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Markets Buoy on Durable Goods, Q3 Earnings: MRK, CAT, MMM, AMD

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Tuesday, October 27, 2020

Markets are up in early trading today, even though a congressional stimulus package looks kaput. But bouncing back from the roughly 2% losses yesterday, we’ll take a little filling in of the gaps.

Durable Goods Orders for September were expected to come in flat (on average — between -0.2%-+0.4%) but posted their highest tally since July: +1.9%. This is a preliminary figure that will be revised over time. Still, it’s a good sign for the economy that big-ticket items like dishwashers and automobiles are moving off retailers’ proverbial shelves.

Ex-Transportation, this figures halves to +0.8%, with Shipments coming in at a less-than-expected +0.23%. Non-Defense, ex-Aircraft, we’re at +1.0% — still higher than expected. It’s down about half from the core read in August, but about 3x higher than projected. Ultimately, we still look in good shape on these economic metrics; as of last month, growth off pandemic lows was still a thing. (These days, it’s harder to tell.)

In Q3 earnings this morning, we see better-than-expected results from a number of well-known companies:

Merck (MRK - Free Report) posted beats on both top and bottom lines in its Q3 earnings report released this morning: $1.74 per share beat the Zacks consensus by 30 cents, while $12.6 billion in revenues swung to a positive +1% year over year, as compared to a -2% expectation. Guidance for next quarter was upped to a range of $5.91-6.01 per share from the $5.70 expected, with a sales range on $47.6-48.6 billion, encapsulated by the expected $47.9 billion.

Caterpillar (CAT - Free Report) also outperformed estimates, with $1.22 per share topping the $1.15 expected, on $9.9 billion in sales which improved on the $9.67 billion in the Zacks consensus. These numbers are down 54% and 23%, respectively, and with no guidance stated in its earnings report we see the stock selling off 2.5%.

3M (MMM - Free Report) also outperformed estimates on the bottom line in its quarterly report: $2.43 per share beat the the $2.25 expected. Revenues came in a tad light at $8.4 billion, up 4.5% year over year.

AMD (AMD - Free Report) has agreed to purchase chip rival Xilinx (XLNX - Free Report) for a remarkable $35 billion. This has pushed Xilinx shares up 13% in today’s pre-market, with AMD rising 0.7%. This acquisition looks to build a powerhouse chip company going forward.

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