Tuesday, November 3, 2020

Wall Street in Focus on US Election Day

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News shaping
the markets today

     

What’s happening: Wall Street closed higher on Monday, recovering slightly from the sharp losses recorded last week, with national polls predicting a victory for Democratic candidate Joe Biden.

What happened: US stocks will be in focus today, as investors brace for volatility during the all-important Election Day.

Details: Investors are expecting some volatility in the global financial markets as the result of the US Presidential elections will influence various key decisions, including the fiscal stimulus package.

Joe Biden has a lead versus Donald Trump, with the former Vice President receiving support from 52% of registered voters compared to the incumbent President’s 42%, according to the NBC News/Wall Street Journal poll.

Experts at independent investment research CFRA Research said that the US stock market has been a good indicator of who will win the elections. In all instances of the S&P 500 index declining in the three months prior to Election Day, the current President has lost the election in 88% cases. Meanwhile, a rise in the S&P 500 in the same period has been followed by a victory of the incumbent President 82% of the times.

Although the stock market was trading higher till last week, the dramatic plunge over the past few trading days has taken the S&P 500 to the red. The S&P 500 slipping 0.04% from July 31 to October 31 indicates a Biden’s victory, according to CFRA Research's Presidential Predictor.

Markets received some support on Monday from strong manufacturing data, which climbed to a two-year high in October.

The Dow Jones index gained 423.45 points to close at 26,925.05 on Monday, after recording its worst weekly performance since March. Shares of Honeywell and Walgreens Boots Alliance drove the blue-chip index higher.

The S&P 500 added 1.2% to reach 3,310.24, while the Nasdaq 100 gained 0.4% to settle at 10,957.61.

What to watch: Markets await news from various US states as ballots are counted. Investors will also be waiting for a basket of economic reports, including the ISM New York index, factory orders and economic optimism index. US factory orders are expected to rise 1% in September following a 0.7% improvement in the prior month.

Covid-19 remains a major concern for investors, with total cases in the US approaching 9.3 million.

The Markets Today

     

Shares of Estee Lauder Companies edged higher on Monday after the cosmetics giant reported stronger-than-expected earnings for its first quarter.

Context: With people being forced to remain indoors due to the pandemic, the New-York based company saw a sharp downturn in the sales of its makeup products. Despite this, Estee Lauder was able to surpass expectations driven by the online sales of its skincare products and a spike in the Asian markets.

Details: The M.A.C brand owner reported a decline in sales and earnings for its first quarter, but both metrics exceeded market estimates.

  • Sales slipped 9% to $3.56 billion, but came in ahead of the consensus estimates of $3.46 billion.
  • Net income declined to $523 million, or $1.42 per share, from $595 million, or $1.61 per share, in the same quarter last year.
  • Excluding non-recurring items, the company earned $1.44 per share, beating the consensus view of 90 cents a share.

Why it matters: The cosmetics giant increased investments into its online business. This resulted in a spike in the demand for its skincare products, including moisturisers and creams. Skincare sales climbed 10% to $2.04 billion, while makeup sales tumbled 32% to $978 million in the quarter. Despite the decline in regular makeup items, the company’s s online sales grew by a whopping 40% during the quarter.

While sales tumbled 25% in the Americas and 8% in Europe, Estee Lauder witnessed a 9% growth at the Asia-Pacific region, driven by South Korea. The company also witnessed a surge in demand at its duty-free shops in China after the government raised the annual tax-free shopping quota for Hainan tourists.

Management issued mixed guidance for the current quarter, projecting a 3% to 5% decline in net sales. The company also projected adjusted earnings between $1.45 and $1.60 per share, lower than the market expectations of $1.73 per share.

Shares of Estee Lauder gained 1.9% to close at $223.85 on Monday following the release of quarterly results. The stock has risen more than 13% over the past three months.

What to watch: Investors will keep an eye on the growth in the company’s online business, especially given the resurgence of infections in the US and Europe. Markets will also monitor Estee Lauder’s sales in the Asian region, particularly in countries like China and South Korea, which have been able to keep the pandemic largely under control.

Other Markets: European trading indices closed higher on Monday, with the FTSE 100, German DAX 30 and French 40 up 1.39%, 2.01% and 2.11%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

France's government budget value, Spain’s tourist arrivals, Mexico’s business confidence and manufacturing PMI, Brazil’s manufacturing PMI, Brazil’s balance of trade, Argentina’s tax revenue as well as the US Redbook index.