Surging coronavirus cases sink US stock futures

US stock futures fell on Sunday evening, as a deal on a new fiscal stimulus package in the US agreed before next week’s presidential election looks to be a long shot. The US Covid-19 new case rate has raced back to record-setting levels of around 80,000 daily, including multiple staff in Vice President Mike Pence’s office.

Last week stocks slipped overall as stimulus package negotiations between Democrat and Republican lawmakers continued to drag on. All eyes this week will be on the final days of polling data in the run-up to election day, and the chances of a “blue wave” result – where Democrats win the presidency and a majority in both chambers of Congress. Last week, Goldman Sachs told clients that a blue wave could lead to “substantially more fiscal support” for the economy, including a stimulus package and infrastructure spending, according to CNBC.

Bank stock rally stands out in negative week overall

While the S&P 500 closed last week 0.5% down, it was not doom and gloom across the board. Bank stocks rallied by 3.2% on aggregate, according to data from Fidelity, including a 2.3% gain for JPMorgan and a 2.7% gain for Bank of America.

On Friday, chipmaker Intel was at the back of the S&P 500, closing the day 10.6% lower after disappointing investors with its Q3 earnings report, which showed unexpected weakness in its data center unit. Key rival AMD – which delivers its own earnings report on Tuesday – is expected to continue its run of making gains at the expense of Intel, according to MarketWatch.

In corporate news over the weekend, $7bn market cap firm Dunkin’ Brands is in talks to go private. Inspire Brands, which is owned by private equity group Roark Capital, is reportedly negotiating a deal to acquire the group. That would bring the Dunkin’ Donuts and Baskin-Robbins brands into the same stable as chains Buffalo Wild Wings and Arby’s. This year, Dunkin’ stock has gained 17.5%, following a 27% rally over the past three months. With restrictions on restaurant visits, fast food chains such as Dunkin’ that have drive-through locations have outperformed the broader sector.

S&P 500: +0.3% Friday, +7.3% YTD (-0.5% last week)

Dow Jones Industrial Average:  -0.1% Friday, -0.7% YTD (-1% last week)

Nasdaq Composite: +0.4% Friday, +28.7% YTD (-1.1% last week)

FTSE 250 builds lead over FTSE 100 in 2020

Small beat large in the UK last week, with the FTSE 250 index up 1.6% and the FTSE 100 down 1%. A gap in performance between the two indices has been emerging in recent weeks, with the FTSE 250’s 17.3% loss in 2020 so far now five percentage points ahead of the FTSE 100’s performance. Similar to the US, banks were among the week’s winners; Barclays, NatWest and Lloyds all gained between 8% and 10%.

One firm that continued a recent tear last week was Rolls Royce, which added close to 10%, taking its one month gain past the 50% mark. Monday is a big day for the company in securing its future, as shareholders will vote on a two billion pound heavily discounted rights issue. Over the weekend, The Telegraph reported that the company’s shareholders are demanding a huge overhaul of the engineering firm’s business in return.

FTSE 100: +1.3% Friday, -22.3% YTD (-1% last week)

FTSE 250: +1.2% Friday, -17.3% YTD (+1.6% last week)

What to watch

Twilio: Cloud-based platform firm Twilio, which allows software developers to embed voice, messaging, video and other communication services into applications, has seen its share price surge more than 200% in 2020. The shift to a virtual world due to the pandemic has clear benefits for the firm, and earlier this month multiple analysts raised their price targets on the stock following an investor day. Wall Street is anticipating Twilio will post a small loss per share when it delivers its Q3 earnings today, but investors will be watching revenue and active customer numbers closely.

Beyond Meat: Plant-based meat substitute company Beyond is another that has enjoyed huge gains in 2020. Since the start of the year, the firm’s share price is up more than 125%, on the back of multiple new product additions and distribution deals. The company reports its latest set of quarterly earnings on Monday, where one point of interest will be recent reports that it may have a new partnership with McDonald’s in the UK. Following its mammoth rally, Wall Street analysts favour a hold rating on the company, with several rating the firm’s shares as a sell.

BP: British oil giant BP will deliver its third-quarter earnings on Tuesday, after seeing its share price sink by close to a third over the past three months. Year-to-date, the company is down more than 50%. While oil prices were higher in Q3 on average versus Q2, they have been stuck around the $40 barrel a month mark now for months. A key part of BP’s earnings report will be its plans to pivot towards cleaner sources of energy, which The WSJ described last month as “the most aggressive plans yet by a major oil company.”

Big tech earnings

The coming week is packed with third-quarter earnings reports from a host of US tech giants, the performance of which in 2020 has been a major factor behind the broader market’s gains. That share price growth has stalled in recent months, and investors will be watching for signs of continued momentum as the pandemic continues to rage. Investors will also be hoping of news on initial iPhone 12 sales from Apple, the state of the digital advertising market from Facebook, and the thinking of Alphabet’s management on what the Justice Department’s antitrust suit against Google means for the company.

Crypto corner: bitcoin hits highest level since January 2018

The world’s preeminent cryptoasset hit a 2020 high of $13,361 early on Sunday morning, after steady gains have seen it rise considerably across October from a low of $10,363 on 2 October, a 29% gain. Bitcoin last saw such valuations in June 2019 when the Libra whitepaper was released.

Elsewhere, ethereum and XRP have followed suit with rises so far in October. Ethereum is up from a low of $332 on 7 October and is now trading around $406, a 22% gain. XRP meanwhile is up from a low of $0.23 on 2 October and is now trading around $0.25, a more modest gain of 8%. Across 2020 though it is down from a high of $0.31 reached in mid-august.

All data, figures & charts are valid as of 26/10/2020. All trading carries risk. Only risk capital you can afford to lose

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