Todd’s Take on the Market

Stocks fell on Friday, led by the mega-cap tech names, to wrap up the worst week since March as coronavirus cases surged, U.S. fiscal stimulus talks broke down and traders braced for this week’s presidential election. Some buying in the last half hour of trading brought the major averages substantially off their lows of the day. Among the tech mega-caps, only Google managed to eke out a gain following its Thursday earnings report, Apple pared more than 5% and is now more than 20% below its all-time high, Facebook fell 6% amid concerns about the 2021 ad market and Twitter plunged 20% to wipe out its big run-up since mid-September. For the week, the Dow Jones average tumbled 6.5%, the S&P 500 sank 5.6% and the Nasdaq lost 5.5%.

Year-to-date, the S&P 500 is up 1.2%, but this performance hides a large dispersion between the top names and the remaining stocks. Specifically, U.S. markets have been led by a handful of growth companies, which have benefited the most as we shifted from our daily commutes to the office to working from home. As a result, the five largest names of the S&P 500 by market capitalization have returned 38.6%, while the remaining stocks are down 4.8%.

U.S. GDP came roaring back in Q3 at an annualized rate of 33.1% (vs. 30.9% consensus estimate and -31.4% prior).

The number of U.S. workers filing initial claims for unemployment insurance also fell by 40,000 to 751,000 last week to the lowest level since the pandemic began, though some are skeptical about taking a quick look at the data.

Much of the Q3 gain came from carry-over effects from fast progress in May-July while real GDP remains down 2.9% Y/Y.

This is a big week for the markets.

Election—that’s anyone’s guess.

Earnings—they have been good despite the market’s poor reaction.

Economy—this is jobs week, so we’ll see how many jobs were added.

COVID—numbers are just trending in the wrong direction.

It’s a big week, but we WILL get through it.

As always, stay tuned and we’ll keep you posted—and if something whacky goes on, I will be in touch sooner.

God Bless America!!!

Todd Day, MBA

Portfolio Manager
Horizon Financial Services, LLC

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