Market Analysis

Beyond the Numbers

Upbeat Economic Data May Contribute To Rebound On Wall Street
10/29/2020 8:59 AM

The major U.S. index futures are pointing to a higher open on Thursday, with stocks likely to regain ground following the sell-off seen in the previous session.

Early buying interest may be generated in reaction to a report showing a stronger than expected rebound by the U.S. economy in the third quarter.

The report from the Commerce Department said real gross domestic product skyrocketed by 33.1 percent in the third quarter after plunging by 31.4 percent in the second quarter. Economists had expected GDP to soar by 31.0 percent.

Adding to the positive sentiment, the Labor Department released a report showing initial jobless claims fell to their lowest level since before the coronavirus-induced lockdowns in the week ended October 24th.

Bargain hunting may also contribute to strength on Wall Street after the sell-off seen on Wednesday pulled the Dow down to a nearly three-month closing low. The Nasdaq and the S&P 500 also hit their lowest closing levels in over a month.

Following the mixed performance seen on Tuesday, stocks moved sharply lower during trading on Wednesday. With the steep drop on the day, the Dow ended the session at its lowest closing level in nearly three months.

The major averages saw further downside going into the close, ending the session just off their lows of the day. The Dow tumbled 943.24 points or 3.4 percent to 26,519.95, the Nasdaq plunged 426.48 points or 3.7 percent to 11,004.87 and the S&P 500 plummeted 119.65 points or 3.5 percent to 3,271.03.

The sell-off on Wall Street came amid continued concerns about a recent spike in coronavirus cases across the U.S.

The U.S. has averaged more than 70,000 new coronavirus cases a day over the past week, with 29 states setting new records this month for the most new daily cases since the pandemic began in February.

More than 8.78 million cases have been reported nationwide and at least 226,000 people have died of COVID-19, according to data from John Hopkins University.

According to JHU, the average number of daily new cases this past week is up 21 percent compared to the previous week.

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

Meanwhile, President Donald Trump has continued to downplay the pandemic in recent days, accusing the media of focusing too much on the disease ahead of next week's elections.

"Covid, Covid, Covid is the unified chant of the Fake News Lamestream Media. They will talk about nothing else until November 4th., when the Election will be (hopefully!) over," Trump tweeted. "Then the talk will be how low the death rate is, plenty of hospital rooms, & many tests of young people."

Lingering uncertainty about a new stimulus bill also weighed on Wall Street, with some analysts suggesting a victory by Joe Biden could make Republicans less likely to approve a new relief package until next year.

Gold stocks turned in some of the market's worst performances on the day, dragging the NYSE Arca Gold Bugs Index down by 7.1 percent to its lowest closing level in over three months.

The sell-off by gold stocks came amid a steep drop by the price of the precious metal, as gold for December delivery plummeted $32.70 to $1,879.20 an ounce.

Substantial weakness was also visible among airline stocks, resulting in a 6.3 percent nosedive by the NYSE Arca Airline Index.

Energy stocks also saw significant weakness on the day as the price of crude oil for December delivery plunged $2.18 to $37.39 a barrel.

Software, transportation and steel stocks also showed notable moves to the downside amid broad based weakness on Wall Street.

Commodity, Currency Markets

Crude oil futures are tumbling $1.90 to $35.49 a barrel after plunging $2.18 to $37.39 a barrel on Wednesday. Meanwhile, after plummeting $32.70 to $1,879.20 an ounce in the previous session, gold futures are slumping $11.40 to $1,867.80 an ounce.

On the currency front, the U.S. dollar is trading at 104.29 yen versus the 104.32 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1711 compared to yesterday’s $1.1746.


Asian stocks fell on Thursday, tracking overnight declines in the U.S. and Europe, as rising coronavirus infections and new restrictions being introduced in European countries added to worries about the economic outlook. Lingering uncertainty about U.S. fiscal stimulus and the U.S. election also kept investors on edge.

Chinese shares recovered from an early slide to end slightly higher as investors awaited cues from third-quarter earnings and a meeting of China's Communist Party leaders that will set the next five-year plan.

The benchmark Shanghai Composite Index inched up 3.49 points, or 0.1 percent, to 3,272.73. Hong Kong's Hang Seng Index dropped 0.5 percent to 24,586.60.

Japanese shares extended losses for the fourth straight session on rising concerns over escalating coronavirus cases in the northern hemisphere. Investors also reacted to weak retail sales data and the Bank of Japan's interest rate decision.

The value of retail sales in Japan fell 8.7 percent from a year earlier in September, a government report showed. That missed forecasts for a decline of 7.7 percent following the 1.9 percent drop in August. On a monthly basis, retail sales dipped 0.1 percent after jumping 4.6 percent in the previous month.

The BOJ held its monetary policy steady but trimmed its growth and price forecasts for the current fiscal year. The central bank made no changes to a package of steps aimed at easing corporate funding strains.

The Nikkei 225 Index slipped 86.57 points, or 0.4 percent, to 23,331.94, while the broader Topix closed 0.1 percent lower at 1,610.93.

Central Japan Railway and East Japan Railway both fell about 2.4 percent after reporting disappointing earnings. Electronics and gaming giant Sony jumped 6.7 percent after upwardly revising its full-year forecast.

Australian markets hit a fresh three-week low on fears that a new wave of lockdowns and business restrictions sweeping across Germany, France and other places in Europe would damage a nascent economic recovery.

The benchmark S&P/ASX 200 Index tumbled 97.40 points, or 1.6 percent, to 5,960.30, while the broader All Ordinaries Index ended down 93.80 points, or 1.5 percent, at 6,168.

Gold miner Newcrest Mining lost 3.9 percent after reporting a decline in first quarter output. Evolution Mining fell 4.3 percent and Northern Star Resources gave up 5 percent as gold lingered near a one-month low hit in the previous session.

Banks ANZ, NAB and Westpac fell between 1.5 percent and 2.4 percent, while mining heavyweights BHP and Rio Tinto dropped 1-2 percent.

Smaller rival Fortescue Metals rose 0.9 percent after it reported a 5 percent increase in first quarter iron ore shipments.

Beach Energy, Origin Energy, Oil Search and Santos slumped 4-5 percent after oil prices fell more than 5 percent on Wednesday.

Online jobs portal Seek plunged 5.9 percent after U.S. activist short seller Blue Orca took on the company, claiming its business in China, Zhaopin, is full of junk listings.

Seoul stocks fell notably as the latest statistics showed an alarming surge in coronavirus cases in major global economies. The benchmark Kospi dropped 18.59 points, or 0.8 percent, to 2,326.67.

Market bellwether Samsung Electronics declined 1.5 percent after saying it expects fourth quarter profit to fall due to weak server chip demand and rising smartphone competition. No. 2 chipmaker SK Hynix also ended down 1.5 percent.

Top pharmaceutical firm Samsung Biologics soared 9.4 percent after announcing the opening of a new research and development center in the U.S.

Business sentiment in South Korea improved in October, the latest survey from the Bank of Korea showed today, with a Business Survey Index score of 79.0 - up from 68.0 in September. The outlook also improved, rising to 78.0 from 70.0 in September.


European stocks have moved to the downside on Thursday after suffering heavy losses the previous day on concerns about rising coronavirus cases and the impact of tough lockdown restrictions.

While the French CAC 40 Index has slid by 0.7 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both down by 0.2 percent.

The British pound has strengthened versus the euro amid optimism that the U.K. and EU are making progress in securing a trade deal.

Swiss lender Credit Suisse Group AG has also come under pressure after it posted a steeper than expected slide in third-quarter profit.

Nokia shares have also plunged. The Finnish telecom network equipment maker cut its full-year profit forecast and announced a new strategy under which it will have four business groups.

Smith+Nephew has also moved to the downside after the medical technology company reported a decrease in quarterly underlying revenue.

Lender Standard Chartered has also slumped after its third quarter pre-tax underlying profit declined 40 percent.

Aixtron, a provider of deposition equipment to the semiconductor industry, has also tumbled after its net income for the first nine months of 2020 dropped to 9.6 million euros from the prior year's level of 20.2 million euros.

Airbus has also dropped. The aerospace and defense company reported a third quarter net loss of 767 million euros compared to profit of 989 million euros last year.

On the other hand, Dutch chip equipment maker ASM International NV has surged after raising its guidance for the fourth quarter.

British telecoms giant BT Group has also moved sharply higher after boosting its earnings guidance for the full year.

Royal Dutch Shell has also rallied. The oil major increased its dividend to shareholders after posting better than expected third-quarter earnings.

Lloyds Banking Group has also risen after the bank posted a forecast-beating quarterly profit amid a surge in demand for home loans.

French telecoms operator Orange has also spiked after its third quarter core operating profit topped expectations.

Shares of Volkswagen have also shown a notable move to the upside after the German automaker returned to a profit in the third quarter.

U.S. Economic Reports

After reporting a record contraction in U.S. economic activity in the previous quarter, the Commerce Department released a report on Thursday showing the economy rebounded by more than expected in the third quarter.

The Commerce Department said real gross domestic product skyrocketed by 33.1 percent in the third quarter after plunging by 31.4 percent in the second quarter. Economists had expected GDP to soar by 31.0 percent.

The substantial rebound in GDP reflected increases in consumer spending, private inventory investment, exports, non-residential fixed investment, and residential fixed investment.

A separate report from the Labor Department showed first-time claims for U.S. unemployment benefits fell to their lowest level since before the coronavirus-induced lockdowns in the week ended October 24th.

The report said initial jobless claims dropped to 751,000, a decrease of 40,000 from the previous week’s revised level of 791,000.

Economists had expected jobless claims to dip to 775,000 from the 787,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims fell to their lowest level since hitting 282,000 in the week ended March 14th.

At 10 am ET, the National Association of Realtors is due to release its report on pending home sales in the month of September. Pending home sales are expected to jump by 3.4 percent in September after spiking by 8.8 percent to a record high in August.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

The Treasury Department is scheduled to announce the results of its auction of $53 billion worth of seven-year notes at 1 pm ET.

Stocks In Focus

Shares of Inphi Corp. (IPHI) are skyrocketing in pre-market trading after the chipmaker agreed to be acquired by Marvell Technology (MRVL) for $10 billion in cash and stock.

Coach and Kate Spade parent Tapestry (TPR) is also seeing significant pre-market strength after reporting fiscal first quarter earnings well above analyst estimates on better than expected revenues.

Shares of Ford (F) are also likely to move to the upside after the auto giant reported much better than expected third quarter earnings.

On the other hand, shares of Spotify (SPOT) may come under pressure after the streaming music service reported a wider than expected third quarter loss.
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