Monday Morning Reads

Monday Morning Reads



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Financial earnings will dominate the current week as the sector tries to break out of the malaise that made it an underperformer throughout the summer's recovery rally. Trading revenue and bank credit loss estimates will give an indication of the pace of the economic recovery, though the four largest lenders more than doubled their war chests for defaulted loans over the first six months of the year. Among those reporting over the next few days are JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC) and Morgan Stanley (NYSE:MS).

What to watch

Earnings from S&P 500 companies are projected to drop 20.5% from a year earlier in the third quarter, according to FactSet, marking an improvement from the 25% decline anticipated at the end of June and the 32% drop reported for the second quarter. Results that top forecasts could fuel a further leg up for a stock market that has advanced more than 50% from its March lows, though there are still many unknowns. Just 69 companies in the S&P 500 have issued earnings guidance for the quarter (compared with the five-year average of 104) and more than 1 in 4 companies are still not providing an EPS outlook for 2020 or 2021.

More gains as stimulus talks continue

Following the biggest weekly rally in three months, U.S. markets look set to begin the week with some more gains. While the latest White House coronavirus package hit resistance from both Democrats and Republicans over the weekend, discussions are continuing. Odds are also increasing that the Democrats could take the Senate following the November election, which would lay the groundwork for a larger stimulus package. Equity markets remain open today for Columbus Day, though bond traders will get the day off in observance of the federal holiday.

The new Black Friday

Big-box retailers are battling it out this week, throwing major sales events as Amazon Prime Day (NASDAQ:AMZN) begins at 3 a.m. ET Tuesday and lasts through Wednesday. Target (NYSE:TGT) will have "Deal Days" and Best Buy (NYSE:BBY) will jumpstart Black Friday sales on those days, while Walmart (NYSE:WMT) holds its "Big Save Event" from 7 p.m. ET Sunday through Thursday. "There are so many unknown variables this year," said Tyson Cornell, who leads the U.S. consumer markets group at PwC. "By kicking off sales in October, [retailers] are hoping to spread consumer traffic and demand over the next few months, helping them maintain social distancing in stores, consistently move inventory and adjust their strategies based on early consumer demand."

Big Tech 'hit list'

The EU has been working to make powerful tech companies less powerful, and the bloc is building a list of businesses that are in its crosshairs, FTreports. The "hit list" includes up to 20 of the largest internet companies - based on market share of revenues and the number of users - that will be subject to new and far more stringent rules. New regulations would force them to share data with rivals and make them more transparent on how they collect information. A number of Big Tech names, including Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) and Google (GOOG, GOOGL) are already under antitrust scrutiny in the U.S., and last week a House subcommittee said Congress should consider breaking up some companies.
Go Deeper: Feds consider forcing Google to sell Chrome, parts of ad business.

Emergency authorization request around Thanksgiving

The head of the Trump administration's Operation Warp Speed program, Moncef Slaoui, expects drugmakers to file with the FDA for emergency authorization of a coronavirus vaccine by late November. The project aims to deliver 300M doses of a vaccine starting in January, though none of the four vaccine candidates to enter Phase 3 trials have yet publicly reported data from the mid-stage studies. "My expectation is really something between 80% and 90% efficacy," Slaoui added, saying immunization in high-risk populations could begin this year.
Go Deeper: 30-second coronavirus test could help out the travel sector.

Disney battles record-low viewership of NBA Finals

The Los Angeles Lakers beat the Miami Heat 106-93 on Sunday, capturing a record-tying 17th NBA Championship and restoring the storied franchise to the top of the basketball world. The series capped the longest, rockiest season in NBA history, which resumed in July at a spectator-free bubble in Disney World (NYSE:DIS). TV ratings have also been challenging Disney's ABC network, with the first three games of the finals setting historic record lows and averaging 6.6M viewers a game (48% lower than last year). The 2019 NBA Finals brought in about $288M in revenue for Disney's media segment, but amid declining viewership and slashed advertising budgets, that figure is likely to be much lower for 2020.

China taps the brakes on yuan rally

Looking to restrain a rally in the yuan, which has climbed 4.3% in the past three months, China's policy makers are removing rules that made betting against the currency expensive. Financial institutions will no longer need to hold 20% of sales on some foreign exchange forward contracts, a move imposed two years ago when the renminbi slumped toward 7 per dollar. In stock market news, Shenzhen soared 3.3% and Hong Kong rose 2.2% before an address from Xi Jinping this week that's expected to detail greater cooperation between the two cities, driving foreign capital inflows and enhancing the tech sector.

IMF and World Bank meetings

The annual meetings of the International Monetary Fund and World Bank are going virtual this year as the gathering kicks off today against the backdrop of the coronavirus crisis. The fund has warned that the rebound from COVID-19 will be long and uneven, leading G20 nations to extend a freeze in debt payments from the world's poorest nations that's set to expire at year end. Extending the Debt Service Suspension Initiative (DSSI) by another six months would provide an extra $6.4B of relief, rising to $11.4B if it runs to the end of 2021. The World Bank also wants borrowings reduced to prevent a larger fallout and is also pushing banks and investors to provide relief to DSSI countries.

What else is happening...

Energy companies begin restoring Gulf operations in wake of Hurricane Delta.

Mallinckrodt (NYSE:MNK) files for Chapter 11 to offload opioid liabilities.

New Shaq SPAC is targeting technology and media companies.

Amazon (AMZN) gives up on Crucible, its first major video game.

General Motors (NYSE:GM) records first China sales growth in two years.

British Airways (OTCPK:ICAGY) chief steps down amid industry's 'worst crisis.'

Today's Markets

In Asia, Japan -0.1%. Hong Kong +2.2%. China +2.6%. India +0.2%.
In Europe, at midday, London +0.1%. Paris +0.6%. Frankfurt +0.4%.
Futures at 6:20, Dow +0.1%. S&P +0.5%. Nasdaq -1.4%. Crude -1.3% to $40.09. Gold +0.1% at $1927.20. Bitcoin -1.6% to $11256.
Ten-year Treasury Yield +1 bps to 0.78%

Today's Economic Calendar

9:00 Fed's Kashkari Speech

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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