Refinitiv Newscasts - Trading at Noon: Doordash for cash

Giant

09/12/2020 17:00

Click the following link to watch video: https://share.newscasts.refinitiv.com/link?entryId=1_cap0gask&referenceId=1_cap0gask&pageId=RefinitivNewscasts
Source: Reuters Insider

Description: Doordash, the biggest food delivery firm in the U.S., went public
on Wednesday with a $3.37 billion share sale, as the S &P opened at yet
another record high. Philip Lawlor of FTSE Russell told us the rotation into
value is well underway - and it's especially good news for small caps.
Short Link: https://refini.tv/3lWNPSt

Video Transcript:

Markets hit another new high as takeout giant DoorDash goes public. Hello, and
welcome to Trading at Noon. I'm Elena Casas. DoorDash has served up one of
this year's biggest US stock market debuts. The food delivery firm sold the
shares in its initial public offering at $102 apiece, well-above its target
range. That's raised it $3.37 billion and more than doubles its valuation to
around $39 billion at the open. The S&P 500 has opened at another record high,
amid hopes of a vaccine-backed economic recovery. That is prompting a rotation
towards economically-sensitive stocks, like banks and industrials. The markets
are fairly flat there though across the board now. Meanwhile, the House of
Representatives is set to vote later on a one-week stopgap funding bill that
will buy more time to reach a deal on coronavirus relief. Help is urgently
needed as cases rise, and state and local governments have been forced to lay
off 700,000 people this year. US schools alone are facing a funding gap of
$246 billion. Meanwhile, vaccinations could start in the US as soon as this
weekend. FDA documents released Tuesday say Pfizer's jab is safe and
effective. President-elect Joe Biden promised to get Americans 100 million
vaccine shots in his first 100 days. He warned though, that the road ahead
would be rough. 

My first 100 days won't end the COVID-19 virus. I can't promise that. But we
did not get into this mess quickly, we're not going to get out of it quickly.
It's going to take some time.

Well, for more on how markets are moving, I'm joined now by Philip Lawlor,
Managing Director of Global Market Research at FTSE Russell. Philip, thanks
for joining us. Now, there still a big spread between value stocks and growth
stocks, like big tech, that have done so well this year. But the rotation does
seem to be underway. So, what exactly is driving it? 

Good question, and clearly that was the dynamic that started the shift in
November. And that was all the function of the optimism around vaccines and
what vaccines are doing in terms of changing the narrative around the growth
expectations next year. So, we're clearly seeing a probability attached to
consensus forecast shifts at being pulled upwards is really what's happening
in markets. And that's always supportive of value stocks. But it's also being
very supportive for small cap. And remember, the Russell 2000 index in the US
delivered record-breaking returns in November as well. 

Small caps, as you said there, did have a November to remember. Why have they
done so well? 

Again, the two key drivers are the change in those growth expectations but
also the weakness in the Dollar is actually very supportive for smaller cap
relative to the large cap at a global level for respective currencies. So, the
sustained weakness in US Dollar is definitely feeding through into some of
that small cap outperformance, in which then they also benefit from the
contribution from banks and pharmaceutical stocks in November. 

And with the thought that markets in US continue to boom, many of these stocks
of course now valued at many times their expected earnings. Can investors be
confident they'll see returns over the next year? 

Well, I think, this feeds back into what's happening with growth, and what
we've been living with for the last year or so has actually been negative
earnings revisions driven by negative operating leverage. So, clearly, when
we're at the cusp potentially of growth expectations beating to the upside
next year, we could be on the herald of what called positive operating
leverage, which means earnings per share could actually accelerate at a faster
rate. And that could actually produce what we call a benign derating. That's
where the improvement in the E - the EPS - picks up at a higher rate than the
market. And that's actually quite a favorable backdrop all around. So, yes,
the markets could still go up. But at the same time, deliver slightly lower
valuations under that scenario. 

Thank you so much for joining us. Philip Lawlor of FTSE Russell. Well, let's
take a look at some of the movers in today's trading session. Boeing is on the
rise after the plane-maker said it expects MAX deliveries to restart in the
first quarter of 2021. It has fallen back a little bit there. That stock has a
lot to claw back. It's lost 27% so far this year. Disney is also in focus as
brokerage KeyBanc initiated coverage of that stock with 'overweight', saying
the success of its streaming service should more than outweigh lower visitor
numbers at the Magic Kingdom. And Zoom is slipping back there after JP Morgan
downgraded it to 'neutral', saying the video calling app is overvalued. Oil
prices reversed early losses as news about COVID-19 vaccines lifted investor
hopes for a recovery in demand. That's outweighing concerns sparked by an
unexpected rise in US stockpiles. But the oil prices you see there is fairly
unchanged. Traders though are urging caution. Stephen Brennock of oil broker
PVM said, "The specter of a post-Christmas wave of infections make it clear
that demand outlook is still very much under the COVID shadow." And finally,
Royal Caribbean's attempt to restart the cruise industry has hit an iceberg.
The Quantum of the Seas set sail from Singapore on Monday on a cruise to
nowhere, a trip that's open only to Singapore residents and makes no stops.
But it's not immune to COVID. After an 83-year-old man tested positive for the
disease, the 1,700 passengers had to be confined to their cabins in port for
more than 16 hours. Some were allowed to disembark on Wednesday, but the
cruise giant has had to cancel an upcoming trip. Well, that is Trading at
Noon. I'm Elena Casas, and this is Reuters