August 10, 2022

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Business is my step

Daily Markets: Georgia Results Could Mean Potential Rethink for Investors

7 min read

Today’s Big Picture

Equities in Asia closed the day’s trading on a mixed note with China’s Shanghai Composite up 0.6% and the Hong Kong Hang Seng up 0.2% while Japan’s Nikkei slumped 0.4% and South Korea’s Kospi fell 0.8%. By comparison, equities in Europe were mostly higher by mid-day trading while U.S. futures point to a mixed open as investors wait for the outcome of the remaining too close to call Senate race in Georgia.

With Democrat Raphael Warnock defeating Republican Kelly Loeffler in one Georgia Senate special election, the result of the Ossoff-Perdue race is reportedly down to counting absentee ballots. The winner of that race will determine if Democrats take control of the Senate. Should a “blue sweep” occur, it would mean Democratic control of both the Senate and the House of Representatives for the next two years and require a re-think among investors in terms of government policy expectations. Granted, it would be a narrow margin of Democratic control in Washington, but should it come to pass, it could mean more fiscal stimulus as well as the potential for higher taxes, regulation, and an expansion of health-care benefits. A re-think of sorts could pressure certain sectors in the near-term, such as technology stocks, while benefitting others, like clean energy stocks.

Data Download

Coronavirus

According to data from Johns Hopkins, nearly 21 million cases of the coronavirus have been reported in the U.S. and over 353,000 people have lost their lives to this pandemic. The nation has reported over 125,000 hospitalizations for Covid-19 every day but one since December 30, as hospitals around the nation are pushed up against the limits of occupancy, overwhelming doctors and nurses. Yesterday, hospitalizations hit an all-time high of 131,195, according to the Covid Tracking Project. Eleven states broke record highs for hospitalizations on Tuesday.

California and Texas reported 22,485 and 13,308 cases respectively, while Alabama, Arkansas, Arizona, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, and Virginia all broke new record highs as well. Another 3,478 people died yesterday alone in the U.S. from the virus, up from 1,545 on Monday, reaching the second-highest one-day increase in fatalities.

The European Medicines Agency (EMA) is meeting today to consider giving the green light to Moderna’s (MRNA) COVID-19 vaccine.

International Economy

Consumer Confidence in Japan fell to 31.8 in December from 33.7 in November, marking the weakest since August.

Consumer confidence in France jumped to 95 in December of 2020 from a downwardly revised 89 in November, beating market forecasts of 91. The nation’s preliminary Inflation Rate came in at 0.0% YoY for December versus 0.2% in November, where it was expected to remain.

IHS Markit reported December Services PMIs, which revealed weaker than expected Eurozone activity likely due to renewed pandemic restrictions:

Country Dec 2020A Dec 2020E Nov 2020
Australia 57.0 57.4 55.1
Japan 47.7 47.2 47.8
China 56.3 57.8 57.9
Spain 48.0 45.0 39.5
Italy 39.7 45.3 39.4
France 49.1 49.2 39.9
Germany 47.0 47.5 45.0
Eurozone 46.4 47.3 41.7
UK 49.4 49.9 47.6

Domestic Economy

Yesterday’s ISM Manufacturing for December showed that while the virus case count may be accelerating, the US manufacturing sector managed to grow at its strongest pace since August 2018 thanks to strong demand despite staffing and supply chain challenges. The headline index rose to 60.7 from 57.6 versus expectations for a decline to 56.6.

Later today, a joint session of Congress will count electoral votes for the Presidential election and declare the result, TBD if fireworks will ensue. We will also get ADP’s National Employment Report for December, which is expected to see an increase of 200,000 in private-sector employment following the 307,000 jobs added in November. Today also brings the latest Markit Service PMI, Factory Orders, EIA Energy Stocks, and the FOMC meeting minutes.

Markets

U.S. equities rebounded yesterday from Monday’s sell-off with the S&P 500 closing up 0.7%, the Nasdaq Composite 1.0%, the Nasdaq 100 0.9%, the Dow 0.6% and the Russell 2000 fell 1.5%. Yesterday’s market was a return to the 2020 winners with the two deciles of best-performing stocks from last year averaging 2.5% gains in Tuesday’s rebound.

The U.S. Dollar fell 0.4% against a basket of currencies, a tailwind for U.S. manufacturing, while the yield on the 10-year Treasury rose 0.03% to 0.95%. The news of an oil production cut by Saudi Arabia saw Brent crude rise to $53.85 a barrel, the highest level since March, and WTI rose above $50.

Stocks to Watch

Simply Good Foods (SMPL) reported better than expected November quarter top and bottom-line results and boosted its outlook for the current quarter above consensus expectations. The company noted that Atkins and Quest performance exceeded internal forecasts due to better-than-expected e-commerce retail takeaway and the timing of shipments related to the seasonal inventory build by certain retailers. For the current quarter, Simply Good sees revenue of $223.8-$233.8 million vs. the $223.48 million consensus.

MSC Industrial (MSM) reported November quarter EPS that beat consensus expectations by $0.02 while revenue for the quarter matched expectations. The company commented that during the quarter it saw continued sequential improvement in sales of non-safety and non-janitorial product lines, while sales of safety and janitorial products grew roughly 20%.

President Trump signed an executive order banning transactions with eight Chinese apps, including Alibaba’s (BABA) Alipay, as well as QQ Wallet and WeChat Pay. The order, which takes effect in 45 days, says that the apps are being banned because they are a threat to U.S. national security. Given the timing of the order, investors will want to see if it is overturned before being enacted.

Amazon (AMZN) announced the Housing Equity Fund, a more than $2 billion commitment to affordable housing units. The company will provide below-market capital—in the form of loans, lines of credit, and grants—to preserve and create 20,000 homes affordable for moderate- to low-income families in the Puget Sound region, Arlington, and Nashville.

Green Dot Corporation (GDOT) has launched GO2bank, a new mobile bank designed to help the two in three Americans living paycheck to paycheck stretch their money further and build a stronger financial foundation.

AT&T (T) shared it expects attractive wireless device pricing for both new and existing customers, should continue to drive migrations to unlimited plans and momentum in the company’s wireless business. We suspect more on this will be had from next week’s CES 2021, during which more affordably priced 5G smartphones are expected to be announced. AT&T also shared the release of Wonder Woman 1984 on HBO Max contributed to high subscriber engagement over the holiday season and it will provide updated details on HBO Max subscribers when it announces fourth-quarter earnings.

Tiffany & Co. (TIF) reported its holiday sales for Nov 1 – Dec 31 increased by approximately 2% YoY. Worldwide comps were +4%, led by Asia-Pacific region +27%.

Cal-Maine Foods (CALM) reported November quarter EPS $0.25 vs. the -$0.08 consensus; revenue for the quarter rose 11.5% YoY to $347.3 million vs. the $333.5 million consensus. The company shared the quarter’s results “reflect favorable demand trends for shell eggs, primarily at the retail level as consumers continue to prepare more meals at home during the COVID-19 pandemic. Demand from foodservice customers has been less consistent and remains well below pre-pandemic levels.”

Honda Motor (HMC) shared it saw a 4.2% December gain for trucks, plus a new record for electrified vehicles and a double record for Passport.

Fiat Chrysler (FCAU) reported its U.S. sales fell 17.4% last year vs. 2019, including a 7.9% drop in the December quarter.

Comfort Systems (FIX) entered into a definitive agreement to acquire Tennessee Electric Company, headquartered in Kingsport, Tennessee.

Henry Schein (HSIC) acquired a majority ownership position in Prism Medical Products, a nationwide provider of specialty home medical supplies with a core competency in advanced wound care products.

Central Garden & Pet (CENT) announced it acquired online retailer DoMyOwn.com for an undisclosed amount.

Hologic Inc. (HOLX) agreed to buy privately held Biotheranostics Inc., which provides molecular diagnostic tests for breast and metastatic cancers, for $230 million.

UnitedHealth Group’s (UNH) Optum unit has agreed to acquire health care technology company Change Healthcare (CHNG) for $27.75 a share in cash.

AmerisourceBergen (ABC) announced it will acquire the majority of Walgreens Boots Alliance’s (WBA) Alliance Healthcare businesses for approximately $6.5 billion.

CNBC reports Macy’s (M) notified the employees at about 45 of its department stores that they will close by the middle of 2021. The closures are part of a previously announced plan by Macy’s to shut 125 locations by 2023.

After today’s market close, Jefferies (JEF) and Resources Connection (RGP) are expected to report their quarterly results. Investors looking to get a jump on those report s and other such ones to be had in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

  • January 7: Balance of Trade, Jobless Claims, ISM Non-Manufacturing
  • January 8: Nonfarm Payrolls, Wholesale Inventories
  • January 11-14: CES 2021
  • January 12: JOLTs report, IBD/TIPP Economic Optimism, API Crude Oil stocks
  • January 13: Inflation Rate, EIA energy stocks, Monthly Budget Statement
  • January 14: Import Prices, Jobless claims, Export & Import Prices,
  • January 15: Retail Sales, PPI, Empire State Manufacturing, Industrial Production, Business Inventories, Michigan Consumer Sentiment
  • January 19 Overall Net Capital Flows, Foreign Bond Investment, Net Long-term TIC flows
  • January 20: Chief Justice Roberts swears in the President, NAHB Housing Marking Index, API Crude Oil Stocks
  • January 21: Building Permits, Housing Starts, Philly Fed Manufacturing, Weekly Jobless Claims
  • January 22: Markit Manufacturing and Services Flash PMIs, Existing Home Sales, Energy stocks

Thought for the Day

“‘Life is short’ really means ‘do something.’” —Chimamanda Ngozi Adichie, writer.

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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