November 6, 2020
Market Recap Week Ending November 6th
Monday – Dow +423 to 26,925 NDAQ +46 to 10,957 and the S&P +40 to 3,310. Manufacturing hit a two year high with the ISM Manufacturing PMI number coming in at 59.3 for October, up 3.9 percentage points from September…Big tech struggled today while energy, materials and industrials were the big winners…Interestingly, the Invesco Solar ETF (TAN) rose 3.2% today (an insight to Tuesday’s expected election results?)…Clorox (CLX) beat their quarterly earnings number and traded up 4.24%…Under Armour traded up 4.5% on good quarterly numbers…Covid19 update: 99,000 new cases were reported on Friday and another 81,400 cases on Sunday, which moved the 7-day average of new cases above 81,000 for the first time in the United States. In the UK, a 2nd national lockdown goes into effect on Thursday.
Tuesday – Dow +554 to 27,480 NDAQ +202 to 11,160 and the S&P +58 to 3,369. The risk-on trade continued today, resulting in the best election day rally in modern history. Bonds traded lower, with the 10-year U.S. Treasury yield rallying to its highest level since June 8th before closing at 0.87%. The left-for-dead banking sector rallied 2.7% (BKX) on the rising yields. Ten of the eleven S&P sectors traded higher, apart from energy which traded down 0.75% despite a rally in oil prices to $38.15/bbl, up 1.34% today…Ant Group, the Jack Ma led, much anticipated Chinese IPO, which was set to shatter IPO offering records, has been suspended after Ma made comments last week that appear to have run afoul of powerful entrenched Chinese corporate and government interests. Alibaba (BABA), which owns 33% of Ant Group fell 8% on the news…PayPal (PYPL) fell 4.23% on weak 4th quarter guidance…Wayfair (W) traded up 7% after easily beating Q3 expectations…Ferrari (RACE) rose 7% after beating earnings expectations…Constellation Brands (STZ) rallied 4.79% on an upgrade from Morgan Stanley (MS)…The rise in yields and the underperformance of energy suggests that the market is discounting a contested election and a Democratic sweep. Or is it? After last week’s sudden move down, the last two days could be the result of traders buying to cover their short positions into which they entered last week. We shall see….
Wednesday – Dow +367 to 27,847 NDAQ +430 to 11,590 and the S&P +74 to 3,443.As expected, we do not have an announced winner for the U.S. Presidency. Margins are extremely tight but as of this writing, Joe Biden has the edge, although his lead in Arizona, is shrinking. Pennsylvania, where Trump is leading, still has 500k votes to count from counties that lean heavily blue. A final determination is not expected until tomorrow at the earliest. In Georgia, where Trump has seen a 500k vote advantage whittled away to 33k, there are additional votes from the Atlanta metroplex, a heavily Democrat area, yet to be counted…Prop 22 in CA passed, allowing the gig economy companies (Lyft, UBER, DoorDash) to be exempt from classifying their drivers as employees. UBER traded up 14.5%, Lyft rallied 11.3%…Caterpillar (CAT) traded down 7.4% with no news on the tape…Gun manufacturers fell today; Smith and Wesson (SWBI) was down 11.86%, Sturm Ruger (RGR) was off 7.55%, and Vista Outdoors (VSTO) was down 2.47%…Biogen (BIIB) soared 43.97% after the FDA said the company had provided substantial evidence of effectiveness for its experimental Alzheimer’s drug…DraftKings (DKNG) jumped 5.3% after several states approved sports gambling…Private Payrolls added 365k jobs in October according to ADP missing expectations of 600k additions…Today’s rally along with Monday and Tuesday’s gains, have erased all the losses from last week’s sell off…Senate Leader McConnell said he wants another stimulus bill passed by the end of the year.
Thursday – Dow +542 to 28,390 NDAQ +300 to 11,890 and the S&P +67 to 3,510. The markets continued their incredible rally that started Monday and has continued unabated. Ten of eleven S&P sectors were positive with energy being the sole loser. Jobless claims came in at 751,000 vs expectations of 741k and last week’s number of 751k…The Federal Reserve concluded its two-day meeting and announced that it would keep interest rates steady at their current near zero level, reiterated the need for additional monetary and fiscal policy, and added that wearing masks will help the economy…Qualcomm (QCOM) rallied 12.75% after reporting better than expected quarterly numbers…General Motors (GM) beat numbers and rallied 5.39%…Expedia jumped 4.67% after the travel company beat top and bottom-line numbers…Election: still no winner. Five states are left to determine the winner of the Presidential race. In Nevada, Biden has an 11,000 vote lead and grew his lead by 4k votes today. In Arizona, Biden is leading by 40,000 votes but that lead was double what it is now at the start of the day. In Georgia, Trump’s 300,000+ lead now stands at 1,267 votes and shrinking. In North Carolina, they are awaiting absentee ballots that will be counted if they arrive before 5pm on November 12th. Finally, in Pennsylvania, a 500,000 vote lead for the President has been whittled away to an 18,000 vote lead. We may have a President by tomorrow.
Friday – Dow (66) to 28,323 NDAQ (4)to 11,895 and the S&P (1) to 3,509. Markets consolidated today as the country inched closer to announcing a winner in the Presidential election. Six of eleven S&P sectors traded down but ten of the eleven traded within a 1% gain or loss apart from energy, which traded down 2% and is now down 52% year to date…638,000 jobs were added in the United States in October vs expectation of 530,000 adds. The unemployment rate fell to 6.9%. Leisure and hospitality were the biggest winners with 271,000 jobs coming from that sector and 80% of that number coming from restaurants and bars rehiring employees…Senate Leader McConnell, fresh off a huge reelection victory in Kentucky, is expected to reattempt passage of a “skinny” stimulus deal. That version of the stimulus bill has been DOA in the House since it was first announced late summer…Roku (ROKU) rallied 12.57% off a great earnings report…Marijuana stocks continued to rally post-election with Aurora Cannabis (ACB) up 56%, Tilray (TLRY) +23%, and Canopy Growth (CGC) up 10.85% today alone…Renewed lockdowns in Europe have hit oil hard. WTI traded down 4.3% to settle at $37.14/bbl…The CBOE Volatility Index, which was trading in the high 30’s last week, settled in at 24.62, down 2.99 points in trading today.
The week in review…Dow +1822 or +6.9% NDAQ +984 or +9% and the S&P +240 or +7.3%. The economy continues to improve. Weekly jobless claims are on a declining trend and although the number was flat this week, the monthly October jobs report was better than expected. The manufacturing number was also better than expected on Monday. All that said, this week, the story has been the Presidential election. All the states I mentioned yesterday, NV, AZ, GA, and PA have either flipped to Joe Biden or have increased the margin of advantage for the former Vice President. While the President and his team are exploring various legal means, it does not appear that he has evidence nor the ballots to change the outcome. We await a decision. On the Covid19 front, it was a horrendous week with Europe announcing new lockdowns and the U.S. reporting new consecutive daily records of infections on Wednesday with 107,000, Thursday with 121,000, and today with 129,000 cases. It bears watching if the market will refocus on the pandemic next week especially if the election has been settled.
Disclaimer: This is not a recommendation to buy or sell any of the securities listed above.