Morning Minutes 10/27/2020

Morning Minutes

Stocks Stabilize as Earnings and Durable Goods Orders Roll In

October 26, 2020

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

World stock markets regained their footing overnight and into this morning. In the wake of yesterday’s 1.6%-2.4% declines in the US and a big plunge in Germany, the Dax, Nikkei, and FTSE are all flat, and US index futures are up 0.3% to 0.6%. Commodities are also on the rebound today with WTI and Brent Crude bouncing 0.75% and 0.6% respectively and copper climbing 0.6%. Gold and Silver remain steady with gold holding just above $1,900/oz.

Many of the uncertainties impacting market sentiment lately including COVID Wave 2, the US stimulus impasse and the US Presidential Election, now only a week away, remain unresolved, but for today investors appear to be focusing more on corporate earnings reports. A positive US Durable Goods September report (1.9% vs street 0.5%) also appears to be helping to shore up support.

Several component companies of the Dow Jones Industrial Average are out with results this morning including Caterpillar ($1.34 vs street $1.18, down 2.0% premarket), 3M ($2.43 vs street $2.26, down 1.1% premarket), Merck ($1.74 vs street $1.44, up 1.2% premarket). A muted response to strong results, however, suggests that either high investor expectations had already priced into stocks, or investors remain unwilling to really step up and respond to good news ahead of the US election.

Restaurant Brands* had a mixed report, beating the street on earnings ($0.68 vs street $0.63) but announcing significant differences in same store sales among its three chains with Tim Hortons down 12.5% from a year ago, Burger King down 7.0% but Popeyes Chicken growing 17.4%. Other earnings reports out today including Eli Lilly missing expectations ($1.54 vs street $1.71, down 4.9% premarket) and motorcycle maker Harley Davidson beating expectations ($1.05 vs street $0.31, up 9.6% premarket). Microsoft* headlines afternoon results today.

Despite the uncertain business environment, companies continue to move forward with acquisitions. Today’s big deal is in the technology sector where Advanced Micro Devices has agreed to purchase fellow chipmaker Xilinx in a $35B arrangement.

*Shares of Restaurant Brands and Microsoft are held in some portfolios managed by SIA Wealth Management.

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