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Beyond the Numbers

Jump In Coronavirus Cases May Lead To Sell-Off On Wall Street
10/28/2020 9:00 AM

The major U.S. index futures are pointing to a sharply lower open on Wednesday following the mixed performance seen in the previous session.

The downward momentum on Wall Street comes amid continued concerns about a recent spike in coronavirus cases across the U.S.

Data from John Hopkins University showed that daily new coronavirus cases have risen by a record average of 69,967 over the past week.

The jump in new infections has also been accompanied by an increase in hospitalizations, leading to worries about new lockdowns.

Adding to the negative sentiment, President Donald Trump admitted that talks have collapsed for a coronavirus stimulus package before Election Day.

"After the election, we will get the best stimulus package you have ever seen," Trump told reporters at the White House.

After moving sharply lower during trading on Monday, stocks turned in a mixed performance on Tuesday. While the Dow and the S&P 500 moved to the downside on the day, the tech-heavy Nasdaq ended the day firmly in positive territory.

The major averages finished the day well on opposite sides of the unchanged line. The Nasdaq climbed 72.41 points or 0.6 percent to 11,431.35, while the Dow slid 222.19 points or 0.8 percent to 27,463.19 and the S&P 500 fell 10.29 points or 0.3 percent to 3,390.68.

The mixed performance on the day came amid concerns about the recent spike in coronavirus cases as well as continued uncertainty about the prospects for a new stimulus bill.

Traders were also reacting to some mixed economic data, with separate reports showing a jump in durable goods orders and an unexpected dip in consumer confidence.

The Commerce Department released a report before the start of trading showing new orders for U.S. manufactured durable goods jumped by much more than expected in the month of September.

The report said durable goods orders surged up by 1.9 percent in September after rising by rising by 0.4 percent in August. Economists had expected durable goods orders to increase by 0.5 percent.

The much stronger than expected growth in durable goods orders came as orders for transportation equipment soared by 4.1 percent in September after slumping by 0.9 percent in August.

Excluding the spike in orders for transportation equipment, durable goods orders climbed by 0.8 percent in September compared to a 1.0 percent jump in the previous month. Ex-transportation orders were expected to rise by 0.4 percent.

Meanwhile, the Conference Board released a report unexpectedly showing a slight drop in confidence in the month of October.

The Conference Board said its consumer confidence index edged down to 100.9 in October after jumping to a revised 101.3 in September.

The pullback surprised economists, who had expected the index to inch up to 102.0 from the 101.8 originally reported for the previous month.

"Consumers' assessment of current conditions improved while expectations declined, driven primarily by a softening in the short-term outlook for jobs," said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

She added, "There is little to suggest that consumers foresee the economy gaining momentum in the final months of 2020, especially with COVID-19 cases on the rise and unemployment still high."

Airline stocks moved sharply lower over the course of the session, dragging the NYSE Arca Airline Index down by 3.3 percent.

Substantial weakness was also visible among banking stocks, as reflected by the 3 percent slump by the KBW Bank Index.

Oil, housing and pharmaceutical stocks also saw considerable weakness on the day, extending the downward move seen during trading on Monday.

On the other hand, gold stocks showed a strong move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 1.9 percent. The strength in the sector came amid an increase by the price of gold.

Software stocks also turned in a strong performance, resulting in a 1.2 percent advance by the Dow Jones U.S. Software Index.

Commodity, Currency Markets

Crude oil futures are plunging $1.87 to $37.70 a barrel after jumping $1.01 to $39.57 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,878.30, down $33.60 compared to the previous session’s close of $1,911.90. On Tuesday, gold rose $6.20.

On the currency front, the U.S. dollar is trading at 104.39 yen compared to the 104.42 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1720 compared to yesterday’s $1.1796.

Asia

Asian stocks recovered from an early decline to end mostly higher on Wednesday after U.S. President Donald Trump acknowledged the much-needed Covid-19 stimulus would likely come after the November 3rd election.

Lingering worries about the recent spike in coronavirus cases in the U.S. and Europe kept underlying sentiment cautious to some extent.

Chinese shares eked out modest gains, with the benchmark Shanghai Composite Index rising 14.92 points, or 0.5 percent, to 3,269.24 on optimism that the country is on solid path of economic recovery from the pandemic. Hong Kong's Hang Seng Index dropped 0.3 percent to 24,708.80.

Japanese shares ended lower amid uncertainties from the Covid-19 flare-up and the U.S. presidential election. The Nikkei 225 Index slipped 67.29 points, or 0.3 percent, to 23,418.51, while the broader Topix Index closed 0.3 percent lower at 1,612.55.

Insurer Dai-ichi Life Holdings gave up 2.7 percent and Tokio Marine Holdings lost 3.6 percent.

Furniture retailer Otsuka Kagu jumped 33.1 percent on news its president would be stepping down. Shimano shares surged as much as 17 percent after the bicycle parts maker upwardly revised its full-year earnings and revenue projections, citing greater utilization of bicycles during the Covid-19 pandemic.

Australian markets recovered from an early slide to finish marginally higher, led by healthcare and technology stocks. The benchmark S&P/ASX 200 Index ended up 6.70 points, or 0.1 percent, at 6,057.70, while the broader All Ordinaries Index inched up 14.60 points, or 0.2 percent, to 6,261.80.

ANZ declined 1.7 percent as the lender said its half-year profit will be impacted by $528 million worth of “significant items.” NAB shed 1.1 percent and Westpac lost 1.4 percent.

Energy stocks such as Woodside Petroleum, Santos and Oil Search gave up 2-3 percent after crude oil prices fell to a three-week low overnight.

Healthcare stocks rose broadly, with medical device maker Resmed rallying 3.5 percent. Afterpay jumped 7.3 percent after the buy-now-pay-later firm reported that its underlying sales for the first quarter more than doubled from last year.

Gold miner Evolution Mining surged 4.1 percent and Northern Star Resources advanced 2.8 percent after safe-haven gold prices rose overnight.

In economic news, the Australian Bureau of Statistics said that consumer prices in Australia were up an annual 0.7 percent in the third quarter of 2020, in line with expectations, following the 0.3 percent decline in the previous three months.

Seoul stocks rose to snap a two-day losing streak after a measure of the country's consumer confidence jumped the most since the global financial crisis in another upbeat sign for the economy. The Bank of Korea said its consumer confidence index jumped to 91.6 in October from 79.4 in September.

The benchmark Kospi rose 14.42 points, or 0.6 percent, to 2,345.26. Internet portal giant Naver soared 5.3 percent and its rival Kakao advanced 3.7 percent.

Europe

European stocks have tumbled on Wednesday as governments across Europe seek to tackle rising coronavirus infections with fresh measures that sparked protests in places such as Italy.

Meanwhile, hopes of U.S. stimulus faded after U.S. President Donald Trump admitted that talks have collapsed for a coronavirus stimulus package before Election Day.

"After the election, we will get the best stimulus package you have ever seen," Trump told reporters at the White House.

While the U.K.’s FTSE 100 Index has tumbled by 2 percent, the French CAC 40 Index is down by 3.4 percent and the German DAX Index is down by 3.8 percent.

Peugeot has come under pressure after the French automaker reported a drop in third quarter revenue and said it expects the European car market to drop 25 percent in 2020.

Shares of Sopra Steria have plunged. The consulting and software development company generated revenue of €987.6 million in the third quarter of 2020, representing negative growth of 4.9 percent.

Property developer Land Securities has also tumbled after it announced the appointment of Vanessa Simms as its next chief financial officer.

Chemical company BASF has also plummeted after it swung to a net loss of 2.12 billion euros ($2.50 billion) in the third quarter.

Puma has also moved to the downside. The sports retailing company reported a strong rebound in third-quarter profits and sales, but said it can't give guidance for the year due to uncertain economic outlook.

On the other hand, shares of Next Plc have advanced after the clothing retailer upgraded its profit forecasts for the current year.

Aston Martin has also surged on news that Mercedes will increase its holding in the British carmaker to up to 20 percent by 2023.

Deutsche Bank has edged up slightly. The German lender posted better-than-expected results and raised the outlook for the investment bank.

MorphoSys AG has also moved to the upside. The biopharmaceutical company raised its outlook for the financial year 2020.

U.S. Economic Reports

The Energy Information Administration is due to release its report on oil inventories in the week ended October 23rd at 10:30 am ET.

Crude oil inventories are expected to rise by 1.2 million barrels after falling by 1.0 million barrels in the previous week.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $55 billion worth of five-year notes.

Stocks In Focus

Shares of Six Flags (SIX) are moving sharply lower in pre-market trading after the theme park operator reported a wider than expected third quarter loss.

Software giant Microsoft (MSFT) is also moving to the downside in pre-market trading despite reporting better than expected fiscal first quarter results.

On the other hand, shares of General Electric (GE) are likely to see initial strength after the conglomerate reported an unexpected third quarter profit on revenues that exceeded analyst estimates.
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