Market Recap Week Ending October 23rd

October 24, 2020

Monday – Dow (410)to 28,195 NDAQ (192)to 11,478 and the S&P (57) to 3,426. Speaker Pelosi’s 48-hour deadline to agree to the next stimulus bill, lack of momentum to come to an agreement and the resurgence of Covid19 infections pushed the markets lower today. In fact, the consensus now is that even if the White House and the Speaker come to an agreement, the Senate Republicans will rebel and vote against the measure as many GOP senators find themselves in tight re-election races. All 11 S&P sectors were down today (energy was the worst performer again). Intel (INTC) traded 1.2% higher in after-market trading after announcing it will sell its NAND memory and storage business for $9 billion to South Korean chip maker SK Hynix. IBM (IBM) traded down 3% post close after reporting its third consecutive quarter of declining revenues.

Tuesday – Dow +113 to 28,308 NDAQ +37 to 11,516 and the S&P +16 to 3,443. Stimulus loves me, she loves me not…the negotiations continue with positive comments from Speaker Pelosi and Secretary Mnuchin. The question remains: will the Senate GOP fall in line or do they no longer fear the President..? Proctor and Gamble (PG) beat numbers, raised its 2021 forecast and traded up slightly…Moderna (MRNA) expects interim results from its Covid19 vaccine trial in November and authorization by the U.S. government for emergency use in December; the stock traded up 0.50%…Travelers (TRV) beat numbers and traded up 5.6%…Airlines and cruise lines traded higher on the stimulus comments…September housing starts missed expectations and August housing starts were revised lower…The Department of Justice announced an antitrust lawsuit against Alphabet (GOOG). Eleven Republican state attorneys joined the DOJ as plaintiffs…AMC Entertainment (AMC) dropped 11% after announcing a secondary offering; within the prospectus the company noted the very real possibility of a bankruptcy due its precarious cash position…Netflix (NFLX) missed on earnings, beat on revenues, and missed on subscriber growth. The streaming service company traded down 5.7% post close…

Wednesday – Dow (97) to 28,210 NDAQ (32) to 11,484 and the S&P (7) to 3,435. The rosy talk regarding stimulus talks continued today with few new details. However, as I noted yesterday, it seems unlikely that the Senate will be inclined to pass any deal larger than their “skinny deal.” Reports today had Senate Majority Leader telling his caucus at a private lunch that he is encouraging the White House not to agree to any stimulus bill that may divide the GOP before the election…The Beige Book was released and showed slight to modest economic growth across the U.S. over the last 7 weeks…PayPal (PYPL) announced it will allow users to buy, hold, and sell cryptocurrencies; Bitcoin jumped 7% on the news to $12,755/coin…Snap (SNAP) traded higher on good numbers suggesting good times ahead for online advertising…AstraZeneca (AZN) shares fell after a volunteer in a Covid-19 vaccine trial died. The company said that an independent review showed no health concerns regarding the trial and that it would continue…Tesla (TSLA) reported third quarter results that beat on both the top and bottom line. This is the company’s 5th consecutive profitable quarter….

Thursday – Dow +152 to 28,363 NDAQ +21 to 11,506 and the S&P +18 to 3,453. Jobless claims surprised expectations; 787,000 claims were filed vs expectations of 870,000 claims, a beat of nearly 100,000! This is the first time initial claims have been under 800k since March. Continuing claims were also better at 8.73 million vs expectations of 10 million. Despite the better data, the markets did not rally until more positive talk regarding the stimulus bill came from House Speaker Pelosi. Energy and banks, the redheaded stepchildren of 2020, rallied more than 4% and almost 2% respectively…Coca Cola (KO) beat expectations and traded up 1.38%…Chipotle (CMG) beat top and bottom-line estimates but traded down nearly 5% due to higher reported costs…American Airlines (AAL) lost $2.4 billion in the 3rd quarter but traded up 3% because it reduced its cash burn..? AT&T (T) beat numbers and traded up nearly 6%…Existing home sales surged in September, beating expectations…Las Vegas Sands (LVS) reported a smaller than expected loss and traded up more than 8%…Southwest Air (LUV) traded up like American despite its biggest quarterly loss in its history (though like AAL it also cut its cash burn)…The FDA approved Gilead’s (GILD) remdesivir for Covid19 treatment….

Friday – Dow (28) to 28,335 NDAQ +12 to 11,548 and the S&P +12 to 3,465. Talk on the stimulus bill both positive (Mnuchin, Pelosi) and negative (Trump, Kudlow) contributed to the directionless trading of today’s markets. Intel (INTC) dropped 10% after reporting their Q3 earnings which revealed a slowdown in their data center business and confirmed a delay in their latest generation chips…Toy maker Mattel (MAT) jumped 9.5% today on better than expected earnings…Fastly (FSLY), which had seen an incredible rally in its stock since the pandemic began in March, was hit by a downgrade from Piper today. The stock traded down 3.5% to settle at $76.35/share, down from its all-time peak of $136.50/share reached just before they reported disappointing earnings on October 15th…American Express missed their numbers and traded down 3% on weaker customer spending…AstraZeneca (AZN) and Johnson and Johnson (JNJ) announced that the FDA has given both companies clearance to resume their CVD19 vaccine trials in the U.S…

The week in review…Dow (271) or (0.95%) NDAQ (123) or (1.1%) and the S&P (18) or (0.50%). The Senate Judiciary Committee recommended the confirmation of Amy Coney Barrett to the Supreme Court. The full Senate will take up her confirmation and is expected to confirm her with a vote on Monday. The final presidential debate was last night and while more Presidential, it is unlikely that any minds were changed due to the candidate’s respective performances. Jobless claims declined materially this week signaling good news for job seekers and a positive data point for those worried about the economic recovery. Treasury yields moved higher throughout the week. The benchmark 10-year Treasury closed at 0.859%, its highest level since June. This is likely due to expectations of a stimulus package being passed no later than February of 2021 no matter the results of the election on November 3rd. It is also interesting to note that a steepening yield curve, that is to say, when it costs increasingly more to borrow money for a longer period of time, is an indication of a strong and growing economy…With just over a quarter of the 500 S&P companies having reported so far, 84% of them have beaten their 3rd quarter earnings estimates; big tech will be in focus next week as Apple (APPL), Facebook (FB), and Alphabet (GOOG) are scheduled to report.