Before The Bell
October has come and gone, and to say that it was a somewhat turbulent month would be an understatement. True, there were few of the sizable moves that had rocked Octobers in years past. Nevertheless, after a mostly constructive start to the month, a sudden spike in COVID-19 cases here and in Europe, the announcement of lockdowns across parts of the Continent, and the virtual breakdown of talks in Washington aimed at securing a much-hyped stimulus package combined to take a big toll on the equity market in the final week of the month.
These pressures sent the Dow Jones Industrial Average to four triple-digit point losses last week, including a pair of sizable ones, as record COVID-19 cases (more than 99,000 on October 30th alone) sent the bulls running for cover. In fact, even the report of a stunning 33.1% jump in third-quarter GDP (largely on strong consumer demand) could provide little more than momentary relief before the selling resumed, taking the market down sharply on Friday, although the day ended well above its lows.
So, here is where we stand as a new month begins. The pandemic is raging; future partial lockdowns cannot be ruled out on our shores, and there is no movement on the stimulus front. And tomorrow a very bitter election campaign will come to an end with a contested outcome quite possible, as the polls predict a tight race on the Presidential front. None of this is putting traders at ease, with the most recent five-day span being the worst such period since March. Now, as noted, a new week and month are upon us.
As for this past Friday, a mixed batch of earnings reports and outlooks from some of the most notable tech stars after the close of trading Thursday got the stock market off on the wrong foot Friday, with selling resuming from the outset. Then, things got worse for the key indexes, with the Dow Jones Industrial Average tumbling to a 500 point loss at one stage, before attempting a recovery during the afternoon. At last there was some success, and that index would lose 158 points on the day. It was worse for the NASDAQ, which would lose 274 points on the tech selloff.
Now, after the worst week in seven months, a new 30-day stretch is about to begin with the same problems and uncertainties we saw in October. In addition, the five days ahead will be busy for the economy, with major issuances on manufacturing activity and construction spending released later today, factory orders tomorrow, the trade gap on Wednesday, along with figures on non-manufacturing activity and private-sector employment from ADP (ADP). Thursday, then, will bring the weekly jobless claims data and on Friday will get the monthly employment and unemployment report. In between, the Federal Reserve will hold its next FOMC meeting.
As for the day ahead, the early signals in the futures market are pointing to a strong rebound in the market when trading resumes later this morning, after a woeful back-to-back September and October.
– Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
