Tuesday Morning Reads

Tuesday Morning Reads




Open Interest:




Election, coronavirus, earnings, stimulus

Concerns about COVID-19 infection rates appear to have come back to the fore for markets as average daily cases hit a record high in the U.S., just days away from the presidential election. Wall Street sold off on Monday, led by a decline in energy, industrial stocks and other cyclicals, prompting the Dow to slide 650 points to record its worst week since September. Echoing the weakness, compounded with little hope of a stimulus package from Washington, U.S. stock index futures hugged the flatline in the overnight session. "To me, this is Phase 2 of the pandemic," said Frank Rybinski, chief macro strategist at Aegon Asset Management. "Until we get some eradication of the virus, it's going to be like a gray cloud."

Third quarter reports

More than one third of the S&P 500 index components, or 186 companies, are set to report Q3 results this week, including some of the top names in the index. Today's lineup includes manufacturing behemoth's 3M (NYSE:MMM) and Caterpillar (NYSE:CAT), healthcare giants Pfizer (NYSE:PFE), Eli Lilly (NYSE:LLY) and Merck (NYSE:MRK), as well as tech titans Microsoft (NASDAQ:MSFT) and AMD (NASDAQ:AMD). Sideshow? While net earnings are surprising to the upside, with the exception of a few misses, the market seems laser focused on the election, COVID-19 and any news related to stimulus talks.

Hopes dim for stimulus deal

A coronavirus aid package before the election is looking less likely by the day as the Senate adjourned after confirming Amy Coney Barrett's nomination for the U.S. Supreme Court. Members will now be allowed to leave the capital and join their House counterparts on the campaign trail, where the representatives have been since early October. House Speaker Nancy Pelosi still remains "optimistic" about a pre-election deal following Monday's phone call with Treasury Secretary Steven Mnuchin, but is still waiting on the White House to accept "language around Covid-19 testing."

Data center push

Intensifying its battle with Intel (NASDAQ:INTC) in the data center chip market, Advanced Micro Devices (AMD) has agreed to buy Xilinx (NASDAQ:XLNX) in a $35B all-stock deal. The tie-up would create a combined firm with 13,000 engineers, with a nimble manufacturing strategy that relies heavily on Taiwan Semiconductor Manufacturing (NYSE:TSM). Since taking over AMD in 2014, Lisa Su has focused on data centers that power internet-based applications and services, which have fueled the rise of artificial intelligence and 5G telecom networks. AMD -4.5%; XLNX +10.2% premarket.

Overnight earnings roundup

HSBC (NYSE:HSBC) soared nearly 7% after the bank beat estimates and signaled it may resume limited dividend payments, as well as accelerating a restructuring plan. On the energy front, BP (NYSE:BP) swung back to profit, with the stock climbing 2% in premarket trade amid a "continuing oil demand recovery." Novartis (NYSE:NVS) shares meanwhile went south, falling 2% overnight, after revenues missed expectations, though the drugmaker did lift its full-year forecast.

Blockbuster listing

Ant Group is reportedly planning to stop taking investor orders for the Hong Kong leg of its IPO on Wednesday, a day earlier than scheduled, as the record stock sale has already been heavily subscribed. The potential move would bring the closing in line with the Shanghai leg of its dual offering, which is slated to begin trading on Nov. 5. Putting it in perspective: Ant, which is a third owned by Alibaba (NYSE:BABA), will have a market value of at least $315B, about the same valuation as JPMorgan (NYSE:JPM) and four times larger than Goldman Sachs (NYSE:GS).

Cloud gaming

Facebook Gaming (NASDAQ:FB) is launching cloud-streamed games for the Facebook app and web browser, a move that will expand its content library to include more-complex and multiplayer titles. Its free-to-play model is in contrast to the paid, subscription cloud-gaming services of rivals like Google Stadia (GOOGGOOGL) and Amazon's Luna (NASDAQ:AMZN). Facebook's service will launch on the desktop web and Android, but not iOS due to terms and conditions of the App Store. "Apple treats games differently and continues to exert control over a very precious resource," reads a blog post.
Go Deeper: More than 380M people play games each month on Facebook.

Adelson may exit U.S. gambling industry

Las Vegas Sands (NYSE:LVS) is exploring the sale of its casinos in Las Vegas, according to Bloomberg, in a deal that would leave Sheldon Adelson focused on Asia. The world’s largest casino company is working with an adviser to solicit interest for the Venetian Resort Las Vegas, the Palazzo and the Sands Expo Convention Center, which are all connected along the city's famous strip and together may fetch $6B or more. Investor attention has focused on its Macau operations of late, but a sale in Nevada may point to trouble for Las Vegas casinos. LVS +1.2% premarket.

Taiwan sales

Not paying any attention to China's recent sanctions, the U.S. State Department has signaled its approval for a potential $2.4B sale of anti-ship missiles to Taiwan. As many as 100 Harpoon Coastal Defense Systems built by Boeing (NYSE:BA) could be shipped. On Monday, Beijing said it would impose sanctions on Boeing's defense unit, Lockheed Martin (NYSE:LMT) and Raytheon (NYSE:RTX) over another $1.8B arms sales to Taiwan, an island with which it has not ruled out the use of force to achieve reunification.

What else is happening...

Eli Lilly (LLY) ends COVID-19 antibody trial after lack of improvement.

Schwab (NYSE:SCHW) begins cutting 1,000 jobs from TD Ameritrade acquisition.

U.S. appeals court rejects immediate WeChat (OTCPK:TCEHY) ban.

Big shakeup at AIG... New CEO and life insurance separation.

Facebook (FB) achieves goal of helping 4M people register to vote.

Smucker (NYSE:SJM) to sell Crisco unit to B&G Foods (NYSE:BGS) for $550M.

Monday's Key Earnings

NXP Semiconductors (NASDAQ:NXPI) +3.1% AH driven by auto and mobile recoveries.
Twilio (NYSE:TWLO) -1.5% AH forecasting wider-than-expected Q4 loss.

Today's Markets

In Asia, Japan flat. Hong Kong -0.5%. China +0.1%. India +1%.
In Europe, at midday, London flat. Paris -1%. Frankfurt -0.4%.
Futures at 6:20, Dow flat. S&P flat. Nasdaq +0.2%. Crude +1.1% to $38.98. Gold -0.2% at $1902.70. Bitcoin -0.9% to $13199.
Ten-year Treasury Yield unchanged at 0.80%

Today's Economic Calendar

8:30 Durable Goods
8:55 Redbook Chain Store Sales
9:00 S&P Corelogic Case-Shiller Home Price Index
9:00 FHFA House Price Index
10:00 Consumer Confidence
10:00 Richmond Fed Mfg.
1:00 PM Results of $54B, 2-Year Note Auction

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.

More Posts by UPB: View All | Private Twitter Feed: Access Now! (For Diamond Members)