Not Good Enough for Earnings

By Alex Eule |  Wednesday, October 14 0-for-2. Speaker of the House Nancy Pelosi and Treasury Secretary Steven Mnuchin are still talking about a stimulus. But even as they get closer on terms, the calendar poses a growing obstacle. Today, Mnuchin said that "getting something done before the election and executing on that will be difficult." Not exactly what investors wanted to hear.  The major indexes fell for a second consecutive day, with the Dow Jones Industrial Average ending down 166 points.  Earnings, thus far, have been OK, but not good enough to overshadow the stimulus stalemate. Goldman Sachs stock finished essentially flat despite third-quarter numbers that easily bested Wall Street estimates. Bank of America's latest quarter was slightly more profitable than expected, and its stock actually fell 5.3%. (The bank's revenue missed analysts' forecast.)  Earnings season is currently zero-for-two in terms of boosting the market. Tomorrow is another chance, with results scheduled from Morgan Stanley, Charles Schwab, Taiwan Semiconductor Manufacturing, and more. After stock markets closed tonight, United Airlines reported that its third-quarter revenue was down 78% from a year ago, a terrible number, but in line with what Wall Street expected.   My colleague Daren Fonda notes that the third-quarter report still contained some good news.  The good news in the report was that United cut its daily cash burn, making progress similar to its large rival Delta Air Lines, which reported results on Tuesday. United’s cash burn averaged $21 million in the quarter, excluding debt and severance payments, a big improvement over its $37 million daily average in the second quarter. United said it had cut operating costs by 59% compared with pre-pandemic levels, and it is in the process of furloughing more than 13,000 employees. The airline has raised more than $22 billion since the pandemic started, Daren writes. "Even though the negative impact of Covid-19 will persist in the near term, we are now focused on positioning the airline for a strong recovery that will allow United to bring our furloughed employees back to work and emerge as the global leader in aviation," CEO Scott Kirby said in a statement late today. Apple stock was flat a day after its big iPhone announcement, but investors seem to be getting worried about whether its new phones are enough to push consumers toward nascent 5G networks. Communication Services was the worst performing sector in the S&P 500 on the day, led by a 4% loss for shares of T-Mobile US.

 

DJIA: -0.58% to 28,514.00 S&P 500: -0.66% to 3,488.67 Nasdaq: -0.80% to 11,768.73 The Hot Stock: Concho Resources +10.2% The Biggest Loser: Wells Fargo -6.0% Best Sector: Industrials +0.6% Worst Sector: Communication Services -1.2% *Last night's newsletter included the wrong Hot Stock and Biggest Loser. It should have been Waters Corp. (+7.1%) and Royal Caribbean (-13.2%)