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Day Ahead: 3 Things to Watch for September 1

Stock Markets Aug 31, 2020 04:22PM ET
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© Reuters.

By Liz Moyer

Investing.com -- Monday marked the end of the best August for stocks since the Reagan era -- 1984, specifically -- as the Federal Reserve continued to reassure investors that interest rates would remain low for the foreseeable future.

Fed Vice Chairman Richard Clarida said in a speech earlier in the day that falling unemployment wouldn't push rates higher. He stressed the importance of the central bank's recent policy shift to allow inflation to run above 2%.

The S&P 500 and Dow Jones Industrial Average both fell for the day, while NASDAQ Composite rose 0.68%.

There are two more Fed officials lined up to speak this week, including one on Tuesday afternoon. Investors are pushing shares of Chipotle Mexican Grill to an all-time high, and earnings from Zoom Video could set that stock ablaze as well.

Here are three things that could affect markets tomorrow:

1. More reassuring comments from Fed officials

Fed Governor Lael Brainard is scheduled to comment about the bank's monetary policy shift on Tuesday in a 1:00 PM ET (1700 GMT) speech at the Brookings Institution. Onlookers are expecting her to reinforce the message Clarida put forward on Monday.

 
Last month, Brainard said the economic recovery would be difficult and that the central bank might have to pull out a tool called yield curve control, where the Fed sets targets for short- to medium-term Treasuries, to generate growth.

2. Chipotle at all-time high as shut-ins order burrito delivery

Burrito chain Chipotle Mexican Grill Inc (NYSE:CMG) shares are on a five-day rally, hitting an all-time high on Monday. They are up 58% this year, at $1,315.

Hedge fund billionaire Bill Ackman took a gamble on the once-beleaguered company, buying up shares starting in 2016 to a roughly 4% stake now. Back then, Chipotle was suffering from the lingering fallout of bacteria outbreaks in several of its stores and was trying to woo back a skeptical customer base. In his recent letter to Pershing Square shareholders, Ackman said Chipotle has undergone a successful business transformation led by CEO Brian Niccol.

Despite shutdowns because of Covid-19, Chipotle has remained strong. Same store sales plummeted in the spring, but the chain was able to use digital ordering and delivery to keep up business. Digital sales jumped to 70% of all sales in April and fell back somewhat as stores reopened. But the digital channel continues to be a strong driver of growth alongside in-store sales, Ackman noted.

3. Will Zoom earnings zoombomb the stock?

Zoom Video Communications Inc (NASDAQ:ZM) has arguably been one of the biggest beneficiaries of the pandemic-induced lockdowns that forced workers and students to rely on video conferencing technology to continue work and school. Already, Zoom is on pace to triple its 2020 revenue from last year. Shares rose 8.6% on Monday.

The young company blew second quarter expectations out of the water, reporting after Monday's closing bell per-share earnings of 92 cents versus the estimated 45 cents. Revenue of $663 million beat the expectation of $500 million. Zoom estimated its own fiscal third-quarter earnings in a range of 73 cents to 74 cents per share on revenue of $685 million to $690 million. That should turbo charge the shares when stocks open for trading in the morning.

Investors have been watching to see how this San Jose, California, company converts subscriber gains into bigger profit. But network security has posed some issues, as uninvited people "zoombomb" private meetings. The company has been working to improve privacy and security.

 

Day Ahead: 3 Things to Watch for September 1
 

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Comments (2)
Ethan Strong
Ethan Strong Aug 31, 2020 8:14PM ET
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Eating gold burritos and zooming with Moms
Plopseven Schwartz
Plopseven Schwartz Aug 31, 2020 6:22PM ET
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This is a global pandemic and economic crisis and you degenerate gamblers are betting on burritos
Zach Lohman
Zach Lohman Aug 31, 2020 6:22PM ET
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That’s right, I’m riding with Bill’s fund.
Michael Mcfaul
Michael Mcfaul Aug 31, 2020 6:22PM ET
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Been short there have you
Jiang Botao
Jiang Botao Aug 31, 2020 6:22PM ET
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just saying Chipotle has one of the best business models there is. ZM on the other hand is so crappy
 
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