Plus, nonfarm payrolls for September came in lower than expected, stimulus talks are in limbo, and Tesla delivered more vehicles than expected in the third quarter.
Stocks were lower to start Friday with the Dow falling 200 points, or 0.8%. The S&P 500 also slid 0.8%, while the Nasdaq dropped 0.9%.
President Donald Trump tested positive for COVID-19, as did his wife, First Lady Melania Trump. Trump is said to be experiencing “mild symptoms” and has said he has begun the quarantine process. The disease has been especially risky for men, the elderly, and those who are overweight, putting Trump in the high-risk category. While House Speaker Nancy Pelosi issued reassurance that “the continuity of government is always in place,” should the issue of succession arise, market watchers are warning that the new uncertainty over the health of the president may lead to a deeper selloff in risk assets. “The market move is less about the election and more about the possibility that the U.S. president might become incapacitated,” said David Stubbs, head of markets strategy at JPMorgan International Private Bank. “This would inject significant uncertainty into the policy and geo-political outlook. That is clearly a risk-off event and markets are acting as such.”
Nonfarm payrolls rose by a lower than expected 661,000 in September, bringing the unemployment rate to 7.9%, the Labor Department said today. “The issue is momentum, and I think we’re losing it,” said Drew Matus, chief market strategist for MetLife. “When you go through a significant disruption to the labor market, it takes time to fix itself. That’s without regard to whether there’s a virus.” The decline in the unemployment rate came along with a 0.3 percentage point drop in the labor force participation rate to 61.4%.
Stimulus talks are in limbo after the House passed a Democrat-led $2.2 trillion relief package yesterday. Talks yesterday between Speaker Pelosi and Treasury Secretary Steven Mnuchin brought no immediate breakthrough on a deal to bridge the gap between Democrats and Republicans on stimulus. Pelosi did say last night that she would review the documents the Treasury chief had sent her to determine next steps. However, said also said that she won’t accept whatever the White House offers just to come to an understanding. “This isn’t half a loaf,” Pelosi said. “What they’re offering is the heel of the loaf. It’s no use going into a negotiation just saying you’ll take the path of least resistance.” It’s unclear whether President Trump’s COVID-19 diagnosis would change the course of the negotiations or make an impact on what Republicans are willing to agree to on the stimulus front.
Tesla shares are down more than 5% this morning even after the electric car maker delivered more vehicles than expected in the third quarter. Tesla said today that it delivered 139,300 vehicle in the third quarter and produced 145,036 vehicles, while analysts had expected the company to report deliveries of 137,000 in the quarter. “Overall, these are stellar numbers,” said Wedbush analyst Dan Ives. “The read through here is that China was a source of strength.” Elsewhere in the auto industry, Ford reported that its vehicle sales fell by just 4.9% in the third quarter, about half the drop seen in the broader industry and smaller than the sales declines felt by General Motors and Fiat Chrysler. “We’re carrying really good momentum into Q4,” said Mark LaNeve, Ford vice president of U.S. marketing, sales and service. “Obviously, nobody really knows what twist and turns could come from a pandemic environment or the election, but certainly Q3 exceeded expectations and we’re looking forward to Q4.”
And Twilio shares are up more than 13% today after the company said in a filing yesterday that it anticipates more revenue in the third quarter than the $401 million to $406 million range it provided in August. The range had implied 36% to 38% growth, which would be down from 46% in the second quarter. Still Twilio said during an investor day presentation that it expects at least 30% organic annual revenue growth in each of the next four years and a 60% to 65% adjusted gross margin over the long term.
Stocks We’re Watching
Camtek Ltd (NASDAQ: CAMT): Camtek shares gained as much as 17.7% yesterday after the company announced that it had received orders amounting to $15 million for systems serving front-end macro inspection applications from two large manufacturers that Camtek expects to install during the fourth quarter of 2020 and the first quarter of 2021. “These high-volume orders demonstrate a continuous and growing demand for Camtek’s equipment for the front-end macro inspection application,” said Camtek CEO Rafi Amit in a statement. “I am pleased to note that our strong 2D detection capabilities combined with high productivity and breakthrough technologies have enabled us to significantly increase our presence in the front-end segment. Looking ahead, and in line with our strategy, I believe there is a huge potential and very interesting business opportunities for our systems in this market.”