‘This country is in bunker mode,’ says Peter Andersen
U.S. stocks closed mostly lower Friday, ending a four-day winning streak yet still eking out the best week since April as investors sifted through October jobs data, continued to monitor election results, and weighed a surge in COVID-19 cases.
What did major benchmarks do?
The Dow Jones Industrial Average DJIA, -0.23% fell 66.78 points, or 0.2%, to close at 28,323.40, while the S&P 500 SPX, -0.02% lost 1.01 point, closing at 3,509.44. The Nasdaq Composite COMP, +0.03% rose 4.30 points, less than 0.1%, to finish at 11,895.23.
The Dow on Thursday rose 542.52 points, or 2%, to finish at 28,390.18, while the S&P 500 advanced 67.01 points, or 2%, to close at 3,510.45. The Nasdaq Composite surged 300.15 points, or 2.6%, to end at 11,890.93. For the week, the Dow gained 6.9%, the S&P 500 rose 7.3%, and the Nasdaq added 9%, the best week since April 9 for all three benchmarks.
Despite the uncertainty around the presidential vote, Wall Street notched its best weekly performance since April. The S&P 500 ended up 7.3% and the Nasdaq jumped 9%, respectively, for the week. The Dow rose 6.9% this week.
What drove the market?
Stocks halted a four-day winning streak that saw equities extend gains in the wake of Tuesday’s U.S. elections, with the ongoing vote tally showing Democratic challenger Joe Biden closing in on the 270 electoral college votes needed to defeat President Donald Trump. Biden moved ahead of Trump in vote counts in Georgia and Pennsylvania early Friday.
The election week rally was attributed in part to expectations for a Biden win coupled with diminishing chances of a Democratic takeover of the Senate which would make it difficult to repeal the 2017 corporate income tax cut or tighten financial regulations.
“At least the market has a narrative: A Democrat President who doesn’t control the Senate, will be less combative on trade, but will be more limited where fiscal policy is concerned,” said Kit Juckes, macro strategist at Société Générale, in a note.
“This leaves a bigger role for the Federal Reserve, which means even lower rates for longer, even more QE for longer,” he wrote. “So the dollar is weaker, spreads are tight, equities have rallied around the world this week and volatility is (even) lower than it was.”
Control of the Senate, however, might not be clear until January, with a pair of races in Georgia potentially headed to runoffs.
While the drama around the U.S. election has been in focus all week, the Labor Department on Friday said the U.S. economy added 638,000 jobs in October, topping expectations for a gain of 503,000 but a slowdown from the pace seen since the labor market began to recover from the COVID-19 pandemic in May. The jobless rate dropped to 6.9% from 7.9%.
“The continuing Improvement in labor market conditions is unambiguous, but so is the slowdown in the pace of gains,” said Jim Baird, chief investment officer of Plante Moran Financial Advisors. “The wild card in the outlook is the risk presented by the resurgence in COVID-19 and the path forward for additional fiscal stimulus to help bridge the gap for sidelined American workers.”
Some market participants are even more wary.
“I don’t think this current rally is justified,” said Peter Andersen, founder of Boston-based Andersen Capital Management. “The narrative is that it’s going to be a balanced government, a Democratic president and a Republican senate. If that does turn out to be that, great, but it’s premature. We could have surprises that could really rattle markets.”
“In my years of experience managing investments, I would say this personally has been the most challenging period, up there with 2008, with Y2K, with periods where it’s been really difficult to get a sense of what the future is going to hold,” Andersen said in an interview. “People are being very naive right now thinking that they have a clear picture, and it’s all compounded by the virus. This country is in bunker mode.”
Meanwhile, the continued rise in COVID-19 infections could threaten the economic rebound. The U.S. on Thursday set a fresh record of 121,000 new cases in a single day.
Which companies were in focus?
- Shares of Uber Technologies Inc. UBER, +6.93% gained 7% after the ride-hailing company, fresh off its election victory to avoid classifying drivers as workers in California, reported results that showed its business continues to recover from the pandemic.
- Peloton Interactive Inc. PTON, -0.92% shares lost 1% after the interactive exercise-equipment company said sales continued to surge as a result of the pandemic but warned that it continues to struggle with supply issues that make it difficult to keep up with demand.
- Shares of CVS Health Corp. CVS, +5.76% closed 5.8% higher after the drugstore chain beat estimates for the third quarter and raised its full-year guidance, buoyed by strong demand for coronavirus testing.
- Shares of Hershey Co. HSY, +3.32% closed 3.3% higher after the chocolate and confectionery products company delivered third-quarter profit and revenue that beat expectations, and provided an upbeat full-year outlook.
- ViacomCBS Inc. VIAC, -6.36% shares lost 6.2% after delivering results topped Wall Street expectations.
- Marriott International Inc. MAR, +2.95% shares closed up 2.9% after the hotel operator reported a surprise third-quarter profit and revenue that fell a little less than forecast, while not providing financial guidance given “numerous uncertainties” associated with the COVID-19 pandemic.
What did other markets do?
The yield on the 10-year Treasury note TMUBMUSD10Y, 0.829% gained 5 basis points to 0.824% after the strong jobs report.
The pan-European Stoxx 600 Europe Index SXXP, -0.19% closed 0.2% lower, while London’s FTSE 100 UKX, +0.06% finished the day virtually unchanged.
Oil futures came under pressure, with the U.S. benchmark CL.1, 2.85% down 4.3% to close at $37.14 a barrel. Gold futures GC00, 0.64% finished up 0.3%, or $4.90, at $1,951.70 an ounce.
The ICE U.S. Dollar Index DXY, -0.05%, a measure of the currency against a basket of six major rivals, was down 0.3%.