Weekly Market Update: Markets temporarily inoculated against risks of Covid winter and delays in approving new relief funding
The broader narrative this week remained the confluence of positive news on coronavirus vaccine development weighed against surging infections and rapidly rising hospitalizations into the upcoming Thanksgiving holiday. US indices generally notched the week’s high on Monday in the wake of the release of Moderna’s trial results which resulted in another flurry of buying in pandemic-stricken names. By Friday, Pfizer and BionNTech formally submitted a request to the FDA for emergency use authorization but stay at home sector names were already rebounding as momentum waned in the broader market. Treasury yields were capped by the persistent risk to the near term economic outlook caused by the surging pandemic, and lingering uncertainty emanating from President Trump’s spiraling attempt to contest the election results. The US economic data showed some signs of softening amid commentary from both corporate leaders and Federal Reserve officials who acknowledged the recent spike in Covid cases is posing risks to their near term outlooks. The dollar weakened, hurt by continued dysfunction in DC. Given the current political environment hopes for another round of fiscal stimulus remain faint in the near term, and a rift developed between Treasury Secretary Mnunchin and the Federal Reserve on how to deal with the expiration of the Fed’s emergency 13-3 lending powers. New EU coronavirus relief funds were also held up by political skirmishes in Europe, while any Brexit trade deal now appears to be at least another two weeks away. For the week, the S&P slipped 0.8%, the DJIA fell 0.7%, and the Nasdaq rose 0.2%.
In corporate news this week, Moderna announced its COVID-19 vaccine candidate met primary endpoints with 94.5% efficacy in its Phase 3 trial, and plans to submit it for emergency use authorization with the FDA in coming weeks. Boeing received the long-awaited and largely expected FAA approval for its 737 MAX jet to take to the skies again, after being grounded since 2019. On the retail front, Home Depot notched top and bottom line beats but warned of rising employee expenses, Lowes narrowly missed profit estimates, Target crushed earnings and gained market share, while Walmart posted another solid quarter though it still refrained from reinstating guidance. Nvidia easily surpassed analyst estimates but saw its Q3 gross margins decline by 50 bps and forecast that its data center segment revenue would shrink quarter-on-quarter.
PNC agreed to acquire BBVA’s U.S. banking subsidiary for $11.6B in cash with the aim to expand its banking branch reach coast-to-coast. Home Depot announced it would buy its former subsidiary HD Supply for $56/share in an $8B cash deal as it seeks to grow its maintenance and repair distribution network in North America. Amazon entered the prescription drug sector with its launch of Amazon Pharmacy, a service to deliver medications and offer savings to customers when paying without insurance. In a bid to stave off further pushback from developers, Apple announced it would halve its App Store commission to 15% for small businesses, down from 30%, though the higher fee remains for larger companies. Google said it plans to begin offering checking accounts with banks in an update to its Google Pay app. Shares in Tesla jumped after it was announced the automaker would finally enter the S&P 500 index.
SUN 11/15 (CN) US President Trump said to be looking at implementing additional measures against China during his final weeks in office - press
MON 11/16 BBVA.ES Confirms PNC to acquire BBVA USA Bancshares, Inc. for $11.6B in cash MRNA COVID-19 Vaccine Candidate mRNA-1273 meets Primary Efficacy Endpoint in First Interim Analysis of the Phase 3 COVE Study with vaccine efficacy of 94.5%; Intends to submit for EUA with U.S. FDA in coming weeks MRNA Announces Longer Shelf Life for mRNA-1273, COVID-19 Vaccine Candidate at Refrigerated Temperatures HDS To be acquired by Home Depot for $56/shr in ~$8B cash deal VOW3.DE CEO: Affirms FY22 Op RoS 6-7%, ROI 10-12%, Capex ratio 6.0-6.5%, R&D Cost ratio 6.5-7.0%, Net Cash flow >€10B, Liquidity >€20B - slides *(US) NOV EMPIRE MANUFACTURING: 6.3 V 13.5E (EU) Hungary and Poland have followed through with threat to block the 2021-2027 EU budget and recovery fund at Ambassadors meeting in Brussels BIDU Reports Q3 $3.00 v $1.85e, Rev $4.16B v $3.92Be
TUES 11/17 AMZN Introduces Amazon Pharmacy: Prescription Medications Delivered; Prime members receive free two-day delivery and up to 80% savings when paying without insurance WMT Reports Q3 $1.34 v $1.19e, Rev $134.7B v $133.0Be *(US) OCT INDUSTRIAL PRODUCTION M/M: 1.1% V 1.0%E; CAPACITY UTILIZATION: 72.8% V 72.3%E HD CEO: We see no correlation in companies business as it relates to areas where Covid-19 cases are spiking - conf call comments *(US) NOV NAHB HOUSING MARKET INDEX: 90 V 85E (record high) (US) Atlanta Fed GDPNow raises Q4 GDP growth to 5.4% from 3.5% (US) FDA: Lucira Health, Inc. Receives U.S. FDA Emergency Use Authorization (EUA) for Lucira COVID-19 All-In-One Test Kit, first COVID-19 Test for Self-Testing at Home (prescription required) (US) Follow Up: Wayne County (most populous county in Michigan) board has unanimously voted to certify Nov vote (after 2-2 deadlock)
WEDS 11/18 *(UK) OCT CPI M/M: 0.0% V -0.1%E; Y/Y: 0.7% V 0.5%E *(EU) EURO ZONE OCT FINAL CPI Y/Y: -0.3% V -0.3%E; CPI CORE Y/Y: 0.2% V 0.2%E LOW Reports Q3 $1.98 v $1.97e, Rev $22.3B v $21.1Be AAPL Announces App Store small business program from Jan 1st, 2021; Reduces App Store commission to 15% for small businesses (from 30%) TGT Reports Q3 $2.79 adj v $1.61e, Rev $22.6B v $20.9Be; Lifts share buyback suspension and will resume in 2021; Guidance remains withdrawn BA Formally granted FAA approval to resume Boeing 737 Max service (as expected) *(US) OCT HOUSING STARTS: 1.530M V 1.460ME; BUILDING PERMITS: 1.545M V 1.568ME (US) Trump campaign to file for recount in state of Wisconsin - Fox News *(US) DOE CRUDE: +0.8M V +1ME; GASOLINE: +2.6M V -0.5ME; DISTILLATE: -5.2M V -1.5ME (US) Atlanta Fed GDPNow raises Q4 GDP growth to 5.6% from 5.4% GOOGL Plans to begin offering checking accounts with banks in updated Pay app *(US) NEW YORK CITY SCHOOL SYSTEM WILL TEMPORARILY CLOSE TOMORROW, SAYS CHANCELLOR CARRANZA IN EMAIL TO PRINCIPALS - NYT NVDA Reports Q3 $2.91 v $2.57e, Rev $4.73B v $4.42Be
THURS 11/19 FB Reportedly US state and federal antintrust lawsuits likely to challenge Facebook for buying Instagram & WhatsApp and weaponizing data - WaPo *(TR) TURKEY CENTRAL BANK (CBRT) RAISES ONE-WEEK REPO RATE BY 475BPS TO 15.00%; AS EXPECTED M Reports Q3 -$0.19 v -$0.81e, Rev $3.99B v $3.85B; says achieved positive EBITDA one quarter sooner than expected *(US) INITIAL JOBLESS CLAIMS: 742K V 700KE; CONTINUING CLAIMS: 6.37M V 6.40ME *(US) NOV PHILADELPHIA FED BUSINESS OUTLOOK: 26.3 V 23.0E *(US) OCT EXISTING HOME SALES: 6.85M V 6.47ME *(US) OCT LEADING INDEX: 0.7% V 0.7%E GM To raise GM's financial commitment to EVs and AVs to $27B through 2025 (prior $20B); forecasts 40% of company's U.S. entries will be battery electric vehicles by end of 2025 JNJ Exec: expects to know COVID shot's efficacy in Jan or Feb - conf comments (US) Treasury Sec Mnuchin sends letter to Fed's Powell requesting 90 day extension of Fed's Commercial Paper Funding Facility, Primary Dealer Credit Facility, Money Market Liquidity Facility, and Paycheck Protection Program Liquidity Facility (US) Fed Bostic (dove, non-voter): Given where economy is, is prudent to keep emergency facilities open; Was a bit surprised by US Treasury decision [related to unused Fed stimulus funds]
FRI 11/20 *(UK) OCT RETAIL SALES (EX-AUTO/FUEL) M/M: 1.3% V 0.0%E; Y/Y: 7.8% V 5.9%E ENX.FR Board approved purchase of Borsa Italiana: expects to complete the transaction in H1 of 2021 JPMorgan forecasts negative Q1 GDP (first Wall St bank to do so); expects bounceback in Q2 and Q3 (ZA) S&P cuts South Africa sovereign rating one notch to BB-; outlook Stable