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S&P Futures Gain as Election Looms; Oil Falls Further

A look at the markets with election day looming.
(Joaquin Corbalan P)
(Joaquin Corbalan P)
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It’s election week! Here’s a look at the markets, from WSJ, with arguably the biggest day of the year less than 24 hours away:

S&P 500 and Nasdaq-100 futures improved by 1.2% and 0.9%, respectively. Oil prices dropped amid concerns that “international lockdowns will sap energy demand.”

  • The yield on the 10-year Treasury slipped down from 0.858% to 0.848% Friday.

Was the market oversold last week? “We could see some buying back, with some investors seeing this as a buying opportunity given the huge sell-off that we had last week,” Sean Markowicz, a strategist at Schroder Investment Management, told WSJ.

Tech stocks could rebound. Most were “dragged down last week by the broad selling even after their largely positive earnings reports.”

What’s going on with stimulus, health care and taxes? It all comes down to tomorrow’s election, and Democratic Presidential Nominee Joe Biden is leading President Donald Trump by 10 points in the polls.

  • As far as clarity on new legislation, Investors have been hoping “hoping for a definitive result in the presidential race, helping avoid a contested outcome, and clear control of the Senate and House by the same major party.”

A Better European Outlook: As it turns out, lockdown measures in France, Germany, Ireland, Austria, Belgium and the U.K. have been “less restrictive than some investors expected and for a shorter duration.”

  • Schools are mostly open, and governments have expressed optimism about restrictions being lifted in a matter of weeks.
  • Led by stocks in German and France, the pan-continental Stoxx Europe 600 rose 1.4%.
  • However, the combination of lockdowns and rising infection numbers are pushing investors to markets where Covid-19 is contained.

Asia: Japan’s benchmark Nikkei 225 increased by 1.4% by the close, and Hong Kong’s Hang Seng pushed up 1.5%.

Looking Ahead:

  1. The Institute for Supply Management will release its survey of purchasing managers at factories today. The expectation is another month of expanding activity.
  2. PayPal Holdings, Mondelez International and a string of other companies will report earnings after the market closes.

Justin Oh:

My view hasn’t fundamentally changed that much since the below excerpt from Morning Cents (Oct. 9, 2020). If anything, we have more uncertainty around the recent Covid-19 surge, the upcoming election, and if a stimulus bill will be passed any time soon.

“I had talked about how we should expect a volatile, but relatively sideways market, which has been playing out as expected. Markets don’t like uncertainty, so it has liked new stimulus package negotiations and Biden’s increased lead in the polls. But for the market to make another meaningful move higher, we will need to see another stimulus package to support consumer spending and a weak job market.”

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