Dow slips for second day as hope for fiscal stimulus before election fades

Dow slips for second day as hope for fiscal stimulus before election fades

Paris imposes fresh COVID-19 curfew, second wave rattles Europe

U.S. stock benchmarks extended their losing streak to a second day in a row Wednesday, as Congress and the White House wrangled over further pandemic aid and big banks kicked off third-quarter corporate earnings season with a cautious tone.

How did stock benchmarks perform?

The Dow Jones Industrial Average DJIA slumped 165.81 points, 0.6%, to finish at 28,514.00, while the S&P 500 SPX index fell 23.26 points, 0.7%, to end at 3,488.67. The Nasdaq Composite COMP dropped 95.17 points, or 0.8%, to close at 11,768.73. All three benchmarks traded in positive territory earlier in the session.

The Dow Jones Transport Average DJT rose 104.27 points, or 0.9%, to a record high of 11,887.49, its fifth record close for October, according to Dow Jones Market Data.

What drove the market?

Wednesday marked the second full day of corporate quarterly earnings reports from the likes of Bank of America BAC, Goldman Sachs GS and Wells Fargo WFC as investors looked for signs of economic recovery.

Bank of America reported $20.45 billion in total revenue, missing the $20.8 billion estimate of analysts surveyed by Refinitv, while income was at $4.9 billion, or 51 cents a share, from $5.8 billion, or 56 cents a share, in the year-ago period, but above the FactSet consensus of 49 cents a share.

Goldman reported better-than-expected earnings and revenue that helped to boost the investment bank’s shares. The bank reported earnings per share of $9.68 per share, compared with $5.57 expected by Refinitiv’s consensus estimates, while revenue came in at $10.78 billion, versus consensus estimates for $9.46 billion.

“Bank CEOs were a little bit more cautious than some people were expecting them to be,” said Matt Peron, director of research at Janus Henderson Investors, in an interview with MarketWatch.

Peron thinks the more conservative posture signaled by banking executives on the pace of the economic recovery is prudent despite a lack of significant performance issues on their loan books, though keeping thicker credit buffers in place for longer still “was a little bit sobering” for market players, he said.

Beyond the earnings reports, concerns about the global spread of coronavirus in the autumn and winter in the Northern Hemisphere were rising.

Paris and eight other Franch cities imposed a new curfew on Wednesday in a bid to contain outbreaks, as European cities battle with a second wave of coronavirus infection that threaten to overwhelm hospitals.

The U.S. death toll from the coronavirus illness COVID-19 was heading for 216,000 on Wednesday, driven by a spike in new cases in the Midwest and Mountain West that are starting to fill hospital beds and squeeze health care systems.

Jitters about uncontrolled infections in swaths of the U.S. come after two drug trials were halted within about 24 hours, as Eli Lilly LLY said that it paused an antibody treatment for the illness created by the novel strain of coronavirus, a day after Johnson & Johnson JNJ said that it temporarily halted a vaccine trial. Although such pauses in experimental drug trials are common, the focus on finding a remedy and treatments for the disease that has stricken some 38 million people globally has amplified anxieties.

Wall Street has beenlooking to Congress to make progress on another fiscal stimulus bill to help businesses and households deeply wounded by the economic fallout of measures to limit the spread of COVID-19.

But Treasury Secretary Steven Mnuchin on Wednesday called on U.S. House of Representatives Speaker Nancy Pelosi to abandon an all-or-nothing approach to coronavirus relief talks, while Pelosi said the lack of a national strategic coronavirus testing plan by the Trump administration was a major area of disagreement, underscoring ongoing gridlock ahead of the Nov. 3 election.

Questions about fiscal stimulus dwarf everything else for market participants, even vaccines and earnings, said Mohannad Aama, portfolio manager at New York-based Beam Capital Management. “I think there is an expectation that something will happen before the election. Absent that, there would be a market disappointment.”

Aama expects to see a continued bifurcation among companies reporting earnings: those exposed to the consumer sectors most impacted by world-wide lockdowns will be hurt, while those at a remove will do fine.

All this comes as the 2020 presidential election draws near. However, growing expectations that a decisive Democratic victory in the presidential race and in Congress, or a so-called “blue wave”, will result from the elections, has fostered some hope for more significant and broader array of economic stimulus.

Which stocks were in focus?

  • Walmart Inc. WMT said Wednesday that it will offer “Black Friday Deals for Days” throughout November, both online and in stores. There are three events planned, starting online on Nov. 4. Shares closed 1.6% lower.
  • ConocoPhillip COP  shares fell 1% after a report it was in talks to buy Concho Resources CXO,  Bloomberg News reported, citing people familiar with the matter.
  • Shares of UnitedHealth Group Inc. UNH  fell 2.9% after the health-care company reported third-quarter profit and revenue that beat expectations and raised its full-year outlook.
  • Shares of NIO Inc. ADR NIO spiked 22.6% after JPMorgan upgraded them to buy and said that the Shanghai-based electric-vehicle maker is set to be the “long-term winner” in China’s luxury electric-vehicle market.
  • Netflix Inc. NFLX shares fell 2.3% even after an analyst price-target upgrade, to $670.
  • Shares of Apple Inc. AAPL rose 0.1% a day after its big product announcement.
  • Commercial electric-vehicle makerWorkhorse Group Inc.  WKHS received a zero-emission designation from the California Air Resources Board Wednesday. Shares fell 3%.

What did other assets fare?

The yield on the 10-year Treasury note BX:TMUBMUSD10Y declined a half a basis point to 0.721%. Yields and bond prices move in opposite directions.

In global equities, Hong Kong’s Hang Seng Index HK:HSI and Japan’s Nikkei 225 JP:NIK both closed 0.1% higher. The pan-European Stoxx 600 Europe XX:SXXP fell 0.1% and London’s FTSE 100 UK:UKX   slumped 0.5%.

Gold GCZ0 gained 0.7% to settle at $1,907.30 an ounce, one day after sinking below the $1,900 threshold. Oil futures jumped, pushing the U.S. benchmark CRUDE OIL – ELECTRONIC  up 2.1%, to finish at $41.04 a barrel, even as rising coronavirus case counts put demand in question.

The greenback was 0.2% lower at 93.35, based on the ICE U.S. Dollar Index DXY.

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