Market Perspective for October 11, 2020

The close of markets on Friday afternoon wrapped up an eventful week for stocks and emboldened investors with promising gains across the major indices.

The Dow gained 161 points on Friday, closing with a gain of 0.57 percent for the day. It has traded up for four out of the last five trading days. This was also the best week for the Dow since the week of August 7, 2020. It was up 3.27 percent for the week.

The S&P 500 posted a 0.88 percent gain on Friday. Like the Dow, Friday was the third day in a row of gains for the S&P 500 and the fourth positive trading day out of the last five. Overall, the S&P 500 closed its best trading week since the week of July 2, 2020. It was up 3.84 percent this week.

The Nasdaq Composite increased 1.39 percent for the day, the Nasdaq Composite had its third consecutive day of gains. For the week, the Nasdaq Composite was up 4.56 percent and posted its best week since July 2, 2020.

Lastly, the Russell 2000 Index added another nine points for a 0.55 percent gain on Friday.  It was also the seventh day of gains for the index over an eight-day spread. For the week, the Russell 2000 was up 6.38 percent, which was its best-performing week since June 5, 2020.

One of the biggest drivers of the market was the continued optimism over negotiations for another coronavirus stimulus package. Even though a deal has not yet been reached, the fact that the president has proposed a $1.8 trillion package as a counter-offer has been interpreted as significant movement on a final relief package. Previously, the president capped his offer at $1.6 trillion total for the stimulus package. President Trump’s increased counter-offer from Friday was well-received by investors as a step in the right direction towards agreement and leaves a delta of only $400 billion from the proposal that House Democrats put forward last week.

Markets have responded positively to President Trump’s continued recovery from COVID-19. One of the drugs that the president received during his treatment for COVID-19 was remdesivir, which is manufactured by Gilead Sciences. Gilead’s shares were trading up by 2 percent on Friday morning after an announcement regarding the ability of its anti-viral treatment to reduce recovery time for patients suffering from COVID-19 by five days when compared with a placebo group.

In addition, the release of a study published in the New England Journal of Medicine, which showed that remdesivir also reduced the fatality rate for COVID-19 patients who required low-flow oxygen, helped boost Gilead’s shares. The positive market reaction to developments on coronavirus treatment options bodes well for the future of pharmaceutical stocks as companies continue to innovate anti-viral treatments and other drugs for coronavirus patients.

News of Vice President Mike Pence’s phone conference on Friday with executives from the major cruise lines helped drive an increase of more than 1 percent for Norwegian, Carnival and Royal Caribbean.

Crude oil climbed to $40.60 per barrel this week after OPEC’s Secretary-General said he believed the worst was over for the oil market. Natural gas recovered back near its high for the year. It closed at $2.74 per mmBTU.

The Job Openings and Labor Turnover Survey (JOLTS) showed 6.5 million openings in August, down from 6.7 million in July. Initial claims for unemployment were 840,000 last week. Continuing claims on state programs fell by 1 million, from 11.98 million to 10.98 million.

The services PMI increased in September, beating expectations. Aside from a higher spike when the lockdowns first ended, last month’s reading was higher than any reading in 2019.

Bond yields extended their rally from last week. The 10-year Treasury yield closed the week at 0.78 percent. Rising yields weighed on most bond funds, but tumbling credit risk boosted corporate bonds, particularly high-yield. iShares iBoxx High Yield Corporate Bond (HYG) returned 1.34 percent and iShares iBoxx Investment Grade Corporate Bond (LQD) gained 0.10 percent.

 

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