Market Analysis

Beyond the Numbers

Traders Looking For More Signs Of Progress Toward Stimulus Bill
10/22/2020 9:00 AM

The major U.S. index futures are pointing to a modestly lower open on Thursday following the lackluster performance seen in the previous session.

Uncertainty about a new stimulus bill may weigh on Wall Street, as traders wait for more concrete signs of progress on an agreement.

House Speaker Nancy Pelosi’s deputy chief of staff Drew Hammill revealed the Democratic leader spoke with Treasury Secretary Steven Mnuchin again on Wednesday, saying the conversation brought the two sides closer to being able to put pen to paper to write legislation.

“With the exchange of legislative language, we are better prepared to reach compromise on several priorities,” Hammill said in a post on Twitter.

He added, “Differences continue to be narrowed on health priorities, including language providing a national strategic testing and contract tracing plan, but more work needs to be done to ensure that schools are the safest places in America for children to learn.”

Hammill said Pelosi and Mnuchin plan to speak again later today, although traders may want to see less talk and more action.

A tweet from President Donald Trump has also led to continued uncertainty about whether an agreement will ultimately be reached.

“Just don’t see any way Nancy Pelosi and Cryin’ Chuck Schumer will be willing to do what is right for our great American workers, or our wonderful USA itself, on Stimulus,” Trump tweeted.

“Their primary focus is BAILING OUT poorly run (and high crime) Democrat cities and states,” he added. “Should take care of our people. It wasn’t their fault that the Plague came in from China!”

However, stocks futures have regained some ground following the release of a report from the Labor Department showing a decrease in first-time claims for U.S. unemployment benefits in the week ended October 17th.

After ending Tuesday’s trading modestly higher, stocks showed a lack of direction over the course of the trading day on Wednesday. The major averages spent the day bouncing back and forth across the unchanged line.

The major averages eventually ended the session moderately lower. The Dow fell 97.97 points or 0.4 percent to 28,210.82, the Nasdaq dipped 31.80 points or 0.3 percent to 11,484.69 and the S&P 500 edged down 7.56 points or 0.2 percent to 3,435.56.

The choppy trading on Wall Street came as traders kept an eye on the latest developments in Washington, as lawmakers try to reach an agreement on a new stimulus bill.

White House chief of staff Mark Meadows told CNBC on Tuesday that House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have made "good progress" in talks but noted they "still have a ways to go" before an agreement is reached.

Pelosi and Mnuchin are expected to talk again today as they seek to reach an agreement on a new relief package before next month's elections.

In a post on Twitter, Pelosi's deputy chief of staff Drew Hammill said the Speaker and the Secretary have called for committee chairs to work to resolve differences about funding levels and language.

"With this guidance, the two principals will continue their discussions tomorrow afternoon upon the Secretary's return," Hammill tweeted.

However, Senate Majority Leader Mitch McConnell revealed on Tuesday that he has warned the White House not to make a deal with Pelosi before the elections.

Federal Reserve Governor Lael Brainard urged Congress to pass a new relief bill in a speech at an online conference hosted by the Society of Professional Economists.

"The recovery remains highly uncertain and highly uneven — with certain sectors and groups experiencing substantial hardship. These disparities risk holding back the recovery," Brainard said.

She added, "Further targeted fiscal support will be needed alongside accommodative monetary policy to turn this K-shaped recovery into a broad-based and inclusive recovery."

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Housing stocks showed a significant move to the downside, however, with the Philadelphia Housing Sector Index tumbling by 2.6 percent.

Considerable weakness was also visible among oil stocks, as reflected by the 2 percent drop by the NYSE Arca Oil Index. The weakness in the sector came amid a steep drop by the price of crude oil for December delivery.

Biotechnology, natural gas and airline stocks also saw notable weakness on the day, while gold stocks moved higher along with the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are inching up $0.10 to $40.13 a barrel after tumbling $1.67 to $40.03 a barrel on Wednesday. Meanwhile, after jumping $14.10 to $1,929.50 an ounce in the previous session, gold futures are plunging $21.40 to $1,908.10 an ounce.

On the currency front, the U.S. dollar is unchanged versus the 104.59 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1827 compared to yesterday’s $1.1861.


Asian stocks fell on Thursday after U.S. President Donald Trump accused congressional Democratic leaders of blocking a new economic relief deal, casting doubt on the prospects of a bipartisan, multi-trillion dollar stimulus deal before Election Day. The death of a volunteer participating in Covid-19 vaccine clinical trials also dented risk sentiment.

Chinese shares retreated as U.S. stimulus talks dragged on and Brazil's President Jair Bolsonaro said that his government will not buy China's Sinovac vaccine against Covid-19.

The benchmark Shanghai Composite Index slipped 12.52 points, or 0.4 percent, to 3,312.50 while Hong Kong's Hang Seng Index edged up 31.71 points, or 0.1 percent, to 24,786.13.

Japanese shares ended lower as the yen firmed up after reports that Russia and Iran have both obtained U.S. voter information and taken actions to influence public opinion ahead of the November 3 election.

The Nikkei 225 Index gave up 165.19 points, or 0.7 percent, to finish at 23,474.27, while the broader Topix index closed 1.1 percent lower at 1,619.79.

ANA Holdings plummeted 4.1 percent on reports the airline is expecting to book a record annual net loss of around 530 billion yen ($5 billion) and decided to retire half of its wide-body fleet, losing around 25 to 30 planes. Rival Japan Airlines gave up 2.2 percent.

Australian markets hit nearly two-week lows before ending off their worst levels. The benchmark S&P/ASX 200 Index ended down 18.00 points, or 0.3 percent, at 6,173.80, while the broader All Ordinaries Index slid 19.40 points, or 0.3 percent, to 6,383.70.

Woodside Petroleum declined 1.6 percent and Santos lost 1.9 percent after reporting lower quarterly sales. Medical centre operator Healius surged 9.3 percent after a positive first-quarter update.

The big four banks fell around half a percent. AMP slumped 5.6 percent after the troubled wealth giant revealed net outflows of $2.4 billion from its once-flagship funds management division.

Seoul stocks fell notably to snap a three-day winning streak amid concerns about stalled negotiations over a new round of fiscal stimulus in the world's largest economy.

Concerns over the Covid-19 pandemic also dented sentiment as the number of daily local coronavirus cases in the country hit a monthly high. The benchmark Kospi dropped 15.81 points, or 0.7 percent, to 2,355.05.

Market bellwether Samsung Electronics declined 1.3 percent and top pharmaceutical firm Samsung Biologics tumbled 4.4 percent, while chemical maker LG Chem advanced 3.6 percent.


European stocks are seeing modest weakness on Thursday, as new coronavirus cases continue to surge, U.S. stimulus hopes fade and the FBI warned of election interference by Iran and Russia, raising the risk of a disputed election result.

While the French CAC 40 Index is down by 0.2 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both down by 0.3 percent.

Varta, a battery technology company in Germany, has plunged after extending the contract of its chief executive, Herbert Schein, until 2026.

Thales has also come under pressure. The defense electronics group reiterated the lowered full-year goals it unveiled in July in response to the coronavirus pandemic.

Spectris, a supplier of precision instrumentation and controls, has also fallen in London. The company's like-for-like sales declined 9 percent in the third quarter.

British Airways owner IAG has also moved to the downside after slashing its flight schedule for the rest of the year.

Moneysupermarket.com has also plunged after it reported continued weakness in its insurance and money segments in the third quarter.

Meanwhile, Schneider Electric has moved notably higher. The French energy-management company said it now expects sales for 2020 to fall between 5 percent and 7 percent versus previous guidance of a drop between 7 percent and 10 percent.

Corporate services company Edenred has also moved to the upside after it returned to organic growth in the third quarter.

Spirits maker Pernod Ricard has also risen. The company said that sales would return to growth in the second half of its 2020/2021 fiscal year.

Swiss specialty chemicals company Sika AG has also moved significantly higher after the company confirmed its 2023 targets.

Daily Mail And General Trust has also jumped. The newspaper publisher expects adjusted operating profit in the range of GBP85 and GBP90 million for the year to September 30, well above analyst expectations of between GBP59 million and GBP80 million.

In economic news, market research group Gfk said its forward-looking consumer sentiment index for Germany fell more than expected to -3.1 in November from -1.7 in October.

All three sub-components, namely economic and income expectations and the propensity to buy declined in October. After five rises in a row, the economic sentiment decreased seventeen points to 7.1 points in October.

French business confidence weakened in October, monthly survey data from the statistical office Insee showed. The manufacturing confidence index unexpectedly fell to 93 in October from September's revised score of 94. The expected reading was 96.0.

U.S. Economic Reports

A report released by the Labor Department on Thursday showed a decrease in first-time claims for U.S. unemployment benefits in the week ended October 17th.

The Labor Department said initial jobless claims fell to 787,000, a decrease of 55,000 from the previous week’s revised level of 842,000.

Economists had expected jobless claims to drop to 860,000 from the 898,000 originally reported for the previous week.

Along with the notable downward revision to the previous week’s number, the report showed initial jobless claims in the week ended October 3rd were downwardly revised to 767,000 from 845,000.

The Labor Department noted the latest release reflects actual counts for California, which has completed its pause in processing of initial claims and resumed reporting actual unemployment insurance claims data.

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of September. Existing home sales are expected to spike by 5.0 percent in September after jumping by 2.4 percent in August.

The Conference Board is also due to release its report on leading economic indicators in the month of September at 10 am ET. The leading economic index is expected to rise by 0.6 percent.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auctions of two-year, five-year and seven-year notes.

Richmond Federal Reserve President Thomas Barkin and San Francisco Fed President Mary Daly are due to participate in a “Fireside Chat: Coast-to-Coast - Leading through the Pandemic” at the Women in Banking Symposium virtual event at 1:10 pm ET.

6 pm ET, Dallas Federal Reserve President Robert Kaplan is scheduled to discuss national and global economic issues at a Global Perspectives speaker series virtual event hosted by the Dallas Fed.

Stocks In Focus

Shares of Chipotle Mexican Grill (CMG) are moving significantly lower in pre-market trading even though the restaurant chain reported third quarter results that exceeded analyst estimates on both the top and bottom lines.

Consumer goods company Kimberly-Clark (KMB) is also likely to come under pressure after reporting weaker than expected third quarter earnings.

On the other hand, shares of Snap-On (SNA) are seeing substantial pre-market strength after reporting third quarter adjusted earnings that beat expectations.

Discover Financial Services (DFS) is also likely to move to the upside after reporting better than expected third quarter results.
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