Before The Bell
The most recent five-day stretch of trading started and ended well for the bulls, but in between, the bears were in control and volatility was on display. The market remains on edge ahead of the upcoming Presidential election, which is now just a fortnight away, and with uncertainty about whether a much-needed economic fiscal stimulus package will come prior to Election Day. In addition to those events, trading is being driven by the start of third-quarter earnings season, which has initially been a mixed affair for Corporate America.
On Friday, the Dow Jones Industrial Average rallied 112 points, while the NASDAQ Composite fell 42 points and the broader S&P 500 Index was relatively unchanged. The latter two indexes ended up the volatile session well off of their intra-day lows. The main stories on Friday were COVID-19, corporate earnings, and the latest reading on retail sales, which came in slightly ahead of expectations. Investors should note that both the consumer staples and discretionary stocks were notably lower following the retail sales data. The retail sales figures are expected to be closely examined ahead of the upcoming holiday shopping season for clues as to how the U.S. consumer is feeling, especially with the labor market still suffering from the coronavirus impact and the lack of another fiscal stimulus package. In the retailing space, our sense is that the mass merchandisers, and the companies with strong online businesses and infrastructures are going to fare the best during the upcoming unprecedented holiday season. Investors can find our latest review on the retailing sectors this morning in Issue 11 of The Value Line Investment Survey on valueline.com
The new trading week will bring a heavy dose of earnings news, highlighted by quarterly results from eight Dow-30 companies and a number of technology titans, starting with International Business Machines (IBM) after today’s closing bell. As noted, the earnings news from the banking industry was mixed, at best, last week, and the struggling banking stocks could not gain any traction last week. Wall Street is hoping that Corporate America can provide enough positive stories to help offset the volatility arising from uncertainty about the forthcoming elections.
On the business beat, the housing industry will be at the forefront, with data due on housing starts and building permits, as well as existing home sales. This may bring the housing stocks, which have performed very well since their nadir with the broader market in late March, into focus again on Wall Street. Investors also will be concentrating on Thursday’s initial weekly unemployment claims data, which have not been good in recent weeks.
Before the opening bell, the futures point to a higher start for the U.S. equity market. The investment community is reacting to some COVID-19-related news. This morning, improving stimulus prospects on Capitol Hill are at least temporarily outweighing concerns over still-rising coronavirus cases in the United States. Reports surfaced over the weekend that House Speaker Pelosi and Treasury Secretary Steven Mnuchin, the main negotiators in working toward a deal, continued to speak about a pre-election deal and further discussions are expected today. The market also appears to like remarks from President Trump that he would also be willing to back a proposal larger than the $1.8 trillion sum he had last put forward last week to get deal done for hurting Americans and small businesses. These events are driving pre-market action stateside. Stay tuned.
– William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
