TradeTheNews.com Weekly
Market Update: S&P Holds, Small Caps and NASDAQ Not Out of the Woods Yet as
Q3 Earnings Season Kicks Off
Fri, 19 Oct 2018 16:09 PM EST
Stock markets opened the week in a precarious state, but a big rally on Tuesday
calmed concerns for some, at least temporarily. Volatility and significant
price swings resumed along with relentless selling pressure in China’s stock
market. US small caps and the NASDAQ continued to largely underperform deep
value shares and that overall market. US Treasury yields drifted up towards the
top of the recent ranges and the FOMC minutes Wednesday only confirmed the Fed
remains ready to take rates even higher. Pockets of weakness popped up in a
host of early key industrial Q3 earnings reports, tempering expectations
despite economic reports that continued to point to a robust US economy.
Tariffs, inflation, and a strong US dollar remained the underlying factors
cited by most managements.
Geopolitics stayed front and center, as well, with EU member budget wrangling
and intense Brexit deliberations resulting in bouts of risk aversion. Little
progress was seen on Brexit and to this point a November meeting has not been
secured. Italian bond yields rose after the EU essentially rejected the Italian
budget proposal in its current form ahead of a final decision next week. The
spread between the 10-year BTP yield and that of the German Bund reached the
widest level in more than 5 years. President Trump ratcheted up immigration
rhetoric heading towards November midterms and his advisors continued to talk
tough on China despite reports that President Trump and Xi would meet on the
sidelines of G20 next month. His administration was also forced deal with the
fallout of the apparent murder of Washington Post journalist Khashoggi while in
the hands of the Saudis. It remains to be seen how the foreign policy crisis
will play out, but oil prices seem to be shrugging it off to this point. At one
point WTI crude fell nearly 8% off the recent Oct 4th high. By Friday, options expiration
led to a jump in volumes and trepidation remained high considering the recent
jump in volatility and the well-chronicled history around late Oct trading. The
S&P 500 cash finished the week just below the 200-day moving average for
the first time in more than a year. For the week the S&P was essentially
flat, the Dow gained 0.4% and the NASDAQ lost 0.6%
In corporate news this week, earnings season got rolling with reports from
various large cap names. Netflix shares rose initially after announcing a jump
in subscriptions but quickly gave back those gains back affirming the ominous
pall that has settled over the NASDAQ/high beta complex. IBM fell on another
disappointing quarterly report. Alcoa surged on an earnings blowout and boost
to its buyback plan. Bank of America reported in line but shares dropped amid
uncertainty over the sustainability of paying out low yields, while Schwab fell
on a revenue miss and lower sequential new brokerage account numbers. Friday
the Dow got a huge boost from P&G shares, surging closet to 10% after
reporting impressive sales growth across nearly all its segments. On the
M&A front, Carl Icahn reportedly is accumulating a significant stake in
Dollar Tree, Walgreens CEO Pessina said has not ruled out deal with AmerisourceBergen,
and casino magnate Tilman Fertitta reportedly approached Caesars about a
potential bear hug $13/shr merger deal in cash and stock.
SUN 10/14
HRS Confirms deal with L3 Technologies in a merger of equals; Cash EPS
accretive in first full year post close; $500M of annual gross pre-tax cost
synergies in year 3; $300M net of savings returned to customers
MON 10/15
BAC Reports Q3 $0.66 v $0.62e, Rev $22.8B v $22.6Be
*(US) OCT EMPIRE MANUFACTURING: 21.1 V 20.0E
(US) Sept Monthly Budget Statement: $119.1B v $108Be
(SA) Saudi Government is planning to acknowledge Khashoggi died during an
interrogation that went wrong, and the operation was "carried out without
clearance" - CNN
TUES 10/16
*(UK) AUG AVERAGE WEEKLY EARNINGS 3M/Y: 2.7% V 2.6%E; WEEKLY EARNINGS (EX
BONUS) 3M/Y: 3.1% V 2.9%E
(UK) SEPT JOBLESS CLAIMS CHANGE: +18.5K V +8.7K PRIOR; CLAIMANT COUNT RATE:
2.6% V 2.6% PRIOR
(DE) GERMANY OCT ZEW CURRENT SITUATION: 70.1 V 74.4E; EXPECTATIONS SURVEY:
-24.7 V -12.0E
WMT Adjusts FY19 $4.65-4.80 v $4.80e (inc FlipKart) (prior $4.90-5.05), Op
Income to increase low single digit % (ex Flipkart) - ahead of investor meeting
GS Reports Q3 $6.28 v $5.42e, Rev $8.65B v $8.37Be
(US) SEPT INDUSTRIAL PRODUCTION M/M: 0.3% V 0.2%E; CAPACITY UTILIZATION: 78.1%
V 78.2%E
*(US) AUG JOLTS JOB OPENINGS: 7.136M V 6.900ME (new record)
(UK) Cabinet reportedly informed by Chief Whip that Brexit Irish backstop will
not pass parliament, does not have sufficient votes - press
CSX Reports Q3 $1.05 v $0.94e, Rev $3.13B v $3.04Be
NFLX Reports Q3 $0.89 v $0.68e, Rev $4.00B v $4.01Be
IBM Reports Q3 $3.42 v $3.40e, Rev $18.8B v $19.1Be
BHP.AU Reports Q1 Waio iron ore production 69Mt v 71Mte; attributable iron ore
production 61Mt v 62Mte v 64Mt y/y
WEDS 10/17
ROG.CH Reports Q3 (CHF) Rev 14.0B v 13.9Be
*(UK) SEPT CPI M/M: 0.1% V 0.3%E; Y/Y: 2.4% V 2.6%E
*(EU) EURO ZONE SEPT FINAL CPI Y/Y: 2.1% V 2.1%E; CPI CORE Y/Y: 0.9% V 0.9%E
(US) SEPT HOUSING STARTS: 1.201M V 1.21ME; BUILDING PERMITS: 1.24M V 1.28ME
*(US) DOE CRUDE: +6.5M V +1.5ME; GASOLINE: -2.0M V -0.5ME; DISTILLATE: -0.8M V
-1ME
(US) Association of American Railroads weekly rail traffic report for week
ending Oct 13th: 549.8K, +1.7% y/y
*(US) FOMC MINUTES FROM SEPT 26TH MEETING: GENERALLY ANTICIPATE FURTHER GRADUAL
RATE INCREASES; ESTIMATES OF NEUTRAL RATE WILL BE ONLY ONE OF MANY FACTORS TO
CONSIDER IN FUTURE POLICY
AA Reports Q3 $0.63 v $0.25e, Rev $3.39B v $3.36Be; Adds $200M to buyback plan
(3% of market cap)
(US) Treasury Currency Report: Refrains from naming China as currency
manipulator (as expected); keeps same six countries on FX watch list
*(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.50% (AS
EXPECTED)
THURS 10/18
SAP.DE Reports Q3 Non-IFRS Net €973M v €1.03Be, non-IFRS Op €1.74B v €1.80Be,
Rev €6.03B v €6.02Be
TSM Reports Q3 (NT$) Net 89.1B v 89.9B y/y; Op 95.2B v 98.1B y/y; Rev 260.3B v
252.1B y/y
- 2019 sales to grow on the 'high side' of 5-10% range
UNA.NL Reports Q3 Rev €12.5B v €12.5Be
*(UK) SEPT RETAIL SALES (EX AUTO) FUEL M/M: -0.8% V -0.4%E; Y/Y: 3.2% V 3.8%E
*(US) OCT PHILADELPHIA FED BUSINESS OUTLOOK: 22.2 V 20.0E
(IT) EU Commission responds to Italy draft budget plan: points to
"particularly serious" non-compliance; says Italy plans
"unprecedented" deviation from budget rules
CP Reports Q3 C$4.12 v C$4.12e, Rev C$1.99B v C$1.88Be
*(CL) CHILE CENTRAL BANK (BCCH) RAISES OVERNIGHT RATE TARGET BY 25BPS TO 2.75%,
AS EXPECTED
(CN) China Securities Regulator (CSRC) Chief Liu: China will support non-state
backed listed companies
(CN) CHINA Q3 GDP Y/Y: 6.5% V 6.6%E (slowest growth since Q1 2009)
(CN) CHINA SEPT INDUSTRIAL PRODUCTION Y/Y: 5.8% V 6.0%E (slowest growth since
2016)
FRI 10/19
(US) SEPT EXISTING HOME SALES: 5.15M V 5.29ME (lowest since Nov 2015)
