There’s huge uncertainty in the stock market as investors enter one of the biggest weeks in recent history.
The Presidential Election tomorrow won’t just determine who sits in the White House. Outcomes in Congress could also have a major impact on fiscal stimulus at the same time coronavirus threatens to shut down the economy again. There’s a Federal Reserve meeting, as well, plus key employment data and more corporate earnings.
Stocks took a beating last week as the uncertainty built. The S&P 500 plunged 5.6 percent, its worst drop since March. Nineteen out of 20 index members fell, led by economically sensitive industries like retailers and industrials. Technology also slid as Apple (AAPL) and Microsoft (MSFT) issued so-so results.
Investors can potentially see a lot to like in the current situation — or a lot to fear. The bulls can embrace another big improvement in initial jobless claims (down to their lowest level since March). They can also point to a better-than-expected rebound in the economy (+33.1 percent 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-setting surge of coronavirus cases last week (almost 100,00 on Friday alone). Public-health experts see the numbers rising as winter sets in, while Europe is reimposing shutdowns. Will that crush the economy again?
S&P 500, daily chart, with 100- and 200-day moving averages.
Coronavirus and the Stock Market
While coronavirus and political uncertainty remain the top issues, last week brought several other big stories.
One was news that JPMorgan Chase’s (JPM) started using its JPM Coin for commercial transactions. While different from a cryptocurrency like Bitcoin (BTCUSD), the digital currency is another example of mainstream institutions adopting blockchain technology. It helped lift BTCUSD to its highest level in almost three years.
|Biggest Gainers in S&P 500 Last Week|
|Automatic Data Processing (ADP)||+5.9%|
|Newmont Mining (NEM)||+3.9%|
The Chinese electronic-payments company Ant Group also priced the biggest initial public offering (IPO) ever. While U.S. investors couldn’t access the deal directly, it lifted parent company Alibaba (BABA).
Another big story last week was the European Central Bank’s indication it may increase monetary stimulus. That would run directly counter to recent policy and could reverse this year’s selloff in the U.S. dollar.
Finally, there were two mergers in the semiconductor industry. Advanced Micro Devices (AMD) acquired Xilinx (XLNX) for $35 billion. Marvell Technology (MRVL) paid about $8.7 billion for Inphi (IPHI). Both deals will help the buyers move deeper into growth areas like cloud-computing and 5G networking.
Voting and Volatility
This week is dominated by the Presidential and Congressional elections tomorrow. A strong win by either party would probably have a bullish effect because it would reduce uncertainty and make fiscal stimulus more likely. A contested outcome could hurt confidence and fuel volatility.
The Institute for Supply Management’s manufacturing index is also today. Sometimes important, it could be ignored this week.
|Biggest Decliners in S&P 500 Last Week|
|Franklin Resources (BEN)||-19%|
|Fleetcor Technologies (FLT)||-15%|
Wednesday brings ADP’s private-sector payrolls report and oil inventories. Initial jobless claims are Thursday morning. The Fed’s policy statement and Chairman Jerome Powell’s press conference follow in the afternoon.
The week ends with the Labor Department’s non-farm payrolls report and unemployment rate on Friday morning.
Here are some of the big earnings 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)
This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 02/11/2020.
David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.