Investor Commentary

By: Nell Sloane



Investors seem to be "battening down the hatches" ahead of what many think might be rough waters ahead. Yesterday's tumble was the 10th worst day this year.

Not only do we have a massive global surge in coronavirus cases and lockdowns reemerging but we also have one of the most highly contentious elections in recent history about to go down.

Keep in mind, this is the worst week in the stock market since March and on this very day back in 1929 all out panic hit the New York Stock Exchange, leading to a market crash that devastated the U.S. economy and marked the start of the Great Depression.

Despite what the "Doom and Gloomers" want to tell us, I don't think that's in the cards this time around.

Remember, the entire world is currently being impacted... Germany announced last night they were closing all bars and restaurants for 4 weeks, while France issued a "National Lockdown" requiring all people to stay in their homes until further notice.

My point is that money will eventually have to find a home and go to work somewhere especially with interest rates at record low levels. Again, I clearly see the U.S. as the best house in a bad neighborhood.

We are clearly in a pandemic induced recession and the market is going to react accordingly to the more extreme and negative headlines. Especially as we are still floating in a sea of virus-related fear and headlines and now no sight of fresh "life preservers" from the government, i.e. the next round of stimulus.

Wall Street has now fully recognized the fact we are not going to get a new stimulus bill out of Washington until after the election which makes the market much more nervous and uncertain about consumer sentiment.

If next week's election sparks heated controversy and debate, which certainly looks like a possibility, political gamesmanship in Washington could delay the next round of stimulus for weeks

The question is how many U.S. consumers can still hold their breath that long? Just how beaten up is the middle class?

I think eventually the Calvary shows up bringing more stimulus and the Fed remains accommodating with a glut of cheap money. What happens between now and then is the big unknown, how deep and long does the pullback last until the "easy money" shows up to help with some of the heavy lifting?

Interestingly, since 1927 there have only been about 214 trading days out of more than +23,000 where the market has tumbled more than -3.5% in a single session. So yes, yesterday was an extreme anomaly, but then again so has been the entire year...

As for today, technology stocks are in the spotlight with Alphabet, Amazon, Apple, and Facebook all reporting after the market close. Microsoft earlier this week shattered expectations with a $14 billion profit and expectations are high that its big tech competitors will deliver similar results.

Keep in mind, tech stocks have led overall market gains this year so any negative investor reactions could have a large impact on stock indexes, particularly the Nasdaq.

Other earnings results scheduled for release today include AB InBev, Activision Blizzard, ADM, Conoco Phillips, Dunkin Brands, Kellogg, Kraft Heinz, MGM Resorts, Moderna, Nintendo, Royal Caribbean, Royal Dutch Shell, Shopify, Spotify, Starbucks, T. Rowe Price, Twitter, Westinghouse, and Yum Brands, among a slew of others.

Economic data today will bring the first estimate for third quarter GDP which is expected to show record rebound. September Pending Home Sales will also be heavily scrutinized with housing analysts looking for signs that the hottest sector of the U.S. economy might be cooling off.

Ford Can't Make Trucks Fast Enough: Ford Motor blew away Wall Street expectations as well as the company’s forecasted earnings for the third quarter on stronger-than-expected demand during the coronavirus pandemic. The company earned $2.34 billion during the third quarter, up from roughly $423 million a year earlier. Its total revenue also increased by about $500 million to $37.5 billion from the third quarter of 2019. In a hot market for trucks, Ford had its best Q3 for high-margin pickup sales since 2005. The company's average vehicle sales price was $45,599 for the quarter, up 8% from a year ago. Ford also picked up a 5% increase in U.S. market share. Ford’s North American business remained the standout, generating $3.2 billion in operating income. Vehicle shipments hit 651,000, rising from 639,000 in the third quarter of 2019. U.S. shipments outpaced U.S. retail trends as dealers replenished inventories. Ford said it is approaching 190,000 reservations for its long-awaited Bronco SUV, which is expected to arrive in U.S. dealerships next spring. A limited “First Edition” Bronco model — starting at $60,800 — sold out quickly after the vehicle’s unveiling. The company doubled availability of the model to 7,000 units. All have been reserved, Ford said. (Sources: Edmunds, Barron's

Uber Adds Grocery Delivery: The ride-hail giant announced Wednesday that its Uber and Uber Eats apps will roll out a grocery delivery service. New Yorkers who open the Uber or Uber Eats apps will now see a grocery shopping tab, which will use their delivery address to show them what participating shops are available to them. In its last earnings report, Uber said demand for its Uber Eats delivery service more than doubled while gross ride bookings remained down 75 percent year over year. (Source: NYPost, CNBC

CME Profit Slumps on Low Rates: CME Group, the world's biggest futures exchange operator, said on Wednesday third-quarter profit plunged -35% as the ultra-low rate environment, aimed at easing the economic blow of the COVID-19 pandemic, cut demand for some of its top products. Volumes for CME’s rates and energy products, which are used for hedging against price big moves, were down -51% and -25% respectively. But as the past year has shown, things can change quickly, and the U.S. presidential election on Nov. 3 has the potential to quickly shift market sentiment, especially if there is no clear winner declared on Election Day, CME Chief Executive Officer Terry Duffy told analysts on a conference call. “You could see a lot of uncertainty around the marketplace, and I’m not just reflecting on the price of equities, I’m looking at how people perceive the price of debt coming out of the United States if we go into this contested election process,” he said. “On the rate story, there is something here that people need to be cautious about.” CME’s net income for the quarter ended Sept. 30 declined to $411.5 million, or $1.15 per share, versus $636.3 million, or $1.78 per share, last year. (Source: Reuters)

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