Stimulus and Election Uncertainty Drive SPY Futures Lower; Tesla Again Defies Gravity

The S&P futures were off 6 points in premarket hours after we saw a new round of election interference ahead of the November 3 event. This morning, the Director of National Intelligence warned that Iran has been sending threatening and intimidating messages to voters in an effort to incite violence and impact voter sentiment. 

Meanwhile, JPMorgan warned that we could see a slowdown in an economic recovery. The investment bank said that Q4 growth might fall due to Congress’ inability to move on a stimulus deal. While Lego Batman Movie producer Steven Mnuchin and Speaker Nancy Pelosi continue to hammer out a deal, Senate Majority Leader Mitch McConnell has hinted that he doesn’t plan on bringing any deal to a vote.

Let’s take a look at the numbers from Wednesday before we get into the headlines driving the futures market. 

Here are the key headlines that are driving the Dow Futures this morning. Look for additional updates throughout the day.

The Rundown: Today’s Top Market Stories 

  • This morning, the big story centers around foreign election interference. National security officials said yesterday that both Iran and Russia are working to interfere with the U.S. election. First, Iran has spoofed intimidating emails to Democratic voters aimed at creating civil unrest. Meanwhile, Russia was able to access voter registration information. It remains unclear how they are using this data at the moment. However, the current situation creates a pathway to post-election uncertainty that could extend problems for Americans after the election. Distrust and questions about the authenticity of the vote could create a very toxic situation after the election and delay a conclusion for the final tally. That could negatively impact the broader market and fuel a flight to quality. As a result, I’m eyeing the TLT as a trade and setting the trailing stop around $155.
  • Next up, President Trump took aim at Speaker Pelosi and Senate Minority Leader Chuck Schumer on the progress of the stimulus talks. Trump sent a series of tweets yesterday, which included a statement that the two Democrats are focused heavily on “Bailing out poorly run… Democrat cities and states.” Pelosi and The Legend of Tarzan producer Steven Mnuchin continue to debate and attempt to narrow the gap between Democrats and the White House on additional stimulus. That said, more banks are signaling that further delays will only limit recovery and negatively impact the middle class.
  • Big Tech is back in focus again on Thursday. I still don’t think that the government has a case against Alphabet’s Google. Now, Senate Republicans are raising the alarm about alleged censorship on Twitter and Facebook. The next political show will center around a recent report by the New York Post around Joe Biden’s son and his dealings abroad. The Senate Judiciary Committee has authorized subpoenas to Facebook CEO, Mark Zuckerberg, and Twitter CEO, Jack Dorsey. It’s uncertain that the committee has the ability to do anything about “Censorship.” But they will create one heck of a political show in the process.

COVID-19 Updates

This morning, the key COVID story that has been IGNORED by the market is out of the World Health Organization (WHO). Dr. David Heymann – who led the WHOs infectious disease team during the SARS outbreak said that a vaccine might not prevent COVID-19 from becoming an epidemic. He argues that governments might need to encourage people to live with this pandemic in a “chronic way.” This is quite a statement and one that opens up a number of questions about the viability of a vaccine and what sort of realignment that the economy might require to prevent serious problems in employment and more in the years ahead.

Today’s Top Stocks to Watch: CMG, TSLA, KO, LUV, AAL

CMG: While everyone is talking about Tesla (TSLA) this morning, I think the bigger deal is what is happening with Chipotle Mexican Grill (CMG). The company reported earnings yesterday, and shares are off 5.6%. The big news is that the company saw a huge increase in costs due to delivery. Chipotle started its own delivery channel to compete against other delivery companies like Grubhub and Uber Eats. In addition to rising delivery costs, the firm saw a big drop in drink sales. It will be interesting to see if they shift their strategy or set new delivery limits to ensure that this doesn’t impact its bottom line in the future. That said, the dip may have produced a long-term buying opportunity.

TSLA: Sure. I have to pay attention to Tesla (TSLA). I don’t own it. I probably never will, because I’m not one for YOLO stocks. But I will trade it on the options movements. That said, the company reported its fifth-straight quarter of profitability and said that it’s going to open up new production facilities in Germany and Austin, Texas. The stock is up an incredible 400% in 2020. I can’t justify the valuation at all, but I remain in awe that investors continue to pump money into it. The reality might be that people see TSLA as a store of value the same way that they do with Bitcoin, gold, Amazon, or other tech stocks. If they can disrupt the global energy industry, that’s a really big number. It’ll be very interesting to watch.

KO, LUV, AAL: Earnings reports continue to show that the pandemic is eating into corporate earnings. Coca-Cola (KO) saw a 9% drop in its four drink categories. Southwest (LUV), which plans to start selling middle seats in December to boost revenue – lost $1.2 billion in Q3. That was their largest quarterly drop ever. Meanwhile, American Airlines (AAL) saw a loss in Q3.