Author: Colin Cieszynski

Friday morning finds stock markets around the world trending upward. Over in Europe, the Dax is up 1.1% and the FTSE is up 1.6%. Here in North America, US index futures are up 0.2% to 0.3% adding to yesterday’s gains of 0.2% to 0.5%.  Commodities are steady with WTI and Brent Crude Oil up about 0.4% after Russia indicated openness to extending output cuts, while copper is flat so far. Currency trading is mixed with the Euro (up 0.3%) and Pound (down 0.3%) heading in opposite directions against the US Dollar while gold and silver are up 0.6% and 0.9% respectively

With last night’s final US Presidential Debate in the books, the final leg of the campaign is now underway. Congress continues to haggle over stimulus but it’s uncertain what it would take to make a deal with the election now only 11 days away. Investors are responding positively to progress on a treatment. Gilead Sciences is up 4.2% premarket after the FDA gave its Remdesivir coronavirus treatment full marketing approval, up from emergency use only approval.

The main economic news out today is flash PMI reports, the first look at October economic conditions in the US and Europe. European numbers were split with Flash Manufacturing PMI reports for Germany and France above 50 in expansion territory and above expectations, while Flash Service PMI numbers for both countries were below 50 in contraction territory and below expectations. This suggests that COVID Wave Two may be having a bigger impact on the service sector so far than the manufacturing sector, especially with politicians focusing on targeted closures, rather than widespread, lockdowns. US flash PMI numbers are due at 9:45 am EDT today with the street expecting readings of 53.4 for Manufacturing and 54.3 for Non-Manufacturing.

Earnings reports and the reaction to them has been mixed this morning. Intel is down 10.0% in premarket trading after reporting in-line earnings as investors focused more on disappointing sales from its data center division. American Express ($1.30 vs street $1.35) missed expectations on earnings while Seagate Technology missed on sales. Toymaker Mattel is up 7.0% premarket after beating earnings expectations ($0.95 vs street $0.39).

This morning finds stock markets still stuck in neutral, supported by another round of positive earnings reports but held back by political uncertainty and an apparent reluctance among investors to commit to a direction ahead of the US election which is now only 12 days away. US index futures are down 0.1% adding slightly to yesterday’s 0.3% declines, while over in Europe, the FTSE and Dax are both down about 0.2%. Commodity markets have reversed their direction of the last couple of days with WTI and Brent crude oil both bouncing 0.8% and copper pulling back 1.4%. Gold is down 1.1% sitting just above $1900/oz.

US weekly jobless claims (787K vs street 860K) and continuing claims (8.37M vs street 9.50M) both came in better than expected this morning, indicating the US job market continues to recovery. Tomorrow morning brings flash PMI reports, the first early peek at October economic activity in the US and Europe.

Several companies beat the street on earnings overnight and this morning including: Rogers Communications ($1.08 vs street $0.78), Tesla ($0.76 vs street $0.57,up 4.2% premarket), Coca-Cola ($0.55 vs street $0.46), homebuilder PulteGroup ($1.34 vs street $1.12), chemical producer Dow ($0.50 vs $0.33), appliance producer Whirlpool ($6.91 vs street $4.20) and Chipotle Mexican Grill* ($3.76 vs street $3.47).

More earnings reports are due on both sides of the border this afternoon, headlined by Intel, Expedia, and Union Pacific in the US. Tomorrow morning brings results from American Express.

*Shares of Chipotle Mexican Grill are held in some portfolios managed by SIA Wealth Management.

Stock markets around the world have been mixed overnight as investors react to a mixed bag of earnings reports and US politicians still haggling over stimulus. This morning finds US index futures flat to down 0.2%, while in Europe, the Dax is down 0.9% and the FTSE is down 1.2%. Asia Pacific trading saw the Nikkei gain 0.3% and the Hang Seng rise 0.75%. Further reflecting an indecisive mood among investors, commodities are also mixed with WTI and Brent Crude Oil falling 1.7%-1.8% but copper rising another 1.1%. Currency action finds the Japanese Yen and British Pound posting gains of 0.7% and 0.8% against the US Dollar today while gold, silver, the Euro and the Canadian Dollar are flat to up 0.2% against the greenback.

Canadian retail sales rose by 0.4% over month In August, a slowdown from July’s 1.1% growth and short of the 1.1% the street had been expecting.

Earnings season continues to ramp up today. Canadian National Railway missed street EPS expectations ($1.38 vs $1.54 and year ago $1.66. The railroad noted increased volumes in lumber, grain and autos offset by reduced petroleum shipments.

Netflix is down 5.5% in premarket trading today after the streaming service disappointed on EPS ($1.74 vs street $2.14) and global net subscriber additions (2.20M vs street 3.57M), although revenues exceeded expectations slightly ($6.44B vs street $6.38B). For next quarter, management guided for 6.0M in subscriber additions, down from 8.8M in Q42019.

Several other companies have posted positive reports today including: Snap ($0.01 vs street -$0.05, up 20.8% premarket), Thermo Fisher* ($5.63 vs street $4.61), Texas Instruments ($1.45 vs street $1.28), Verizon ($1.25 vs street $1.22). In case anyone was wondering what consumer are spending money on these days, recreational vehicle producer Winnebago ($1.45 vs street $0.93) and vacuum cleaner producer iRobot ($2.58 vs street $1.00) both crushed street estimates.

Later today, results are due from Tesla Motors, Chipotle Mexican Grill, Whirlpool, CSX and others.

*Shares of Thermo Fisher are held in some portfolios managed by SIA Wealth Management.

While overnight trading was mixed in the wake of yesterday’s US market decline of 1.4%-1.6% for major indices, US stocks have been bouncing back a bit this morning with index futures rising 0.2% to 0.4%. Another round of better than expected earnings reports have been helping to shore up investor confidence. Speculation over whether US politicians can reach a stimulus deal before today’s deadline for getting a deal done before Election Day, has pushed markets in different directions at different times over the last 24 hours.

Earnings season kicks off in Canada today with railroad Canadian Pacific scheduled to report results this morning followed by competitor Canadian National this afternoon. In the US, several senior companies have reported stronger than expected results overnight including: insurer Travelers ($3.12 vs street $3.06), Procter & Gamble ($1.63 vs street $1.42), Logitech ($1.87 vs street $0.57, up 17.3% premarket) and Lockheed Martin ($6.25 vs street $6.09). After the close this afternoon, Netflix, Texas Instruments, and Snap are scheduled to report results.

Overnight economic news has been mixed. The Peoples’ Bank of China held interest rates steady. In the US disappointing housing starts was offset by stronger than expected building permits. Commodities trading has also been mixed with the most interesting development being a 1.1% gain for copper which suggests that investor expectations for the global economy and resource demand remain optimistic despite all of the political and medical noise out there at the moment.

The new trading week is off to a flat to slightly positive start so far as investors digest a number of weekend developments, much of which centers around progress (or lack of progress) around deal making across a number of fronts.

US index futures are up 0.6% to 1.0% this morning after House Chair Nancy Pelosi has set a Tuesday deadline for reaching a stimulus deal before the US election. Over in Europe, however, the Dax is down 0.2% and the FTSE is down 0.3% as the UK and EU remain at loggerheads over a new trade deal with the risk of a potentially disruptive No-Deal Brexit looming ahead. WTI and Brent Crude oil are flat today with WTI holding above $40.00/bbl ahead of an OPEC call where no major decisions are expected but producers could hint at their thoughts about what to do about supply levels in the coming months including how to bring Libya back into the market with a previous blockade having been lifted.

Asia Pacific trading saw mixed returns with Tokyo rallying 1.1% and Hong Kong gaining 0.6% but Shanghai falling 0.7%. Overnight China released mixed economic numbers headlined by its Q3 GDP growth of 4.9% over a year ago which was worse than the 5.2% growth the street had expected by an improvement on the previous quarter’s 3.2% growth rate. Monthly indicators came in better than expected including retail sales (3.3% vs street 1.8%) and industrial production (6.9% vs street 5.8%).

Corporate news today has been focused on earnings and attempts at deal making. Oilfield service giant Halliburton beat earnings expectations ($0.11 vs street $0.08). Keeping with the oil patch, ConocoPhillips announced a deal to purchase Concho Resources for $9.7B in stock. In communications, Altice USA increased its hostile takeover bid for Cogeco to $8.4B from $7.8B which has been rejected by Cogeco’s controlling shareholders. Under the proposed arrangement Altice would keep the US business and sell the Canadian operations to Rogers Communications.

Earnings season starts in Canada this week with the two big railroads reporting on Tuesday, Restaurant Brands on Wednesday and Rogers Communications, Canfor, and Constellation Software headlining Thursday. Earnings season broadens out this week with notable reporters including Netflix on Tuesday, Tesla Motors on Wednesday and Intel plus Amazon.com on Thursday.

It’s a light week for economic news with the main events being Canadian retail sales on Wednesday and Flash PMI reports, the first peek at October economic activity in the US and Europe, on Friday.

Building on morning gains in Europe where the Dax is up 1.0% and the FTSE is up 1.4%, US index futures are in the green this morning with gains of 0.40% to 0.50% as they bounce back from yesterday’s 0.00% to 0.50% declines for major US indices.

Positive economic news has helped to boost investor confidence this morning. US retail sales for September came in much better than expected (1.9% vs street 0.7% and previous 0.6%) indicating that reopening recovery momentum has continued. Meanwhile north of the border, the Bank of Canada indicated late yesterday that it plans to reduce or end some of its emergency operations related to mortgage bond purchases, repos and bankers’ acceptances, citing improved operational conditions in financial markets.

Earnings season continues today with oilfield service giant Schlumberger ($0.16 vs street $0.13) plus Intuitive Surgical ($2.77 vs street $2.07) beating expectations. Boeing is up 5.5% in premarket trading after European authorities cleared the troubled 737-MAX-8 aircraft to start flying with passengers again

European markets are leading the world lower this morning with the Dax diving 2.8% and the FTSE falling 2.0%. With the second wave of COVID in full swing, France declaring a new state of emergency and the UK putting on new restrictions recently, concerns that the recent economic rebound could slow or reverse course have started to grow. Continuing uncertainty surrounding the US election and stimulus talks doesn’t appear to be helping matters either.  Commodities are also under pressure with WTI crude oil falling 3.6% and dropping back under $40.00/bbl. Copper is down 0.5% but holding above $3.00/lb. The US Dollar is on the rebound, gaining 0.6% against gold, 2.3% against silver, 0.7% against the pound, 0.5% against the loonie and 0.3% against the euro.

On this side of the pond, positive earnings reports appear to be cushioning the impact but haven’t been enough to turn the tide. US index futures are down 1.0% to 1.5% this morning, adding to yesterday’s 0.6% to 0.8% losses. Several companies beat the street on earnings today including Morgan Stanley ($1.66 vs street $1.28), Walgreens Boots ($1.02 vs street $0.96), and Alcoa (-$1.17 vs street -$1.38). United Airlines (-$8.16 vs street -$7.53) posted a worse than expected loss, blaming ongoing struggles in the airline sector.

Today’s US economic data is mixed. US initial jobless claims were worse than expected (898K vs stret 825K) but continuing claims were better than expected (10.018M vs street 10.700M). The Empire State Manufacturing Index was worse than expected (10.5 vs street 15.0) but the Philadelphia Fed Manufacturing Survey was better than expected (32.3 vs street 14.0).

Later today, earnings are due from Paypal, followed by Honeywell and Schlumberger tomorrow morning. Friday also brings the monthly US retail sales report.

After Day 1 of this quarter’s earnings season saw US indices stage moderate pullbacks of 0.1%-0.6% on Tuesday, overnight trading has been mixed as investors work through more results. This morning, US index futures are mixed ranging from a 0.1% decline for S&P futures to a 0.2% increase for NASDAQ futures. Overseas, the FTSE and the DAX are both down 0.25%, while mixed Asia Pacific trading saw Tokyo climb 0.1% and Shanghai fall 0.5%.

Gold has regained $1,900/oz with a 0.5% gain this morning while Silver is up 0.7%. In commodity action, natural gas has plunged 5.6%, gasoline is down 1.0%, while WTI crude oil is down 0.4%, holding just above $40.00/bbl. Copper is climbing today with a 0.25% gain.

Day 2 of earnings season brings more results from national and regional banks and brokerages, several of whom beat the street including: Goldman Sachs ($9,68 vs street $5.57), Bank of America ($0.51 vs street $0.49), US Bancorp ($0.99 vs street $0.91) and PNC Financial ($3.39 vs street $2.12). Notably, Bank of America, Goldman, and PNC reported significantly smaller loan loss provisions for the quarter. Goldman Sachs saw strength in investment banking, trading and asset management. Wells Fargo reported EPS below expectations ($0.42 vs street $0.45), but also significantly reduced its loan loss provision ($0.76B vs street $1.76B and previous $9.5B).

In other news, UnitedHealth also exceeded expectations on earnings ($3.51 vs street $3.09). Later today, results are due from Alcoa and United Airlines, while Morgan Stanley headlines tomorrow morning’s numbers. Economic news is light today focused on US and Chinese inflation, tomorrow brings US weekly jobless claims followed by US retail sales on Friday.

US index futures are mixed this morning, varying between a 0.4% decline for Dow futures to a 0.9% gain for NASDAQ  futures as US markets consolidate Monday’s gains of 0.8% for the Dow Industrials, 1.6% for the S&P 500 and 2.6% for the NASDAQ Composite.

It’s the first day of the long-awaited Q3 earnings season with investors looking for insight into the strength and momentum of the summer economic reopening rebound, with big banks in the spotlight for the first few days. Highlights of today’s reports include:

JPMorgan Chase is up 1.6% premarket after posting EPS well above expectations ($2.92 vs street $2.33), boosted by higher than expected trading income and a $569 million decrease to its loan loss provision. Citigroup is up 2.0% premarket after the bank beat the street handily on EPS ($1.40 vs street $0.93). Asset manager Blackrock is up 3.7% premarket after announcing stronger than expected EPS ($9.22 vs street $7.80) and a $129B inflow of assets.

Outside the Financials sector, Johnson & Johnson is down 2.0% in premarket trading today as news that the company has paused its COVID vaccine trial after one of the participants unexpectedly fell ill overshadowed strong earnings. The company beat the street on EPS ($2.20 vs street $1.98) and raised its full year EPS guidance by $0.20 on both sides to the $7.95-$8.05 range. Walt Disney, meanwhile, is up 4.0% premarket this morning after announcing last night it is reorganizing its content operations to focus more on streaming.

In economic news, China’s trade surplus unexpectedly shrank significantly last month ($37.0B vs street $59.9B) as imports surged (13.2% vs street 0.2%), while exports came in essentially as expected (9.9% vs street 10.0%). Commodities have had a mixed response to this news, with WTI and Brent Crude oil rallying 2.0%-2.2%, but copper sliding 0.5%.

US index futures are pointing toward another positive open with gains of about 0.4% as US equity indices look to build on to yesterday’s 0.4% to 0.8% gains. Overseas markets have also been climbing, led by a 1.7% rally for Shanghai on its return to trading from a week of holidays. In Europe, the FTSE is up 0.75% and the Dax is up 0.1%. Commodity trading is mixed today with WTI crude oil down 0.7% but holding $40.00/bbl, while copper is up 1.0%. The US Dollar has dropped back a bit, falling 0.3% against the Euro and the Canadian Dollar, falling 1.35% against Gold and falling 2.75% relative to Silver.

Economic news continues to indicate a recovering global economy. Today’s Canadian employment report hit a home run with job growth accelerating in September and crushing crushed street expectations (378K vs street 156K and previous 278K). The Canadian unemployment rate dropped back under 10% as well, falling to 9.0% from 10.2% last month, and coming in significantly better than the 9.7% street estimate.

Investors main focus stateside is on continued haggling between the White House and Congressional Democrats over fiscal stimulus with the former looking for targeted initiatives and the latter looking for a broad-based program. The two parties also continue to negotiate over what to do about the remaining Presidential debates with election day coming on November 3^rd.

Corporate news has been light today but that is about to change with earnings season set to kick off on Tuesday starting with big banks like Citigroup, JPMorgan Chase and Wells Fargo. Monday is a full holiday in Canada and a partial holiday in the US so we may see positioning today and Monday ahead of next week’s results, particularly in US Financials.

New Video: Market Commentary and Portfolio Update – October 7, 2020

With Paul Vendrinsky-Portfolio Manager, Ted Bader-President, and Colin Cieszynski – Chief Market Strategist, of SIA Wealth Management

A new webinar replay is available featuring Paul Vendrinsky updating on the recent performance of SIA Wealth Managed portfolios, Ted Bader discussing portfolio investing strategy, plus Colin Cieszynski covering current trends in world markets. A PDF version of this presentation is available.

GoToMeeting Version: https://attendee.gotowebinar.com/recording/2347117986365966087

YouTube Version: https://youtu.be/fvknvuvoUO8