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S&P 500 Futures Lower on Election Security Issues, APAC Stocks May Fall

S&P 500, HANG SENG INDEX OUTLOOK:

  • S&P 500 index futures fell on election security concerns, fading stimulus hopes
  • Q3 corporate earnings remained strong, Tesla smashed EPS forecasts
  • Hang Seng Index (HSI) may form a “Double Top” after failing to break a key resistance at 24,750
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S&P 500 Index Outlook:

“Risk off” sentiment swept Asia-Pacific markets at open as US national security officials said that Iran and Russia have both obtained information about American voters’ registrations and are trying to influence the election outcome. All three major US equity indices fell over 0.5% immediately after the news, as uncertainty surrounding the US election surged.

Save-haven bid fueled a rally in the US Dollar, while the risk-linked Australian and New Zealand Dollars fell. Asia-Pacific equities looked set to open broadly lower, led by the Nikkei 225 (-0.71%) and ASX 200 (-1.11%).

Crude oil prices widened the losses to 4.2% as sentiment soured. Last night, the API report showed an unexpected rise in US stockpiles, dragging the energy sector securities lower. Besides, market sentiment was also weighed by fading hope for an immediate stimulus package and rising coronavirus cases across the country. Some 60,598 new cases were reported in the United States over the last 24 hours, adding to its total cases of 8.35 million.

The bright spot might be strong corporate earnings, with continued to smash expectations from the upside. Tesla has delivered strong Q3 results, and its share price surged more than 3% after market close. Tesla’s Q3 revenue, earnings-per-share (ESP) and forward guidance have all smashed analysts’ forecasts, and the company appears on track to delivering half a million vehicles in 2020.

On Wednesday, 25 out of 28 major US companies released better-than-expected earnings (table below). So far in the earnings season, more than 80% of the S&P 500 constituents have beaten their EPS forecasts.

S&P 500 Earnings – October 21st2020

Name

Date

Period

Actual

Estimate

Surprise

Thermo Fisher Scientific Inc

21/10/2020

Q3 20

5.63

4.328

30.10

KeyCorp

21/10/2020

Q3 20

0.41

0.366

12.00

Avery Dennison Corp

21/10/2020

Q3 20

1.91

1.562

22.30

Teledyne Technologies Inc

21/10/2020

Q3 20

2.53

2.362

7.30

Baker Hughes Co

21/10/2020

Q3 20

0.04

0.038

5.30

Nasdaq Inc

21/10/2020

Q3 20

1.53

1.467

4.30

Interpublic Group of Cos Inc/T

21/10/2020

Q3 20

0.53

0.329

61.10

Biogen Inc

21/10/2020

Q3 20

8.84

8.045

9.90

Abbott Laboratories

21/10/2020

Q3 20

0.98

0.908

7.90

NextEra Energy Inc

21/10/2020

Q3 20

2.66

2.589

2.70

Northern Trust Corp

21/10/2020

Q3 20

1.32

1.382

(4.60)

Verizon Communications Inc

21/10/2020

Q3 20

1.25

1.216

2.80

Amphenol Corp

21/10/2020

Q3 20

1.09

0.876

24.40

CSX Corp

21/10/2020

Q3 20

0.96

0.921

4.20

Whirlpool Corp

21/10/2020

Q3 20

6.91

4.202

64.40

Kinder Morgan Inc

21/10/2020

Q3 20

0.21

0.204

2.90

Las Vegas Sands Corp

21/10/2020

Q3 20

(0.67)

(0.738)

9.20

Lam Research Corp

21/10/2020

Q1 21

5.67

5.193

9.20

Align Technology Inc

21/10/2020

Q3 20

2.25

0.613

267.00

Chipotle Mexican Grill Inc

21/10/2020

Q3 20

3.76

3.46

8.70

SL Green Realty Corp

21/10/2020

Q3 20

1.75

1.539

13.70

TechnipFMC PLC

21/10/2020

Q3 20

0.16

0.213

(24.90)

Globe Life Inc

21/10/2020

Q3 20

1.75

1.723

1.60

Edwards Lifesciences Corp

21/10/2020

Q3 20

0.51

0.443

15.10

Crown Castle International Cor

21/10/2020

Q3 20

1.24

1.438

(13.80)

Discover Financial Services

21/10/2020

Q3 20

2.45

1.585

54.60

Xilinx Inc

21/10/2020

Q2 21

0.79

0.729

8.40

Equifax Inc

21/10/2020

Q3 20

1.87

1.585

18.00

Source: Bloomberg

On the political front, the last presidential election debate will be held at 9am Singapore time on Friday, October 23rd (9pm ET, October 22nd). Traders may get more clues from this debate with regards to Biden’s and Trump’s policy differences. Markets appeared to have heavily priced in a Biden-win scenario, rendering them fragile to unwinding activities should the election outcome flip against expectations.

Sector-wise, 9 out of 11 S&P 500 sectors closed in the red, with 65% of the index’s constituents ending lower yesterday. Energy (-1.99%) was a clear drag to the index as crude oil prices fell more than 4%. Besides, industrials (-0.99%) and consumer discretionary (-0.63%) were also were among the worst performers, whereas communication services (+1.29%) and consumer staples (+0.12%) wereperforming better.

S&P 500 Index Sector Performance 21-10-2020

S&P 500 Futures Lower on Election Security Issues, APAC Stocks May Fall

Source: Bloomberg, DailyFX

Technically, the S&P 500 index appears to have entered a consolidative period since mid-October (chart below). The near-term trend has likely turned bearish as lower lows were observed. An immediate support level can be found at 3,420 – the 38.2% Fibonacci retracement. Breaking below 3,420 may open room for more losses towards the next support level at 3,380 – the 50% Fibonacci retracement.

S&P 500 IndexDaily Chart

S&P 500 Futures Lower on Election Security Issues, APAC Stocks May Fall

Hang Seng Index Outlook:

Hong Kong’s Hang Seng Index (HSI) may struggle to break above a key resistance level at 24,750 due to external headwinds. The FBI’s investigation on election security issues have led to a broad decline in Asia-Pacific stocks, which could weigh on sentiment in Hong Kong.

Technically, the HSI failed to break above a key resistance at 24,750 – the 100-Day SMA. A retracement from here may lead to the formation of a “Double Top” pattern, which is a bearish indicator. The overall trend of HSI remains bullish, however, as the 20-Day Simple Moving Average (SMA) line is about to form a “Golden Cross” by crossing above the 50-Day SMA line. A breakout above 24,750 may open room for more upside towards the 24,900-25,000 area.

Hang Seng Index Daily Chart

S&P 500 Futures Lower on Election Security Issues, APAC Stocks May Fall

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— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter