Before The Bell
The election is over, and after many months of highs and lows, elevated drama, hyper-partisanship, and bitter campaigning, the verdict is in, or is it. Actually, the morning after Election Day finds the Presidential verdict not yet rendered in any official way. One thing is for certain, this will be a tight result however it ultimately comes out. And it could be hours, days, or even weeks before we get a definitive result.
As to the election, and the possible changes in direction, there could be some of them, particularly if Joe Biden emerges from all of this with a narrow victory, as is still possible. At this hour, the map seems to favor the Republicans to keep control of the Senate. But, of course, little is known of the specifics at this point. In the meantime, after woeful back-to-back months of September and October, the stock market did manage to right the ship during the first two days of November. Now, it must grapple with the aftermath of November 3rd.
Meantime, regarding yesterday's market, the bulls were out in force from the get go, pushing the Dow Jones Industrial Average--a better-than-400-points winner on Monday--up by some 700 points in late morning. That put the two-day blue-chip advance to over 1,100 points. Then, there was the obligatory backtracking in early afternoon, which shaved a couple of hundred points off of the Dow in a matter of minutes. The NASDAQ also was a big winner of strength in some tech issues.
Then, after the early afternoon pause, the Dow would give back a little more ground, but remain comfortably higher, turning stronger again as we entered the final two hours of trading, pushing back up to an advance of nearly 700 points once more as we hit the homestretch before fading anew, but just modestly, in the closing minutes. All told, the blue chips would gain 555 points, while the S&P 500, following a similar path, would add 59 points. The NASDAQ would surge by 203 points. It was clearly a big win for the bulls.
The betting on the Street is that we would have a clear winner last night or very early this morning, which we do not have. Wall Street traditionally abhors uncertainty, with a decisive outcome often cheered by investors no matter the outcome. In the meantime, bank stocks outperformed on rising yields, with shares of JPMorgan Chase (JPM) rising some 3% on the day. As for the higher yields, Monday's strong reading on manufacturing activity certainly helped to counter the earlier pressure on yields from rising COVID-19 cases.
Also helping the stock market was a sense that a decisive election result could help get the stalled stimulus talks back on track. Meanwhile, in other economic news, factory orders continued to rebound, rising 1.1% in September. As for today, the ISM, just off of a strong manufacturing survey, will issue its latest data on non-manufacturing activity, or the services sector. But, of course, the focus will be on the election front.
As for the day ahead, for Wall Street, after a long and arduous night, the equity futures are pointing sharply higher, especially the NASDAQ, as the bulls strive to keep the nascent rally going forward.
– Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
