Morning Minutes 7/21/2020

Morning Minutes

European Stimulus Deal and Earnings Give Stocks a Boost

July 21, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

After over four days of negotiations, European leaders agreed on an €750 billion stimulus package, consisting of €360B in loans and €390 billion in grants. Southern countries including Italy and Greece are expected to be among the beneficiaries of financial support, while some of the Northern countries, including Germany, are expected to receive budget rebates for their contributions. European investors cheered the news sending the Dax up 1.75%, Italy’s FTSE MIB up 1.6% and the UK FTSE up a more moderate 0.5%.

US markets appear set to build on yesterday’s rally, which included a 2.5% gain for the NASDAQ, and Europe’s positive momentum with US index futures rising 0.7%-0.8% this morning. In addition to coronavirus case growth slowing a bit stateside recently, investors continue to react to earnings reports.

IBM is up nearly 5.0% in premarket trading today after beating the street on adjusted EPS ($2.18 vs street $2.12). Cloud revenue growth offset technology services revenue declines helping the company to sales of $18.1B which was better than the $17.6B investors had been expecting but down about 5% from a year ago.

Coca-Cola is up 2.2% in premarket trading despite reporting a 29% drop in revenues over year as EPS beat expectations ($0.42 vs street $0.40). Management indicated that volumes from outside the home sales have been improving as lockdowns have eased and businesses such as restaurants have reopened.

After the close today, earnings reports are due from Texas Instruments, Snap and others.

Canadian retail sales bounced back by 18.7% in May from a 19.1% plunge in April, but this fell short of the 20.0% the street was expecting.

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