Daily Markets: Investors Keeping An Eye on Washington

Today’s Big Picture

Equities in Asia for the most part traded off today, with Japan’s Nikkei slumping 1.0%, Hong Kong’s Hang Seng falling 0.7% and China Shanghai Composite closing 0.4% lower. By mid-day trading, equities in Europe were mixed and U.S. futures also pointed to a mixed market open later this morning.

While today is a relatively quiet one of the economic data front, investors contend with a sea of quarterly earnings reports today while also keeping at least one eye on Washington. Today, Senator Amy Klobuchar (D-Minnesota), who is set to lead the Senate Judiciary antitrust panel, is expected to introduce a new antitrust plan dubbed the Competition and Antitrust Law Enforcement Reform Act that could impact Big Tech companies such as Facebook (FB) and Google (GOOGL) as well as “other industries with just a few dominant companies.”

Also today, Treasury Secretary Janet Yellen is expected to meet with the heads of the Securities and Exchange Commission, the Federal Reserve Board, the New York Fed, and the Commodities Futures Trading Commission, to discuss “whether recent activities are consistent with investor protection and fair and efficient markets.” And last night, House Democrats won the vote to approve a budget bill that would unlock special rules in the Senate allowing Biden’s $1.9 trillion relief package to pass with a simple majority rather than requiring the needed 60 votes. The Senate is expected to act on the same legislation later in the week.

Data Download

International Economy

Germany’s Construction PMI for January fell to 46.6 from December’s 47.1.

The UK’s Construction PMI for January sank to 49.2 from 54.6 in December, missing the expected reading of 52.9.

Retail Sales in the Eurozone rose 0.6% YoY in December, better than the expected 0.3% but a sharp step slower than the 2.95 YoY growth registered in November.

The Bank of England kept its Bank Rate at a record low of 0.1% and the size of its bond-buying program unchanged at £875 billion during its first meeting of 2021

Domestic Economy

Yesterday the Bureau of Labor Statistics updated its track of metro area unemployment rates, painting a dour picture with unemployment rising in the Kahului area the most, up to 10.8%; Odessa, Texas next at 8.6%; Pueblo, CO at 7.7%; and Las Vegas at 6.9%.

Market Services PMI came in slightly below November’s level, which was the strongest since 2015, driven by growth for foreign orders and U.S. services firms.

Yesterday’s ADP employment report bounced back in January with companies adding 174,000 new jobs, after December’s upwardly adjusted decline of 78,000, beating estimates for a gain of just 50,000. The bulk of the gain came from services, accounting for 156,000 of the total gain.

Later today we will get Nonfarm Productivity for Q4, Factory Orders for December, and the usual weekly jobless claims reports.

Markets

The major equity indices were relatively unchanged yesterday with both the S&P 500 and the Dow adding 0.1% and the Nasdaq Composite fell slightly under 0.1%.

Stocks to Watch

Investors have a sea of corporate earnings to swim through this morning, including those from Cummins (CMI), The Hershey Company (HSY), International Paper (IP), The New York Times (NYT), Parker-Hannifin (PH), Canada Goose (GOOS), and Ralph Lauren (RL).

Nokia (NOK) reported better than expected December quarter revenue and EPS and issued in-line guidance for 2021 that includes revenue of €20.6-21.8 billion vs. the €21.36 billion consensus. The company will provide a long-term outlook latest at Capital Markets Day on March 18 but the Board does not propose a dividend or dividend authorization for the financial year 2020. That dividend policy will also be updated at the upcoming Capital Markets Day.

Qualcomm (QCOM) reported mixed December quarter results with EPS that topped consensus forecasts while revenue for the quarter fell a tad short of expectations despite rising 63% YoY. The company issued in-line guidance for the current quarter with EPS of $1.55-1.75 vs. the $1.56 consensus on revenue of $7.2-8.2 billion vs. the $7.07 billion consensus. Qualcomm noted that its December quarter results would have been stronger absent supply constraints and expects 2021 handset volume to grow in the high single digits.

RF semiconductor company Qorvo (QRVO) crushed December quarter EPS expectations as revenue rose 26.6% YoY, modestly beating the consensus forecast. For the current quarter, Qorvo expects revenue of $1.025-1.055 billion, well above the $945.5 billion consensus with EPS of $2.42 at the revenue midpoint vs. the $1.31 consensus as the deployment of 5G, the roll-out of Wi-Fi 6 and 6E, and emerging technologies like precision location ultra-wideband continue. In the March quarter, at the midpoint of its guidance, Qorvo sees its mobile revenue rising 35% YoY.

Costco Wholesale (COST) reported comp sales for January that were up 15.9% YoY, blowing away expectations for an increase of just 11.8%. Ex fuel and FX, comps were up 16.4% YoY.

PayPal (PYPL) reported December quarter EPS that topped expectations and revenue for the quarter that rose 23.3% YoY, matching consensus expectations. During the quarter, the company’s Total Payment Volume (TPV) rose 39% YoY to $277 billion and added 16.0 million Net New Active Accounts (NNAs). For the current quarter, PayPal sees revenue rising ~28% YoY, 4.4% higher than expectations, and forecasts EPS up ~50% YoY.

eBay (EBAY) reported better-than-expected revenue, 6.3% higher than estimates, an EPS beat by $0.04 and Q1 guidance for adjusted EPS 21% to 27% over estimates and revenue 16% to 18% above estimates on top of adding $4 billion to its buyback authorization.

Semiconductor capital equipment company KLA Corp. (KLAC) reported December quarter results that beat consensus revenue and EPS expectations. The company ended 2020 “with strong backlog setting the stage for double-digit growth in 2021” and noted digital transformation is enabling secular demand drivers such as high-performance computing, artificial intelligence, and rapid growth in new automotive electronics, and 5G communications markets. For the current quarter, KLA sees EPS of $3.23-3.91 vs. the $3.22 consensus on revenue of $1.665-1.815 billion vs. the $1.61 consensus.

Top and bottom-line results at Yum China (YUMC) topped consensus expectations for the December quarter despite same-store sales in the quarter falling 4% YoY, with declines of 4% at KFC and 5% at Pizza Hut. The company shared traffic at transportation hubs remained significantly below the prior year due to reduced travel and the impact of regional pandemic resurgences has continued into the current quarter. Yum China shared the important Chinese New Year holiday season will be subdued, with sales impacted by substantially less travel, smaller gatherings, and generally reduced social activities.

American Airlines (AAL) sent a letter to employees notifying them the company will begin issuing Worker Adjustment and Retraining Notification notices covering ~13,000 team members tomorrow.

After today’s market close, Activision Blizzard (ATVI), Deckers Outdoor (DECK), Ford Motor (F), Fortinet (FTNT), Peloton (PTON), Pinterest (PINS), Skechers USA (SKX), Snap (SNAP), Wynn Resorts and dozens of other companies are is expected to report its quarterly results. Investors looking to get a jump on that report and other such ones to be had in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

• February 5: Nonfarm Payrolls, Balance of Trade
• February 8: Consumer Inflation Expectations
• February 9: JOLTs report, weekly Redbook report, WASDE Report, weekly API energy stocks
• February 10: MBA Mortgage Applications, Inflation rate, Wholesale Inventories, weekly EIA Energy stocks, monthly budget statement
• February 11: Weekly jobless claims
• February 12: Lunar New Year in China: Year of the Ox, Michigan Consumer Sentiment, weekly Baker Hughes Oil Rig count
• February 16: NY Empire State Manufacturing, weekly Redbook, Net Capital Flows
• February 17: Retail Sales, PPI, Industrial Production, Capacity Utilization, Manufacturing Production, Business Inventories, NAHB Housing Market Index, FOMC Minutes, weekly API Crude Stock
• February 18: Housing Starts, Building Permits, Philadelphia Fed Manufacturing, weekly Jobless Claims, Import and Export Prices, EIA energy stocks
• February 19: Markit Manufacturing and Service PMI (flash), Existing Home Sales, weekly Baker Hughes Oil Rig report
• February 22: Chicago Fed National Activity, Dallas Fed Manufacturing
• February 23: S&P/Case-Shiller Home Prices, CB Consumer Confidence, weekly API Crude Oil Stocks
• February 24: New Home Sales, weekly EIA Energy Stocks
• February 25: Durable Goods, Weekly Jobless Claims, Pending Home Sales
• February 26: Personal Income & Spending, Goods Trade Balance, Chicago PMI, Michigan Consumer Sentiment

Thought for the Day

“Don’t bother just to be better than your contemporaries or predecessors. Try to be better than yourself.” ~ William Faulkner

Disclosures

• Nokia (NOK), Qorvo (QRVO), Qualcomm (QCOM) are constituents of the Tematica BITA Digital Infrastructure and Connectivity Index.
• Fortinet (FTNT) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index.
• The Hershey Company (HSY), Costco Wholesale (COST), Qualcomm (QCOM) are constituents in Tematica Research's Thematic Dividend All-Stars Index.
• Peloton (PTON) is a constituent of Tematica Research’s Cleaner Living 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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