Daily Markets: Investors Remain Optimistic

Today’s Big Picture

Asian markets closed mostly off today with the exception of Taiwan’s TAIEX with a 0.40% gain and the Shanghai Composite reversing its role from yesterday gaining 0.44%. Hong Kong’s Hang Seng was off 0.25%, India’s SENSEX closed down 0.52%, Japan’s Nikkei 225 lost 0.40% and Korea’s KOSPI index fell 1.16% on the day. European markets are mixed in midday trading and US futures currently point to a positive open.

As the markets digest the strong consumer spending numbers announced yesterday, there is a dawning realization that these numbers are boosted slightly by inflation. Still, given the approval of the infrastructure bill and the implications on our ability to clear supply chain bottlenecks, the ongoing talks with China, and the promise of an EV-filled future, investors remain optimistic.

Data Download

Coronavirus

Pfizer (PFE) announced yesterday that it had submitted its application to the FDA for emergency use authorization of its Covid-19 treatment pill. If authorized, it would be the first of its kind specifically designed to fight the virus and has been shown to cut the risk of hospitalization by 89% in high-risk adults when taken in combination with a widely used HIV drug. The company also announced on Tuesday that it will allow generic manufacturers to supply this new antiviral to 95 low and middle-income countries. The FDA could authorize booster doses of the Pfizer/BioNTech (BNTX) COVID-19 vaccine for all adults as early as Thursday.

International Economy

Japan’s exports rose less than expected at 9.4% YoY in October after rising 13% in September and compared to expectations for slowing to 9.9% YoY. Machinery Orders were also weaker than expected, rising 12.5% YoY in September, after rising 17% YoY in August and compared to expectations for an acceleration to 17.4%.

Today brought a range of inflation numbers from Europe and North America which were generally surprises to the upside:

• Inflation in the UK was 4.2% YoY in October from 3.1% in September and compared to expectations for an acceleration to 3.8% YoY. Core inflation posted 3.4%YoY from 2.9% in September and compared to expectations for an increase to 3.1%.
• The Eurozone’s headline inflation rate met expectations at 4.1% YoY in October from 3.4% in September . Core showed 2.0% YoY in October from the 1.9% YoY pace in September and compared to expectations for an acceleration to 2.1%.

Domestic Economy

Tuesday’s Retail Sales for October rose more than expected, up 1.7% MoM, the most in seven months, versus expectations for a 1.5% increase and up 16.3% YoY. Online shopping was the big winner, rising 4.0% MoM and 10.2% YoY. Sales at restaurants and bars were flat for the month, but still up 29.3% YoY.

Industrial Production rose 1.6% MoM in October, well ahead of the expected 1.0% pace, helping to make up for the -1.3% decline in September. Capacity utilization in October rose to 76.4%, its highest level since December 2019, beating expectation for an increase to just 75.8%. Capacity utilization remains well below the recent high of 79.9% in August 2018 and 89.4% in 1967. The good news from these reports is that we are seeing some encouraging signs that supply chain bottlenecks are clearing. For example, auto assemblies were up 1.43 million MoM with improved supply of semiconductor chips. While auto production remains well below potential, the chip supply shock may have turned the corner.

Business Inventories rose 0.7% MoM, as expected.

NAHB Housing Market Index rose more than expected to 83 in November, from 80, where it was expected to remain, making a new 6-month high.

Rising prices were evident in Export Prices for October, which rose 18.0% YoY, accelerating from September’s 16.5% YoY pace, while Import Prices rose more modestly at 10.7% YoY, also up from September’s 9.3% YoY pace.

Later today we will get Housing Starts, Building Permits, and the usual weekly EIA Crude Oil and Gasoline Stocks.

Markets

On Tuesday, markets rebounded from Monday’s small declines, boosted by a stronger-than-expected October retail sales report. The Nasdaq Composite rose 0.8%, the S&P 500 added 0.5% to close within one point of a record high, and the Dow gained 0.2%. Thanks to the better-than-expected retail sales report, the strongest sector yesterday was Consumer Discretionary, gaining 1.4%, followed by Information Technology, which rose 1.1%. The weakest sector was Real Estate, falling 0.7%, followed by Consumer Staples, which lost 0.6%. The U.S. Treasury yield curve continued to steepen, with the yield on the 10-year rising 2.1 basis points and the yield on the 30-year rising 2.2 basis points while the 2-year yield fell 0.4 basis points.

Stocks to Watch

Shares of Activision Blizzard Inc (ATVI) fell 6.0% yesterday in the wake of a report in the Wall Street Journal alleging that CEO Bobby Kotick knew about sexual misconduct allegations, including an alleged rape, at the company and failed to inform the board of directors. Employees are reportedly planning to walk out in protest.

The taser and body camera maker Axon Enterprise (AXON) saw its share price close 6.3% higher after reporting results that utterly blew away expectations after being up over 25% in pre-market trading.

People looking for the 411 yesterday from a wide range of sites instead got a 404 error as a massive Alphabet (GOOGL) cloud outage caused the websites for companies such as Spotify (SPOT), Snapchat (SNAP), Discord, and Home Depot (HD) sites to go down Tuesday afternoon.

Following a beat on both its top and bottom line that saw net sales rise 9.8%, shares of Home Depot were up 5.7% by yesterday’s close, making it the Dow’s biggest gainer for the day.

Watch out Rivan (RIVN), as Lucid (LCID) saw its market cap also blow past Ford’s (F) yesterday with its share price closing up 27.3%, at the highs of the day, following the news that reservations for its first vehicles had jumped over 17,000 from 13,000 in the prior quarter and its production plans for 2022 remain on track. The company’s first vehicle, the Air sedan, started being delivered to customers in late October and can boast an industry-leading 520-mile range. Not to be outdone, Rivian shares also rose yesterday, closing up 15.3%.

IT departments worldwide are breathing a sigh of relief after Microsoft (MSFT) announced yesterday that it is shifting to an annual OS update release cycle, rather than putting consumers through the upgrade joy twice a year.

Peloton (PTON) shares enjoyed their biggest 1-day gain since May 2020, closing up 15.2% to $54.84 yesterday, at the highs of the day, on the news that the company intends to sell nearly 24 million shares of its Class A common stocks at a public offering price of $46, bringing the company a net of around $1.07 billion to help shore up cash as sales slow amidst re-openings.

Qualcomm (QCOM) shares were up as much as 8.8% yesterday, making a new all-time high and closing up 7.6% after the company announced at an investors’ conference in New York that it expects to provide just 20% of the modem chips needed in the 2023 iPhone, but that it expects its entire chip business to grow at least 12% by 2024 despite its business with Apple (AAPL) declining to the low single digits as a percent of its chip business by 2024.

The EV- battery developer QuantumScape (QS) saw its share price close 9.3% lower after Morgan Stanley (MS) announced a downgrade on the shares from buy to neutral based on growing competitive pressures.

The cloud computing firm Rackspace Technology (RXT) was up over 22% during intraday trading, ending 11.3% higher after reporting a slight beat of $0.01 on EPS and a beat on revenue.

Shares of Robinhood (HOOD) closed 3.0% lower yesterday after Atlantic Equities downgraded them from buy to neutral on the basis that there is little cause for shares to rise in the coming months given the company’s inconsistent growth.

SoFi Technologies (SOFI) shares closed 5.3% lower yesterday after the company announced a secondary offering of 50 million shares of its common stock by certain selling shareholders.

Tesla (TSLA) is being sued by JPMorgan (JPM) in a $162 million lawsuit filed in a Manhattan federal district court on Monday over warrants that Tesla issued in 2014.

Walmart (WMT) shares lost 2.6% yesterday, making it the Dow’s worst performer, despite reporting third quarter top and bottom line results that were well above expectations, but digital sales growth was up just 8% versus expectations for 20.5% growth.

Earnings Announcements & Guidance

Before today’s market opens we’ll get the latest quarterly results from Lowe’s Companies (LOW), Target (TGT), TJX Companies (TJX), Baidu (BIDU), and more.

IPOs

With the massive share price gains for Rivian Automotive and Lucid Group over the past week, the Sono Group IPO today is likely to be closely watched. Late last night the company price 10 million shares at $15, right in the middle of its $14 to $16 price range.

Braze (BRZE), whose software helps over 1,000 brands understand their customers better, will begin trading today as well, offering 8 million shares at $55 to $60 each.

Today also brings the first day of trading for Iris Energy (IREN), the latest crypto miner to come to market, and will be trading on the Nasdaq with an offering of 8.3 million shares at $25 to $27 each. The company has positioned itself as an environmentally responsible miner due to its use of the British Columbia Hydro network, whose electricity is 98% sources from clean or renewable sources as of 2021.

For more, visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

NVIDIA Corp (NVDA), Cisco Systems (CSCO), Bath & Body Works (BBWI), Tetra Tech (TTEK), Victorias Secret & Co (VSCO), and Sonos (SONO) will be among those reporting their quarterly results. Those looking for more on which companies are expected to report when should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

• November 18: Weekly jobless claims and Philadelphia Fed Manufacturing Index
• November 22: Chicago Fed National Activity Index, Existing Home Sales
• November 23: Markit Manufacturing and Service PMIs, API Crude Oil stock changes
• November 24: FOMC Minutes, Durable Goods Orders, Wholesale Inventories, Retail Inventories, Corporate Profits, weekly jobless claims, 2nd estimate for GDP, Goods Trade Balance, Personal Income and Spending, New Home Sales, PCE Price Index, Michigan Consumer Sentiment
• November 29: Pending Homes Sales, Dallas Fed Manufacturing Index
• November 30: S&P/Case-Shiller Home Price Index, Chicago PMI, CB Consumer Conference

Thought for the Day

“Gratitude opens the door, the power, the wisdom, the creativity of the universe. You open the door through gratitude.” — Deepak Chopra

Disclosures

• Peloton (PTON) and Tesla (TSLA) are constituents of the Tematica BITA Cleaner Living Index
• Peloton (PTON) and Tesla (TSLA) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index
• Qualcomm (QCOM) and NVIDIA Corp (NVDA), are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
• Home Depot (HD), Microsoft (MSFT), Walmart (WMT), and Target (TGT) are constituents of the Tematica Research 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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Smart Investing Earnings Economy Coronavirus Stocks World Markets