today following Californians overwhelmingly voting in favor of Proposition 22, a ballot measure that would exempt drivers for app-based transportation and delivery companies from being classified as employees.

Voters in New Jersey, Arizona, Montana and South Dakota voted to legalize recreational marijuana while South Dakota and Mississippi voters approved measures to legalize medical marijuana. One 1 in 3 Americans now live in a state where adult pot use is legal. Investors will likely be assessing this with regard to companies such as Canopy Growth (CGC), Aurora Cannabis (ACB), and Tilray (TLRY) and ETFs that include the Pure US Cannabis ETF (MSOS) and the Pure Cannabis ETF (YOLO).

Shares of tissue company Clearwater Paper (CLW) sank in aftermarket trading following the company sharing that it sees demand for tissue products softening in the current quarter as retail in-stock conditions and inventories have improved. That outlook along with the company’s mixed quarterly results led the shares to trade off in aftermarket trading last night. 

Shares of secure subsystem processing company Mercury Systems (MRCY) tumbled in aftermarket trading last night despite reporting better than expected September quarter results as the company issued downside guidance for the current quarter. Mercury sees revenues for the current quarter in the range of $200-$210 million vs. the $214 million consensus and EPS of $0.48-40.51 vs. the $0.54 consensus. 

Darling Ingredients (DAR) reported September quarter EPS of $0.61, well ahead of the $0.43 consensus despite revenue for the quarter coming in a tad below the consensus forecast. 

After today’s market close, CF Industries (CF), ePlus (PLUS), GoDaddy (GDDY), Green Dot (GDOT), Hyatt Hotels (H), Match Group (MTCH), Nu Skin (NUS), Ping Identity (PING), Qorvo (QRVO), Qualcomm (QCOM), and several dozen other companies will report their quarterly results. Investors looking for more details on those and other reports to be had this week should visit Nasdaq’s earnings calendar page. 

On the Horizon

• • November 5: FOMC Interest Rate Decision, Jobless Claims reports, Productivity, Unit Labor Costs
  • November 6: US October Employment Report, Wholesale Inventories, Consumer Credit
  • November 9: Mortgage delinquencies and foreclosures
  • November 10: Apple (AAPL) event, NFIB Small Business report, JOLTS Report
  • November 11: MBA Mortgage Apps
  • November 12: CPI, Weekly Jobless Report, Real Hourly Earnings, Bloomberg Comfort, Budget Statement
  • November 13: PPI and University of Michigan Sentiment
  • November 16: Empire State Manufacturing
  • November 17: October Retail Sales, Import/Export Prices, Industrial Production, Business Inventories, Capacity Utilization, Homebuilder Sentiment, TIC Flows, Facebook (FB) CEO Mark Zuckerberg and Twitter CEO Jack Dorsey appear before the Senate Judiciary Committee. 
  • November 18: US October Housing Starts, Building Permits, MBA Mortgage Apps
  • November 19: Weekly jobless report, Philly Fed Outlook, Bloomberg Comfort, Leading Index, Existing Home Sales, Kansas City Fed Activity
  • November 20: Options Expiration
  • November 23: Chicago Fed National Activity, Preliminary Markit PMIs
  • November 24: FHFA Home Prices, Case-Shiller Home Prices, Consumer Confidence, Richmond Fed Manufacturing
  • November 25: Personal Income/Spending, PCE, Retail Inventories, GDP, Durable Goods, University of Michigan Sentiment, New Home Sales
  • November 26: Markets Closed for Thanksgiving

Thought for the Day

“We elect our Presidents, be they Republican or Democrat, then start daring ’em to make good.” ~ Will Rogers

Disclosures

• Qorvo (QRVO), Qualcomm (QCOM) are constituents in the Tematica BITA Digital Infrastructure and Connectivity Index.
• Ping Identity (PING), Radware (RDWR) are constituents in the Foxberry Tematica Research Cybersecurity & Data Privacy Index.
• Nu Skin (NUS) is a constituent 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.

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Elections Stocks Coronavirus Earnings