Morning Minutes 7/9/2020

Morning Minutes

Walgreens Earnings Miss Weighs on The Dow

July 9, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

Overnight upward momentum for stock markets has faded as the North American trading approaches amid mixed news developments. Asia Pacific trading saw Shanghai post another strong gain of 1.4%, while Hong Kong, Sydney, Tokyo and Seoul all rose 0.3%-0.6%. European trading has been mixed this morning with Frankfurt rallying 1.4% but London and Milan falling 0.5%.

US premarket action has been mixed today with NASDAQ futures up 0.5%, S&P futures flat and Dow futures down about 35 points or 0.1%. A pre-market drop of 4.9% for Walgreen Boots (WBA) appears to be weighing on the Dow. The drug store chain reported significantly weaker than expected adjusted earnings per share ($0.83 vs street $1.17) as management indicated that COVID-19 caused a shift in sales to lower margin items (more masks and vitamins, fewer prescriptions and beauty products), particularly in the UK where some of its stores were temporarily closed.

These results provide an indication to investors that while there has been a significant increase in focus within parts of the health care sector on the COVID-19 crisis (masks, ventilators treatment/vaccine development), other areas were left to languish (postponed non-elective surgeries and routine doctor visits). Walgreen Boots results appear to reflect this change in focus and suggest that results across the health care sector in the upcoming earnings season could be quite variable between companies and sub-groups.

Today’s economic reports have been encouraging. Canadian housing starts were 211K annualized in June, beating the 198K street estimate. US jobless claims increased by 1.31M, which was better than the 1.37M street estimate. Continuing claims continue to decline falling to 18.0M from 18.76M last week and beating the 18.95 street estimate.

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