Week 45 in Brief
How did the major indices perform?
U.S. stocks recorded their best weekly gains since April, as investors anticipated the outcome of the US presidential elections which ignited a stock market rally around the world.
- On Friday, the Dow Jones Industrial Average dipped 66.78 points, or 0.2%, to end the day at 28,323.40; the S&P 500 dropped 1 point ending at 3,509.44; while the Nasdaq Composite rose less than 0.1% to 11,895.23.
- Energy and financials were the worst-performing sectors in the S&P 500, falling 2.1% and 0.8%, respectively.
- Although stocks wobbled Friday, the S&P 500 and Dow Jones Industrial Average gained 7.3% and 6.9%, respectively, for the week. The tech-heavy Nasdaq advanced 9%. All three had their best weeks since April when U.S. stocks were first rebounding from their pandemic-fueled plunge.
- The tech-heavy Nasdaq logged back-to-back moves of at least 2% for the first time since February 2016. The S&P 500 rose at least 1% for four consecutive days, something that has only happened three times previously in data going back to 1938, according to Instinet.
Stocks in focus
- Shares of Tesla shed 1.86% to $429.95 Friday and closed $72.54 below its 52-week high ($502.49) on September 1st. The stock underperformed when compared to some of its competitors Friday such as Toyota Motor Corp which rose 0.09% to $137.20, General Motors Co which rose 0.89% to $37.47, and Honda Motor which rose 6.03% to $26.36.
- Uber shares rose 7.34% on Friday to hit a new 52-week high of $45.09 for a change of up 7.34% after Californian voters approved Proposition 22.
- Meanwhile, Amazon’s founder and chief executive sold $3 billion worth of his shares in this pivotal U.S. election week, representing 1.8% of his total stake in the firm.
- Results of the presidential election have been ripping through the financial markets, igniting a stock rally, driving bets in derivatives while stoking moves across the bond market, from corporate debt to Treasurys and municipals. Even bitcoin prices have rallied to heights not seen in more than two years.
- For months, investors had positioned for a jolt of volatility around the presidential contest and sketched out countless scenarios for how individual stocks and sectors would react to the outcome, with many anticipating a Democratic sweep in Congress and the White House.
- For the most part, investors appear relieved that it didn’t appear the outcome of the election would be mired in uncertainty for as long as feared. As votes continued to be counted for the fourth day, it grew more likely that there would be a clear winner, with former Vice President Joe Biden inching closer to securing the required electoral votes.
- Investors also warmed to the prospect of a divided government, where if elected, Democrat Joe Biden will become U.S. president in a Republican-controlled Senate, potentially delaying major policy changes including tighter scrutiny on big American firms.
Economic Data & Policy
- The Federal Reserve left policy unchanged this week but highlighted rising risks to the economy from the coronavirus pandemic.
- US unemployment rate fell to 6.9% in October, better than the forecasted 7.7%, indicating that the hiring picked up last month at a stronger pace than expected. Following the report, yields jumped with the Ten-year note climbing back above 0.80% and the dollar lingered at a more than two-year low.
European stocks closed slightly lower on Friday, taking the shine off a 7% rally this week as investors focused on soaring coronavirus cases on the continent and uncertainty around the U.S. presidential election.
- The pan-European Stoxx 600 slipped 0.2% after a five-day winning streak that marked the index’s best week since early June.
- The FTSE 100 gained 0.07%, while the DAX led the CAC 40 lower. They fell 0.70% and 0.46% respectively.
- Airline Lufthansa dropped 6.9% as Germany warned against unnecessary travel to Denmark, Italy, and several other countries.
- British airline EasyJet fell 2.6% after it said the recently announced lockdowns in England, Germany, and France had forced it to further scale back its already reduced flying schedule.
- Meanwhile, Italy registered its highest ever daily coronavirus case tally, with the northern region of Lombardy remaining the hardest-hit area.
Asian markets finished mixed as of the most recent closing prices.
- The Nikkei 225 gained 0.91%, while the Shanghai Composite led the Hang Seng lower. They fell 0.24% and 0.06% respectively.
- Chinese regulators halted Ant Group’s highly anticipated IPO a few days before its debut, sending reverberations across financial markets. Shares of Alibaba, which owns a roughly 33% stake in Ant Group tumbled by more than 7% in Asia trade on Wednesday and more than 8% in New York.
Commodities and other assets
- Crude oil declined for a second day Friday, with the West Texas Intermediate crude decreasing 3.6% to $37.40 a barrel, the biggest dip in more than a week while Brent Crude 3.62% lower to settle at $39.45 a barrel. Still, both contracts gained in the week, with Brent up 5.8%, and U.S. crude rising 4.3%.
- Meanwhile, gold strengthened 0.1% to $1,952.39 an ounce, the highest in more than seven weeks.
- The yield on 10-year Treasuries jumped six basis points to 0.82%, the biggest surge in more than a month while the yield on 30-year Treasuries climbed eight basis points to 1.60%, the largest surge in more than a month.
- The Bloomberg Dollar Spot Index dipped 0.3% to 1,149.91, the lowest in more than two years.
- The Japanese yen appreciated 0.2% to 103.29 per dollar, the strongest in eight months.
- The euro gained 0.5% to $1.1881, the strongest in more than two months.
- Investors will have a lot of information to digest, including the highly anticipated outcome of the presidential election.
- Several companies, including McDonald’s, Beyond Meat, and Novavax will report earnings.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.