Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for October 20, 2020.
House speaker Nancy Pelosi’s 48-hour deadline for lawmakers and the White House to agree on a new stimulus package before the election was met with a cold reception by investors on Monday. There was hope of a deal being reached imminently to help safeguard the US economic recovery, but that is becoming less likely as politicians continue to lock horns. The S&P 500 sank by 1.6% in response, with the energy, information technology and communication services sectors falling hardest.
Of the 30 stocks in the Dow Jones Industrial Average, which fell 1.4%, Intel was the only stock in the green after news that the firm has reached a deal to sell its flash-memory business for $9bn. Per The WSJ, the firm has been wanting out of the business for some time, as prices for flash memory have sunk.
Overnight, stock markets across Asia also headed south, with both the Japanese Nikkei and Hong Kong’s Hang Seng down 0.5% and 0.2% respectively, as nervous investors headed for the door. European markets have also opened in the red after record covid infection numbers were reported on the continent.
Despite yesterday’s sell off, US futures are up between 0.5% and 1% but the uncertainty over the election could keep a lid on gains as investors weigh up how much risk they want to leave on the table going into such a volatile event. That being said, we also have some big names reporting earnings which will undoubtedly garner some interest (more below).
Apple keeps slipping after last week’s iPhone release
All three of the major US stock indices suffered yesterday, with the Dow being pushed back into negative territory in terms of its year-to-date return. Eight stocks in the Dow fell by more than 2%, with Apple the biggest loser at -2.6%. The firm is now down 6.8% over the past five trading days, which includes the announcement of its latest iPhone models last week. Apple’s share price is still up 58% year-to-date, and 93% over the past 12 months.
In earnings news, IBM delivered a third straight quarter of revenue declines, which sent the firm’s share price tumbling 3% in after-hours trading. For new CEO Arvind Krishna, the decline is a continuation of the troubles under his predecessor Ginni Rometty. On the earnings call, Krishna declined to provide earnings guidance, and said that the firm would be booking charges of $2.3bn in Q4 to “simplify and streamline” the business. Also of note is the company reporting that revenue from its cloud business gained 19% year-over-year to account for 6% of the total.
- S&P 500: -1.6% Monday, +6.1% YTD
- Dow Jones Industrial Average: -1.4% Monday, -1.2% YTD
- Nasdaq Composite: -1.7% Monday, +27.9% YTD
UK stocks continue to head sideways
London-listed stocks started off the week in mixed fashion, with both the FTSE 100 and FTSE 250 continuing the journey sideways that they have been on since May. The FTSE 100 closed the day 0.6% down, while the FTSE 250 gained 0.2%. There were no major losers in either index, with gambling firm GVC falling furthest in the FTSE 100 at -2.4%.
In the FTSE 250, travel names enjoyed a positive day, with Tui, easyJet and Carnival up 6%, 4.8% and 4.5% respectively. Doorstep lender Provident Financial led the index however with a 6.7% gain, taking its rally over the past three months past the 25% mark. The company remains down more than 50% in 2020 overall, however.
In corporate news security firm G4S made headlines yesterday as a takeover battle between the firm and hostile suitor GardaWorld (a Canadian firm) continued. GardaWorld made a full offer for the firm valuing it at 190p per share, below the firm’s current market cap. At the same time, GardaWorld reportedly sent G4S shareholders a letter encouraging them to ignore G4S management and take the deal. G4S put out its own note, telling investors the bid “significantly undervalues the company.”
- FTSE 100: -0.6% Monday, -22% YTD
- FTSE 250: +0.2% Monday, -18.4% YTD