Todd’s Take on the Market

Stocks closed out the week essentially flat as traders and investors focus on earnings, the election and the coronavirus.

Treasury Secretary Steven Mnuchin said Friday that House Speaker Nancy Pelosi is “still dug in” on a number of issues in the aid deal.

With no stimulus optimism left, the market is left to price in the uncertainty and volatility surrounding the unknowns of the election. Could be continued pressure into Nov 3.

Traders will keep their eyes peeled for a raft of Big Tech and blue-chip corporate earnings as well as key economic data this week. Apple, Facebook, Alphabet, Amazon, Boeing and Caterpillar all report later in the week, while the first look at third-quarter GDP is due on Thursday.

A third of the S&P 500 report this week as well as the government’s release of Q3 GDP.

So far, things are looking good: Of the 135 companies in the S&P 500 that have reported, 83.7% of them have beaten Wall Street expectations.

But the market action now is not about earnings, it’s about the vaccine and the economy. The problem is, the markets think [a vaccine] is a binary event, like flipping a switch on, and suddenly we are all going to go back into the movie theaters. It may not turn out that way.

However, the market has not priced in any notable disappointments: The market will start to get worried if we go into November and December and we haven’t heard anything. Stocks were not at all set up for a failure: If we have efficacy rates in the 40s for all the results, that would be a huge disappointment and the markets would certainly have a problem.

Jobless claims and continuing claims did fall last week. This is a positive in a sea of negatives.

The U.S. housing market is on fire—existing home sales. New home sales and new permits were all solidly higher.

The yield on the 10-year Treasury put in a new high and it is something to pay attention to. I believe Treasury traders are expecting some sort of stimulus deal—they are going to be disappointed.

There is a lot in focus just days ahead of the election (GET OUT AND VOTE), it’s a bust of a week for earnings and Rona is surging, so I would urge all of you to stay tuned and we’ll keep you posted.

Todd Day, MBA

Portfolio Manager
Horizon Financial Services, LLC

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