Daily markets: are the bulls back?

The big picture of today

U.S. equity markets are bullish again after closing in the green for five straight days, likely largely because 83% of the 53 S&P 500 companies that have released so far have beaten estimates. Expectations are on the rise, analysts now expecting EPS growth of 32.4% against 14% in the third quarter at the start of the year. The debt ceiling debate, inflation fears, speeches about cutting spending and supply chain disruptions have all faded into the background.

Stocks in Asia-Pacific were mixed today, with Hong Kong’s Hang Seng up 1.4%, Australia’s ASX 200 adding 0.5% and Japan’s Nikkei 225 up 0, 1%. On the other side of the spectrum, South Korea’s Kospi lost 0.5%, Shenzhen’s Chinese component lost 0.3%, and its Shanghai Composite lost 0.2%. By midday, European stocks were relatively directionless and mixed with US equity futures indicating little change at the open.

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Coronavirus

At one point as an example of successful handling of a pandemic, the UK is now facing a rising death toll which reaches the highest levels since March with cases exceeding 40,000 per day during the week last and daily hospitalizations of nearly 1,000 for the first time in more than a month. Health leaders are calling for Covid-19 emergency plans, including mandatory masks, vaccine passports and work-from-home orders … again.

The FDA may approve a mixed vaccine recall strategy later today, when it is expected to announce the authorization of Moderna (mRNA) and Johnson & Johnson (JNJ) boosters.

International economy

Japanese exports slowed in September, from 26.2% yoy in August to 13% yoy, but still exceeded expectations of an 11% increase. Imports were also stronger than expected, increasing 38.6% year-on-year from 44.7% year-on-year in August, but above the expected decline of 34.1%.

The People’s Bank of China held benchmark rates steady for the 18th consecutive month in October, leaving the 1-year prime rate at 3.85% and its 5-year rate at 4.65%. The national house price index slowed to 3.8% year-on-year in September after rising 4.2% in August. On a monthly basis, new home prices fell on average in major Chinese cities in September, the first such decline in six years.

Germany’s producer price index (PPI) unexpectedly rose to 2.3% mo in September, against expectations of a slowdown to 1.0% after rising 1.5% yoy annual in August. On a year-over-year basis, the PPI rose 14.2% yoy in September, accelerating from the 12% yoy pace in August and exceeding the expected increase to 12.7%.

The UK inflation rate unexpectedly slowed to 3.1% year-on-year in September, from 3.2% in August, where it was expected to remain. Core inflation also slowed more than expected, falling to 2.9% year-on-year in September from expectations of slowing to 3.0% from August’s 3.1% pace. PPI production increased to 6.7% year-on-year in September from 6.0% in August, lower than the expected increase of 6.8%. PPPI Input increased less than expected to 11.4% from 11.2%, against the expected acceleration to 11.6%.

The Eurozone saw September inflation accelerate as expected to 3.4% yoy from 3.0% in August, while core inflation also increased as expected to 1.9% yoy from 1 , 6% in August.

Domestical economy

Yesterday’s Census Bureau residential construction report in September was a double disappointment with weaker-than-expected housing starts and building permits in addition to a downward revision to August data. The only bright spot (a bit) is that all the weakness is in multi-family units as single-family housing starts remained unchanged between August and September with permits down less than 1%. Multi-family housing starts fell 5% and 18.3% on permits.

Today brings the EIA’s weekly crude oil and gasoline inventories, and we’ll hear Quarles from the Federal Reserve.

Markets

Yesterday, the Nasdaq 100, the Nasdaq Composite and the S&P 500 all rose 0.7%, enjoying their fifth consecutive day of gains. The Dow Jones rose another 0.6% while the Russell 2000 underperformed with only a 0.4% gain. Copper fell 0.9%, crude gained 0.5% and the 10-year Treasury yield rose above 1.6% while the US dollar fell 0.3%.

Crypto had a chance yesterday (like it needed it), with bitcoin advancing over 4% to nearly $ 65,000 yesterday, thanks in large part to the first day of trading in the ProShares Bitcoin Strategy ETF (BITO), the first US ETF linked to bitcoin. On day one, the trading volume was around $ 1 billion.

Actions to watch

Before the US stock markets open this morning, Abbot Labs (ABT), ASML (ASML), Canadian Pacific (CP), NextEra Energy (NEE), Verizon (VZ), and Winnebago (WGO) will be among the companies that will publish their quarterly results.

Netflix (NFLX) released after yesterday’s close, beating on growth in subscriber numbers (up 4.38 million from expectations of 3.72) and forecasted growth in number of subscribers (8.5 million against 8.32 million expected). EPS was 25% above expectations, but fourth-quarter EPS was down 27% below forecast, or 9% above expectations for both combined. The company benefits from growing free cash flow thanks to both the growth in sales and the huge expansion of margins, with an EBITDA multiple that has more than doubled in recent years.

United Airlines (UAL) reported operating revenue 2.1% above expectations, but passenger revenue 1.2% below expectations. Non-passenger revenues come mainly from air freight and have been slashed by 26% thanks to global air freight prices that have gone parabolic. Adjusted EPS is still missing by nearly $ 0.60, but management said the company is on track to meet its targets with 2022 capacity 5% higher than 2019 despite fourth quarter 2021 revenue expected to be 25 to 30% lower in the fourth quarter of 2019.

Interactive Brokers (IBKR) reported a 25% shortfall on consensus revenue, with EPS also well below leaner forecasts. Both were motivated by a significant drop in the value of the company’s investment in a finch brokerage. On the positive side, customer transactions and cleared transactions both increased 24% year-on-year, and margin loan balances increased 67% year-on-year.

Reports to suggest Facebook (FB) will rename the company with a new name in the coming week. The company is hosting its Facebook Connect conference on October 28, but the rebranding could be unveiled ahead of that event.

Axes reports growth in the number of subscribers for Microsoft (MSFT) signature game service, Xbox Game Pass, has been slower than the company hoped for last year

Union Pacific (UNP) switched to 24/7 operations at its California plant to alleviate bottlenecks in the supply chain.

We work is required to intervene on the public market by merger with an ad hoc acquisition company (SPAC) BowX Acquisitions (BOWX), and the combined entity will start trading tomorrow under the ticker WE. The company continues to have negative cash flow, bleeding $ 2.1 billion in the first quarter of 2021 after exiting more than $ 3.2 billion in 2020.

After today’s market closes

CSX (CSX), IBM (IBM), Lam Research (LRCX), Las Vegas Sands (LVS) and Tesla (TSLA) are expected to release their quarterly results. Those looking to get a glimpse of the revenue reports to be had in the coming days should visit the Nasdaq revenue calendar page.

On the horizon

  • October 21: Weekly Unemployment Claims, Philly Fed Manufacturing Index, Existing Home Sales
  • October 22: Markit Service and Marketing PMI (flash)
  • October 25: Chicago Fed National Activity Index, Dallas Fed Manufacturing Index
  • October 26: S & P / Case-Shiller Home Price Index, New Home Sales, CB Consumer Confidence
  • October 27: durable goods orders, wholesale inventories, durable goods, goods trade balance
  • October 28: Q3 GDP (advance estimate), weekly jobless claims, pending home sales
  • October 29: Personal income and expenditure, PCE price index, Q3 employment cost, Chicago PMI, Michigan consumer sentiment

Thought of the day

“If a year was hidden in a clock, then fall would be the magic hour.” -Victoria Erickson

Disclosures

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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