Today’s Big Picture
The major equity indices in Asia-Pacific closed today mostly in the green with South Korea’s Kospi leading the pack, up 1.3%, Hong Kong’s Hang Seng rose 0.4%, Australia’s S&P/ASX 200 added 0.3%, and China’s Shanghai Composite rose 0.1%, while Japan’s Nikkei fell 0.2%. By midday trading, European markets were mostly positive and U.S. equity markets point to a slight gain at the open.
The major driver for the day in U.S. markets is hope for fiscal stimulus as Capitol Hill looks closer to some sort of agreement between Republicans and Democrats. Investors will be looking to today’s Employment Report from the BLS to gauge the health of the labor market as overall markets seem unfazed by ever-rising case counts and record-breaking hospitalizations in the U.S., at least for now. Meanwhile, a potential wrinkle has emerged in Brexit conversations, and details of a fresh round of stimulus in Japan are set to be shared next week – more on both in Data Download.
Data Download
Coronavirus
The U.S. reported yet another record high for Covid-19 related deaths, and daily new infections again were over 200,000 for the second time in less than a week, reaching a record of 210,161 according to the Covid Tracking Project. Hospitalizations rose to over 100,000 for the first time earlier this week, doubling over the past month. Around 25% of intensive-care beds across the country are occupied by a Covid-19 patient, up from 10% in September and according to federal data, more than 1,000 hospitals on Wednesday reported a critical staffing shortage. California Governor Newsom announced plans for stay-at-home orders that will stop all but the most essential businesses and services for three weeks in areas where hospital intensive care unit capacity falls below 15%.
President-elect Biden announced that he will ask Americans to wear a mask for the first 100 days he is in office and will issue an order that masks be worn everywhere the presidency has jurisdiction, which includes all federal buildings and interstate transportation. Former presidents Obama, Bush, and Clinton all said they plan to get vaccinated on camera to boost people’s confidence in the vaccines.
Turns out this whole vaccine thing may be a bit more complicated than the market was hoping it would be. Pfizer (PFE) announced yesterday afternoon that it will only be shipping half (50 million) the expected doses of its coronavirus vaccine by the end of the year. According to a spokesperson for the company, “Scaling up the raw material supply chain took longer than expected.”
Moderna (MRNA) announced yesterday that this month it expects to be able to produce 20 million doses followed by 85 to 100 million for the U.S. in the first quarter of 2021 which would mean it could provide vaccinations for as many as 60 million in the U.S. by the end of March. The vaccine requires two doses per person, four weeks apart. Internationally the company expected to provide 15 to 25 million doses in the first three months of 2020. Overall the company expects to make between 500 million and 1 billion doses during 2021.
International Economy
Prime Minister Yoshihide Suga said Japan’s government will decide on a fresh economic package early next week. Suga said the new package would include an unprecedented 2 trillion yen ($19 billion) fund to promote carbon neutrality in 2050, among a slew of steps to cope with the economic impact of COVID-19.
On the Brexit front, talks have entered a ‘difficult phase’, British Business Secretary Alok Sharma said, saying a deal only be struck if the EU accepts that Britain is a sovereign nation.
Retail sales in Australia rose 1.4% MoM in October after a 1.1% decline in September but were below expectations for a 1.6% increase.
Factory Orders in Germany rose 2.9% MoM on the tails of a 1.1% prior increase, nearly double the expected 1.5% increase.
Eurozone construction PMI for November rose to 45.6, still in contraction, but better than the prior 44.9. The main Euro nations continue to be in contraction as well:
- France barely saw an increase to 42.8 from 42.7 in October
- Germany rose to 45.6 from 45.2
- Italy neared expansion, rising to 49.8 from 48.1
- The UK (soon to be ex-Europe) is in expansion territory and rose from 53.1 to 54.7
- Retail Sales in Italy rose 2.9% YoY, accelerating from last month’s 1.4% increase.
OPEC has confirmed it will cut production by 500K barrels per day (b/d) to 7.2 million b/d starting in January 2021.
France warned that it intends to veto any trade deal between the UK and the EU that does not meet its requirements as negotiators race against the clock.
Domestic Economy
Yesterday Senate Majority Leader Mitch McConnell (R., Ky.) announced that the Democrat leadership’s endorsement of a slimmed-down $908 billion coronavirus stimulus package is a move in the right direction. Democrats had been looking for over $2 trillion in aid while the Republican leadership was thinking more like a quarter of that. Some cause for optimism on the stimulus front here but, Senate Minority Leader Chuck Schumer’s (D., Ny.) comments that the underlying reality of the two parties differences remain and his argument that “the Senate should pass only what Republicans approve of and leave the rest for later,” counters any enthusiasm investors may be feeling for an imminent stimulus package. The current plan contains no stimulus checks, adds $300 per week to unemployment insurance benefits, and does not address the ending of the moratoriums on evictions and foreclosures.
After two weeks of rising jobless claims, yesterday’s report saw initial claims dropping by 75,000 from the prior week’s upwardly revised 787,000, bringing new claims for the week to 712,000, well below the 775,000 expected. Pandemic Unemployment Assistance claims also fell 30,000 to hit a new low. Adjusted continuing claims fell 569,000 this week to 5.52 million, well below the expected decline to 5.8 million. This was the first reading below 6 million since March 20. All that is promising news, but nearly 26% of all those receiving jobless benefits have been unemployed for an extended period, a material headwind to the economy and the full recovery of the labor force.
Yesterday’s ISM Non-Manufacturing survey showed growth slowing in November, much like we saw with the Manufacturing report. The headline index came in slightly stronger than expected, falling to 55.9 from 56.6 versus expectations for a decline to 55.8. This was the sixth consecutive month of expansion but was the lowest read over the past six months.
Later today we will get Nonfarm Payrolls for November from the Bureau of Labor Statistics, Balance of Trade, Unemployment Rate, the Labor Force Participation Rate, and Factory Orders as well as the usual weekly Baker Hughes Oil Rig report.
Markets
All three major indices hit new all-time highs intraday yesterday, but then reversed course on the news from Pfizer concerning supply-chain problems, leaving the S&P 500 basically flat, the Nasdaq Composite up 0.2%, and the Dow up 0.3%. With the slowdown in vaccinations, the tech-heavy (aka work-from-home-friendly) Nasdaq Composite held on to its gains to close at a new record high.
Stocks to Watch
Investors in retail companies ranging from Amazon (AMZN) and Walmart (WMT) to Target (TGT) and Nike (NKE) as well as logistics companies like UPS (UPS) have reason to cheer this morning. Data from ACI Worldwide (ACIW) revealed a 21% YoY increase in global eCommerce transactions in November and a 30% YoY increase over the Thanksgiving to Cyber Monday 2020 period. Per findings from the company, global eCommerce transactions were up 20% YTD through the end of November.
Big Lots (BIG) reported October quarter EPS of $0.76 vs. the $0.66 consensus. Revenue for the quarter climbed 18.0% YoY to $1.38 billion, a touch ahead of the $1.35 billion consensus. During the quarter, the company recorded a 17.8% increase in comparable sales while eCommerce sales rose 70% YoY.
Yesterday Ryanair (RYAAY) announced that it is ordering 75 of the now un-grounded Boeing (BA) 737-MAX jets to the tune of $9 billion. Good news for U.S. manufacturing.
Shares of DocuSign Inc. (DOCU) moved higher in aftermarket trading last night after the company reported stronger than expected October quarter results and boosted its revenue guidance above consensus expectations. For the current quarter, DocuSign guided to revenue of $404-408 million vs. the $387.4 million consensus, with subscription revenue of $384-388 million.
Cloudera (CLDR) also reported better than expected October quarter results with both its top and bottom line besting consensus expectations. Exiting the quarter, the company’s Annualized Recurring Revenue was $756 million, representing 12% year-over-year growth. Cloudera sees EPS for the current quarter in the range of $0.10-$0.12 vs. the $0.10 consensus with revenue of $219-$222 million vs. the $215.2 million consensus.
Shares of Marvell Technology (MRVL) fell in aftermarket trading as the company’s latest quarter results missed revenue expectations. Per the company, “Demand continues to increase, and we are guiding fourth fiscal quarter revenue at the mid-point to grow approximately 5% sequentially. Our team is working to mitigate the impact of industry-wide supply constraints that are currently limiting our ability to fully satisfy the increase in demand.” For the current quarter, Marvell expects revenue of $785 million-plus or minus 5% vs. the $786.4 million consensus.
Despite revenue falling 7.8% YoY, Ulta Beauty’s (ULTA) October quarter results handily beat EPS expectations. Comparable sales for stores open at least 14 months, including stores temporarily closed due to COVID-19, and e-commerce sales decreased 8.9% YoY led by a 15.4% drop in transactions, which was offset by a 7.6% increase in average ticket. The company increased its sales expectations for the current quarter and now expects comparable store sales to 12%-14%.
Shareholders of Intel (INTC), Nvidia (NVDA), Qualcomm (QCOM), Skyworks (SWKS), and other semiconductor companies will want to note the Semiconductor Industry Association found worldwide sales of semiconductors reached $39 billion in October, a 6% YoY increase.
LGI Homes (LGIH) reported 960 home closings in November, up from 748 or 28.3% YoY. That brought the company’s home closings for the first eleven months of 2020 to 7,709, a 16.1% YoY increase.
The US Department of Defense confirmed the addition of China’s top chipmaker SMIC (SMICY) and oil giant CNOOC (CEO) to a blacklist of alleged Chinese military companies. That brings the total number of companies blacklisted by the Trump administration to 35, and a recent executive order issued by Pres. Trump would prevent US investors from buying securities of the blacklisted firms starting late next year.
Southwest Airlines (LUV) told more than 6,800 employees that their jobs are at risk without concessions from labor unions or federal aid as the pandemic continues to cut demand for air travel.
AT&T’s (T) Warner Bros. fired a major shot across the video streaming bow announcing it will send all of its 2021 movies, including Dune, The Matrix 4, and The Suicide Squad, to HBO Max the same day they hit theaters. The 17-film slate will land on HBO Max for a one-month window starting the same day they’ll be available in U.S. theaters.
JM Smucker (SJM) entered into a definitive agreement to sell its Natural Balance premium pet food business to Nexus Capital Management for ~$50 million in cash. The business generated net sales of approximately $220 million in FY20.
Francesca’s Holdings Corp. (FRAN) voluntarily filed for relief under chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware.
Luminar Technologies (LAZR), which produces sensor technology for self-driving cars, made its debut as a publicly-traded company yesterday. Life sciences company Seer (SEER) priced its IPO of ~9.2M shares of Class A common stock at $19.00 per share. DoorDash (DASH) estimates that the initial public offering price per share will be between $90-$95.
After today’s market close, there are no expected quarterly earnings reports to be had. Investors looking to get a jump on reports next week should visit Nasdaq’s earnings calendar page.
On the Horizon
- December 8: Nonfarm Productivity, Unit Labor Costs, API Crude Oil Stocks
- December 9: Wholesale Inventories, JOLTs Report, EIA Crude Energy Stocks
- December 10: Inflation, Weekly jobless claims
- December 11: PPI, Michigan Sentiment, Federal government shutdown if no budget approval is achieved
- December 14: Electoral college votes and sends results to Congress
- December 15: Import and Export Prices, NY Empire State Manufacturing Index, Industrial Production, IBD/TIPP Economic Optimism, Overall Net Capital Flows, Net Long-Term TIC Flows
- December 16: Retail Sales, Markit Manufacturing PMI, Business Inventories, NAHB Housing Market Index, EIA Energy Stocks, FOMC Economic Projections & Press Conference
- 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
“Take a deep breath. Pick yourself up, dust yourself up, dust yourself off, and start all over again.” ~ Frank Sinatra
Disclosures
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
