There is enormous uncertainty in the stock market as investors enter one of the biggest weeks in recent history.
Tomorrow’s presidential election won’t just determine who sits in the White House. The results in Congress could also have a major impact on fiscal stimulus measures as the coronavirus threatens to shut down the economy again. There’s also a Federal Reserve meeting, along with key jobs data and more corporate earnings.
Stocks took a hit last week as uncertainty increased. The S&P 500 plunged 5.6%, its worst drop since March. Nineteen of the index’s 20 members fell, led by economically sensitive sectors like retailers and industrials. Technology has also slipped as Apple (AAPL) and Microsoft (MSFT) posted poor results.
Investors can potentially see a lot to like about the current situation – or a lot to fear. The bulls can enjoy another big improvement in initial jobless claims (down to their lowest level since March). They may also point to a better-than-expected rebound in the economy (+ 33.1% in the last quarter). High levels of fear could also trigger a wave of buying when conditions improve, they might add.
Bears can counter with the record spate of coronavirus cases last week (nearly 100,000 as of Friday alone). Public health experts see numbers rising as winter sets in, as Europe reimposes closures. Will it crush the economy again?
The coronavirus and the stock market
While the coronavirus and political uncertainty remain the main issues, the past week has brought several other big stories.
One of them was that JPMorgan Chase (JPM) had started using its JPM coin for business transactions. Although different from a cryptocurrency like Bitcoin (BTCUSD), digital currency is another example of traditional institutions adopting blockchain technology. It helped lift BTCUSD to its highest level in nearly three years.
|The biggest winners of the S&P 500 last week|
|Tiffany (TIF)||+ 5.9%|
|Automatic Data Processing (ADP)||+ 5.9%|
|ResMed (RMD)||+ 4.9%|
|PerkinElmer (PKI)||+ 4.1%|
|Newmont Mining (NEM)||+ 3.9%|
Chinese electronic payment company Ant Group also priced the largest initial public offering (IPO) ever. While US investors were unable to access the deal directly, it lifted parent company Alibaba (BABA).
Another big story last week was the European Central Bank’s indication that it might increase monetary stimulus. This would go directly against recent policy and could reverse this year’s US dollar selloff.
Finally, there have been two mergers in the semiconductor industry. Advanced Micro Devices (AMD) acquired Xilinx (XLNX) for $ 35 billion. Marvell Technology (MRVL) paid approximately $ 8.7 billion for Inphi (IPHI). Both deals will help buyers venture deeper into growth areas such as cloud computing and 5G networks.
Voting and volatility
This week is dominated by the presidential and legislative elections tomorrow. A strong win by either side would likely have a bullish effect as it would reduce uncertainty and make fiscal stimulus more likely. A contested outcome could hurt confidence and fuel volatility.
The Institute for Supply Management manufacturing index also exists today. Sometimes important, it could be ignored this week.
|Biggest drops in the S&P 500 last week|
|Franklin Resources (BEN)||-19%|
|Fleetcor Technologies (FLT)||-15%|
Wednesday brings the report on ADP’s private sector payrolls and oil stocks. The first jobless claims are Thursday morning. The Fed’s policy statement and President Jerome Powell’s press conference will follow in the afternoon.
The week ends with the Department of Labor’s non-farm wages and unemployment rate report on Friday morning.
Here are some of the big win reports as well:
- Today: PayPal (PYPL), Skyworks Solutions (SWKS), Clorox (CLX), Estee Lauder (EL), SolarEdge Technologies (SEDG)
- Tuesday: Wayfair (W), Emerson Electric (EMR)
- Wednesday: Qualcomm (QCOM), Match (MTCH), Mercadolibre (MELI), Qorvo (QRVO)
- Thursday: Alibaba (BABA), General Motors (GM), Peloton (PTON), Square (SQ), Roku (ROKU), Zillow (Z)
- Friday: CVS Health (CVS), Hershey (HSY), Marriott (MAR)