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Costco beats Q4 estimates, here’s what we know in early trading

Yahoo Finance's Emily McCormick joins Yahoo Finance’s The First Trade with Alexis Christoforous and Brian Sozzi to discuss U.S. Consumer Durable Goods Orders, Costco earnings and Palantir gearing up for its public debut.

Video Transcript

ALEXIS CHRISTOFORUS: The stock market is on track for its worst September in nine years as we head into the fourth quarter. Risks are starting to pile up here for investors. They're worried about rising COVID-19 cases, both here in the US and in Europe, as well as signs the global economic recovery is slowing down and is uneven in parts of the country.

This morning, we found out orders for big ticket items like refrigerators and dishwashers rose 4/10 of a percent, but the street was expecting a rise there of 1 and 1/2%. Also this comes on the heels of yesterday's disappointing news about the labor market, when we learned that applications for unemployment benefits unexpectedly rose to 870,000 last week.

And then, of course, political risks around November's presidential election are also weighing on the markets. Right now, we've got a mixed picture for stock futures. Let's take a look. NASDAQ futures actually in the green by about 12 points. Dow futures, though, down 100, and we have S&P futures off just about eight points. I want to bring in Yahoo Finance's Emily McCormick, who, of course, we know, watches the market for us every day. And a lot of choppiness here this week, Emily, a lot of volatility. Is this what we should expect now we're within 40 days of the presidential election?

EMILY MCCORMICK: Absolutely, Alexis, and that does appear to be the prevailing sentiment right now, really investors having trouble looking past the next 40 days or so, with the presidential election within reach. Now, we still have the VIX elevated and rising again this morning, currently hovering just above 29, so that in itself, a signal of expectations for higher volatility to come in the next month or so. Now, investors are really climbing a wall of worry here, with a number of market negative developments coming in absence of positive catalysts. We had on the coronavirus front, France and the UK each just reporting their highest ever one-day rises in new COVID-19 cases, as of Thursday counts. And we also saw on the US labor market front, yesterday's US jobless claims report showing an unexpected increase in the number of Americans filing for first time unemployment benefits, really solidifying the stagnation we've been seeing in the economic recovery here in the US.

Now, on the fiscal stimulus front, we've heard reports now that house Democrats are working on a $2.4 trillion coronavirus fiscal stimulus plan, but it's unlikely that a package of that size would get support from Senate Republicans. So again, prospects for more economic support before the election really remaining slim here. And of course, we have that presidential election coming up within 40 days now. It seems like in the near term, investors are really bracing for more volatility in the wake of this, JP Morgan analysts saying in a note earlier this week that their baseline is for a contested election. That in itself has imbued a ton of uncertainty into the markets here, Alexis.

ALEXIS CHRISTOFORUS: All right, I want to shed a light on an earnings report out this morning. That is Costco. So help us make sense of this. Annual sales rose by 14 billion online. Order is up 50%, but we've got shares of Costco off about 2% here in the pre-market so what gives, Emily?

EMILY MCCORMICK: Well, absolutely, Alexis. So we are seeing Costco, of course, topping expectations on the top and bottom line for those fiscal fourth quarter results. Remember that Costco had also pre-recorded its August sales earlier this month, so we did get a hint of their performance and the benefit that they'd been seeing because of the COVID-19 pandemic already before these full results. Now one of the nuggets here that were potentially negative in the report this morning was the fact that the company is seeing higher expenses due to the pandemic and cost associated with protecting shoppers. We had Costco posting incremental pre-tax expenses of $281 million in the fourth quarter. That was mostly due to higher wages and sanitation costs, so a little bit of negative news here to offset that surge in sales on the top line that they've been seeing because of the pandemic, Alexis.

BRIAN SOZZI: And Emily, Palantir, coming to market September 30. Lots of excitement around this one. It will be interesting to watch those first couple trades. This will be a very, still very much a controlled company by the founders.

EMILY MCCORMICK: Absolutely. So of course, we do have Palantir with those Class F shares, giving the founders 49.999999% control of the company here. So something to watch on the governance side, but Palantir reportedly planning to go public via a direct listing, not a traditional IPO this coming Wednesday. That's according to a report from Dow Jones. With-- it's set to be valued at $22 billion, could start trading at about $10 per share, according to that report.

Now the company was previously valued by investors in the private markets at $20 billion, following a fundraising round back in 2015, although the company has reportedly lost some of that valuation in the years prior-- uh, in the years that followed that. So potentially going to see a bit of a premium here to where it's been trading in the private markets. Taking a look at those company financials, Palantir, having never been profitable like many of these new tech companies going public, the company lost $580 million in 2019. It has projected more than $1 billion in revenue this year, and it has said that it will turn a profit on an adjusted basis, excluding stock compensation for this year, Brian and Alexis.

ALEXIS CHRISTOFORUS: All right, Emily, thanks so much.