It’s that time of year again. The leaves are falling, the shadows are sharper and third-quarter earnings season is about to begin.
companies worth roughly $2.5 trillion will report third-quarter numbers next week, and there will be something for everyone, as financials, airlines, industrials, and retailers release their results.
Particular attention will be paid to banks, beginning with the big four:
Bank of America,
That will give investors a chance to hear about lending and, more important, about defaults.
Johnson & Johnson
reports, too. Beyond earnings, investors will want to hear about Covid-19 and how the vaccines and therapeutics are advancing.
Earnings should be better than predicted if only because they almost always are. Companies always like to give conservative guidance, and investors hate earnings misses more than they like earnings beats.
Beating earnings forecasts isn’t always a sign of strength, however. Last quarter, more than 80% of firms topped estimates, even as S&P 500 profits plunged 40%. This time around, S&P 500 earnings are slated to drop less than 10% year-over-year.
Still, things are getting better, and that will have to be good enough for now.
*** On the latest episode of Barron’s Streetwise, columnist Jack Hough talks with the CEO of LabCorp about Covid-19 testing and treatments. Plus, the founder of Whole Foods on pandemic shortages and obesity. Listen here.
Trump, Biden Set to Hold Separate Events in Place of Next Debate
Joe Biden is planning a town hall-style event in Philadelphia hosted by ABC News’ George Stephanopoulos in place of next week’s virtual presidential debate after President Donald Trump said he would not participate after the event was shifted to a virtual format.
- President Trump’s physician said in a memo that the president might be able to hold in-person events by Saturday. “If we can have enough time to put it together, we want to do a rally probably in Florida on Saturday night,” Trump told Fox’s Sean Hannity on Thursday.
- Earlier Thursday, Trump campaign manager Bill Stepien said the president would test negative by the debate and proposed pushing the next debate to Oct. 22, followed by a final debate on Oct. 29. The Biden campaign rejected the proposal.
- The president tweeted a video from outside the White House Thursday in which he admitted that he had been “very sick” and said he wanted to make the experimental drugs he had received available immediately under an emergency use authorization.
What’s Next: Trump also told Hannity he’d hold another rally Sunday night in Pennsylvania, a sign of how quickly the president’s reelection campaign might start back up again after it was put on pause last week.
Stimulus Still Up in the Air as Pelosi Rejects ‘Skinny’ Relief Bills
House Speaker Nancy Pelosi rejected passing a series of smaller, so-called skinny relief bills, including a possible stand-alone bill for the airline industry, in place of the broader stimulus measure she was negotiating before President Donald Trump called off talks earlier this week.
- “This is deadly serious,” Pelosi said at a Thursday press conference.”So let’s take a serious, not a skinny, not an emaciated, but a serious, appropriate approach to crushing the virus and then talk about some of the other good things that would flow from that.”
- Pelosi insisted that any bill aiding the ailing industry had always been contingent on a larger bill passing. An airline relief package, she said, could have been included either as part of a larger package or passed separately along with a broader bill.
- “We’re gonna tackle this again,” Senate Majority Leader Mitch McConnell said Thursday, adding that the timing was uncertain because of the election. “I’ve got a significant percentage of my members who think we’ve done enough and who are alarmed by the amount of national debt.”
What’s Next: President Trump is reportedly eager to restart negotiations with Pelosi after seeing the stock market drop following his tweets instructing his team to halt negotiations until after the Nov. 3 election.
Morgan Stanley to Buy Asset Manager Eaton Vance for $7 Billion
has worked to shift away from risky Wall Street trading toward more reliable revenue generators like private wealth and asset management. That effort accelerated Thursday when the bank said it was buying asset manager
for $7 billion.
- Eaton Vance’s $507 billion in assets means the deal will push Morgan Stanley’s total assets under management to $1.2 trillion.
- Entry into the small group of asset managers above the $1 trillion asset threshold drives up profits by allowing firms to generate more revenue while holding operating costs relatively stable.
- The purchase price is $56.50 per share in cash and stock, with Morgan Stanley paying a premium of about 40% over Eaton Vance’s share price at the close of the market on Wednesday.
- Morgan Stanley distributes Eaton Vance funds through its wealth-management business and while much of Morgan Stanley’s business in that unit is abroad, the Eaton Vance’s funds are mainly distributed in the U.S.
- Because of how that geographic distribution fit together, the deal “was sort of obvious,” Morgan Stanley CEO James Gorman told The Wall Street Journal. “If we didn’t do this, someone else would have.”
What’s Next: The acquisition, which was announced just after Morgan Stanley’s $11 billion purchase of E*Trade Financial was completed, is expected to close during the second quarter of next year.
European Economic Slowdown in August Points to More Trouble Ahead
The pace of the economic rebound in Europe slowed down significantly in August according to latest GDP and industrial production figures. And the number of infections keeps rising in most countries, prompting fears about the impact of future, tougher restrictive measures.
- The U.K.’s GDP grew an estimated 2.1% on a monthly basis in August, the Office for National Statistics said Friday, or less than half the median forecast of economists polled by Reuters. And most of the uptick was due to a temporary government subsidy of restaurant meals.
- Manufacturing output in France rose 1% in August after a 4.5% bounce in July, the national statistics institute said. And it stood more than 7% below its February, pre-pandemic level.
- The slowdown happened before more restrictive measures were taken in most European countries to counter the current, severe second wave of the coronavirus pandemic. Spain, France and the U.K. in particular are fast moving toward the kind of tough lockdown measures in place for several months earlier this year.
- Even Germany, where the pandemic was best controlled, Health Minister Jens Spahn said Thursday that he was “highly concerned” by the rise of infections, now at a level not seen since April.
What’s Next: Growth is hit both by the careless who shunned restrictions and caused the pandemic’s second spike, and by the cautious who fear the future and keep saving. Governments managed to curb the rise of unemployment in the spring. Now they have to devise new schemes to protect jobs in winter.
Six Men Charged With Plot to Kidnap Michigan Governor
A group of six men were arrested for an alleged plot to kidnap Michigan Gov. Gretchen Whitmer.
- The six were charged on Thursday with conspiracy to commit kidnapping and were among a total of 13 who were charged with various terrorism, conspiracy, and weapons charges.
- According to the FBI, the group staked out Whitmer’s vacation home twice in preparation of an attack on the governor. The group wanted to put her on trial for “treason,” prior to the 2020 election, according to a federal criminal complaint.
- “When I put my hand on the Bible and took the oath of office 22 months ago, I knew this job would be hard, but I’ll be honest, I never could have imagined anything like this,” Whitmer, a Democrat, said at a news conference.
- Earlier this year, armed demonstrators stormed Michigan’s capitol to protest Covid-19 restrictions in Michigan. President Trump encouraged them on Twitter, saying “LIBERATE MICHIGAN!”
What’s Next: Whitmer criticized President Trump for not outwardly condemning white supremacists and militia groups. During the first presidential debate, Trump dodged a question about such supporters, telling the far-right Proud Boys to “Stand back and stand by.”
Do you remember this week’s news? Take our quiz below and tell us how you did by emailing [email protected]
1. A multibillion-dollar copyright case between Google and which company regarding 11,500 lines of computer code reached the U.S. Supreme Court on Wednesday?
2. Which three scientists received the 2020 Nobel Prize in Physics for their research, including proving the existence of black holes?
a. Didier Queloz
b. Roger Penrose
c. Reinhard Genzel
d. Andrea Ghez
3. Only days after completing an $11 billion takeover of E*Trade, which company announced plans to buy fund manager Eaton Vance for about $7 billion?
a. Merrill Lynch
b. Credit Suisse
c. Morgan Stanley
d. Bank of America
4. After testing positive for coronavirus, in which hospital facility did Trump stay?
a. MedStar Washington
b. Walter Reed
c. Case Western
d. Sibley Memorial
5. Goldman Sachs is buying which company’s credit-card business for about $2.5 billion?
d. General Motors
Answers: 1(c); 2(b, c, d); 3(c); 4(b); 5(d)
—Bonnie Bennett Slater
—Newsletter edited by Stacy Ozol, Anita Hamilton, Mary Romano, Matt Bemer, Ben Levisohn