Market Perspective for November 2, 2020

The trading week began with stocks on the rise. The Russell 2000 Index led with an advance of 1.96 percent, followed by the Dow Industrials gain of 1.60 percent, the S&P 500’s return of 1.23 percent and the Nasdaq’s increase of 0.42 percent.

Some major tech giants posted slight losses to start the week. Twitter (TWTR) shares dropped 2.95 percent Monday, though its shares quickly rose 2 percent in afterhours trading. Its SEC filing, which confirmed that its Chief Executive Jack Dorsey will remain at the helm after an external audit of the company leadership, and its upcoming $2 billion stock buyback plan.

PayPal (PYPL) shares closed up 0.88 percent Monday thanks to an increase in new user account activations due to the recent boom in ecommerce transactions. Investor expectations were tampered by its announcement of fourth-quarter adjusted earnings outlook, which was about 10 cents per share lower than analysts’ expectations. Apple (APPL) shares were down 0.08 percent Monday, but expectations remain that its stock will bounce back as its next product launch date of November 10 approaches.

Treasury yields dipped slightly to start the week. The 10-year Treasury note yield dropped one basis point Monday, while the 30-year bond yield lost 1.5 basis points for the day. However, the two-year note creeped up slightly with a gain of 0.2 basis points.

The Federal Reserve heads into a two-day policy meeting this Wednesday, during which the pace of its continued purchasing of assets for the duration of the pandemic economic recovery will be the central focus. For now, the Fed has maintained its purchasing rate of $120 billion monthly in Treasury notes and mortgage-backed assets, which vastly outpaces its purchasing policy during the 2008 recession.

The Institute for Supply Management released positive news Monday on the status of the nation’s factories, with the index for purchasing managers showing greater strength for the month of October than economists predicted. The index, which measures industry growth as any value over 50, climbed to 59.3 points this past month, its peak since September 2018, which significantly exceeded its September benchmark of 55.4 points.

Oil futures reached their first gain after three previous negative sessions on Monday. They responded to assumptions that OPEC+ will delay any plans to level off cuts in production as a result of concerns over energy demand. Chevron (CVX) shares closed up 3.81 percent for the day following positive third-quarter earnings reports, which demonstrates the resiliency of domestic oil companies with solida long-term growth strategies, even in the midst of declines in oil prices worldwide.

On Friday, the Bureau of Labor Statistics will release the October employment report. Economists forecast 530,000 new jobs and an unemployment rate of 7.6 percent.

The ISM Manufacturing index surged to 59.3 in October, well above expectations. It also was the highest reading in 2 years. It signals the economy in strengthening with new orders hitting a 17-year high.

Earnings will be overshadowed by election news this week, but many blue chips are still reporting. Wayfair (W), Humana (HUM), Exelon (EXC), Emerson Electric (EMR), and Johnson Controls (JCI) headline Tuesday’s reports.

Wednesday brings Qualcomm (QCOM), Mercadolibre (MELI), MetLife (MET), Wynn Resorts (WYNN) and Expedia (EXPE).

Alibaba (BABA), Square (SQ), Peleton (PTON), Roku (ROKU), Booking Holdings (BKNG), Bristol-Myers Squibb (BMY), Regeneron (REGN), Uber (UBER) and Trade Desk (TTD) report on Thursday. A California ballot initiative could directly impact Uber’s business in the state as well.

The week closes out with reports from CVS Health (CVS), Hershey (HSY) and Marriot International (MAR).

While there is certainly some market volatility to be expected in the week ahead, especially in light of this week’s election, Monday’s strong stock rebound from last week’s dip is a strong sign that the economic recovery remains on an upward trajectory.

 

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