Market Analysis

Beyond the Numbers

Upbeat Retail Sales Data May Generate Early Buying Interest
10/16/2020 8:58 AM

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to regain ground after moving lower over the three previous sessions.

Early buying interest may be generated in reaction to a report from the Commerce Department showing much stronger than expected U.S. retail sales growth in the month of September.

The Commerce Department said retail sales spiked by 1.9 percent in September after rising by 0.6 percent in August. Economists had expected retail sales to climb by 0.7 percent.

Traders may also react positively to the latest news regarding negotiations between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin over a new stimulus bill.

Pelosi’s deputy chief of staff Drew Hammill noted on the Twitter that the Speaker and the Secretary spoke for over an hour on Thursday.

Hammill said Pelosi asked Mnuchin about Senate Majority Leader Mitch McConnell’s comments suggesting he would not being willing to put a comprehensive package on the Senate floor.

“The Secretary indicated that the President would weigh in with Leader McConnell should an agreement be reached,” Hammill tweeted.

Adding to the positive sentiment, Pfizer (PFE) Chairman and CEO Albert Bourla said the drug giant will apply for emergency use of the Covid-19 vaccine it is developing with BioNTech (BNTX) soon after the safety milestone is achieved in the third week of November.

“All the data contained in our U.S. application would be reviewed not only by the FDA’s own scientists but also by an external panel of independent experts at a publicly held meeting convened by the agency,” Bourla said in an open letter.

After moving sharply lower in early trading, stocks showed a significant recovery attempt over the course of the session on Thursday. The major averages climbed well off their worst levels of the day but still ended the day in negative territory.

While the Dow plunged by more than 330 points in early trading, the blue chip index ended the day down just 19.80 points or 0.1 percent to 28,494.20. The Nasdaq fell 54.86 points or 0.5 percent to 11,713.87 and the S&P 500 dipped 5.33 points or 0.2 percent to 3,483.34.

The initial sell-off on Wall Street came amid uncertainty about a new stimulus bill after Treasury Secretary Steven Mnuchin suggested on Wednesday that a new relief package is not likely to pass before next month's elections.

Senate Majority Leader Mitch McConnell has also cast doubts on whether a bill can pass before the elections and recently announced plans to vote on a more limited relief package.

Early selling pressure was also generated in reaction to a Labor Department report showing an unexpected increase in first-time claims for U.S. unemployment benefits in the week ended October 10th.

The report said initial jobless claims climbed to 898,000, an increase of 53,000 from the previous week's revised level of 845,000.

Economists had expected jobless claims to edge down to 825,000 from the 840,000 originally reported for the previous week.

With the unexpected increase, jobless claims reached their highest level since topping 1 million in the week ended August 22nd.

However, stocks rebounded well off their lows after Mnuchin told CNBC's "Squawk Box" that he and President Donald Trump are committed to getting a stimulus deal done.

Mnuchin said he plans to talk to House Speaker Nancy Pelosi today and tell her that he won't let the issue of testing, a key sticking points in talks, stand in the way.

"We'll fundamentally agree with their testing language subject to some minor issues," Mnuchin said. "This issue is being overblown."

Financial stocks helped to lead the recovery attempt by the broader markets, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index climbing by 1.7 percent and 1.6 percent, respectively.

Significant strength also emerged among oil service stocks, as reflected by the 1.6 percent gain posted by the Philadelphia Oil Service Index. The rebound by oil service stocks came as the price of crude oil bounced well off its early lows.

Meanwhile, considerable weakness remained visible among gold stocks, resulting in a 1.4 percent drop by the NYSE Arca Gold Bugs Index. The weakness in the gold sector came despite a modest increase by the price of the precious metal.

Pharmaceutical and biotechnology stocks also saw notable weakness on the day, dragging the NYSE Arca Pharmaceutical Index and the NYSE Arca Biotechnology Index down by 1.3 percent and 1.2 percent, respectively.

Commodity, Currency Markets

Crude oil futures are slipping $0.29 to $40.67 a barrel after edging down $0.08 to $40.96 a barrel on Thursday. Meanwhile, after inching up $1.60 to $1,908.90 an ounce in the previous session, gold futures are rising $4.30 to $1,913.20 an ounce.

On the currency front, the U.S. dollar is trading at 105.38 yen versus the 105.45 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1733 compared to yesterday’s $1.1708.


Asian stocks ended mixed on Friday as uncertainty about new U.S. fiscal stimulus coupled with the resurgence in coronavirus cases in Europe stoked concerns about a global economic recovery.

A stalemate in U.S. stimulus negotiations continued despite President Donald Trump's offer to increase the size of a fiscal stimulus package.

Chinese shares rose slightly as investors looked ahead to the release of third-quarter GDP data next week. The benchmark Shanghai Composite Index edged up 4.18 points, or 0.1 percent, to 3,336.36, while Hong Kong's Hang Seng Index climbed 228.25 points, or 0.9 percent, to 24,386.79.

Japanese shares retreated as coronavirus infections climbed across Europe, raising concerns about the outlook for a global economic recovery. Expectations of new stimulus measures by the government and Fast Retailing's upbeat annual earnings forecast helped limit the downside to some extent.

The Nikkei 225 Index dropped 96.60 points, or 0.4 percent, to 23,410.63, while the broader Topix ended 0.9 percent lower at 1,617.69.

Heavyweight Fast Retailing jumped 4.3 percent. The operator of the Uniqlo and GU casual clothing brands, reported a 44 percent drop in profit for the year ended August 2020 but projected a record net profit for the current fiscal year.

Fujifilm Holdings advanced 2.5 percent after saying it was seeking to have its flu drug Avigan approved in Japan as a treatment for Covid-19.

Australian markets fell as lower iron ore prices amid waning hopes for additional U.S. fiscal stimulus pulled down mining stocks.

The benchmark S&P/ASX 200 Index dropped 33.50 points, or 0.5 percent, to 6,176.80, while the broader All Ordinaries Index ended down 29.20 points, or 0.5 percent, at 6,385.

Mining giant Rio Tinto shed 0.9 percent after it reported a 4.6 percent drop in third quarter iron ore shipments. Rival BHP lost 1.4 percent.

Banks ANZ and Westpac fell 0.3 percent and 0.6 percent, respectively. Healthcare stocks ended broadly lower, with CSL losing 0.7 percent and Cochlear declining 1.5 percent.

Meanwhile, pump manufacturer GUD Holdings surged 6.3 percent after reporting strong quarterly sales figures.

Seoul stocks fell for the fourth straight session as the Covid-19 pandemic continued to spread in the United States and Europe. The benchmark Kospi slid 19.68 points, or 0.8 percent, to 2,341.53, led by losses in tech and auto exporters. SK Hynix lost 2.1 percent and Hyundai Motor declined 2.3 percent.

South Korea's unemployment rate rose in September as the coronavirus pandemic weighed on the labor market, official data showed.

The jobless rate rose to a seasonally adjusted 3.9 percent in September from 3.2 percent in August. The number of unemployed increased to 1.0 million in September from 864,000 in the preceding month.


European shares have rebounded from two-week lows on Friday, though the upside remains capped by concerns surrounding a fresh round of lockdowns, vaccine delays and the stalemate in the U.S. over fiscal stimulus.

While the French CAC 40 Index has jumped by 1.7 percent, the U.K.’s FTSE 100 Index is up by 1.4 percent and the German DAX Index is up by 1.1 percent.

Daimler AG has rallied after its preliminary results for the third quarter came in significantly above market expectations. The automaker said it expects positive impact for the remainder of the year 2020.

Peers Renault and Peugeot have also jumped after industry data showed car registrations across the European Union grew 3.1 percent on a yearly basis to 933,987 units in September.

Thyssenkrupp has soared on reports that privately held Liberty Steel Group will make an offer for the company’s ailing steel unit.

Shares of LVMH have also moved sharply higher after the luxury goods maker saw demand rebound in the third quarter.

Man Group shares have also surged. The company said that funds under management rose 4 percent in the third quarter of 2020.

On the other hand, shares of J D Wetherspoon have plunged after the pub chain slumped to a £95 million annual loss.

In economic news, Eurozone consumer prices declined for the second straight month in September, as initially estimated, final data from Eurostat revealed.

Consumer prices decreased 0.3 percent on a yearly basis following a 0.2 percent drop in August. The statistical office confirmed the flash estimate released on October 2. A similar rate was last seen in April 2016.

U.S. Economic Reports

After reporting much weaker than expected U.S. retail sales growth in the previous month, the Commerce Department released a report on Friday showing retail sales jumped by much more than expected in the month of September.

The Commerce Department said retail sales spiked by 1.9 percent in September after rising by 0.6 percent in August. Economists had expected retail sales to climb by 0.7 percent.

Excluding an increase in sales by motor vehicles and parts dealers, retail sales still surged up by 1.5 percent in September after climbing by a downwardly revised 0.5 percent in August.

Ex-auto sales were expected to rise by 0.5 percent compared to the 0.7 percent increase originally reported for the previous month.

The Federal Reserve is scheduled to release its report on industrial production in the month of September At 9:15 am ET. Industrial production is expected to increase by 0.5 percent in September after rising by 0.4 percent in August.

At 10 am ET, the University of Michigan is due to release its preliminary report on consumer sentiment in the month of October. The consumer sentiment index is expected to inch up to 80.5 in October after jumping to 80.4 in September.

The Commerce Department is also scheduled to release its report on business inventories in the month of August at 10 am ET. Business inventories are expected to rise by 0.4 percent.

At 1:35 pm ET, St. Louis Federal Reserve President James Bullard is due to participate in a “Monetary Policy in Transition” Bretton Woods Committee panel at an IMF Annual Meeting webinar.

Stocks In Focus

Shares of CIT Group (CIT) are moving sharply higher in premarket trading after the banking company announced an all-stock merger of equals with First Citizens BancShares (FCNCA), with CIT stockholders to receive 0.0620 shares of First Citizens stock for each share of CIT stock they own.

Aerospace giant Boeing (BA) is also likely to see initial strength after Europe’s top aviation regulator told Bloomberg he’s satisfied changes made to the company’s 737 Max have made the aircraft safe to fly.

Shares of Chewy.com (CHWY) are also seeing significant pre-market strength after Jefferies upgraded its rating on the online pet products retail to Buy from Hold.

On the other hand, shares of Intuitive Surgical (ISRG) may come under pressure after the robotic surgical systems maker reported better than expected third quarter results but once again declined to provide full-year guidance.
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