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Stocks close higher on hopeful-sounding stimulus commentary
22-Oct-20 16:15 ET
Dow +152.84 at 28363.60, Nasdaq +21.31 at 11505.93, S&P +17.93 at 3453.49

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The S&P 500 gained 0.5% on Thursday, as hopeful-sounding stimulus commentary contributed to renewed leadership in the value/cyclical/small-cap stocks. Versus the benchmark index, the Russell 2000 outperformed (+1.7%) by a healthy margin, the Dow Jones Industrial Average (+0.5%) performed in-line, and the Nasdaq Composite (+0.2%) underperformed.

Early in the day, the S&P 500 was down 0.6% despite another round of better-than-expected earnings reports and encouraging economic data, which included a 55,000 decline in weekly initial claims to 787,000 (Briefing.com consensus 860,000). Risk sentiment was ostensibly pressured by chatter that the passage of a stimulus deal might have to wait until after the election.

House Speaker Pelosi, meanwhile, noted that a stimulus deal was "just about there" after negotiating with Treasury Mnuchin several times this week. That observation prompted a relatively modest rebound that was led by the cyclically-oriented energy (+4.2%) and financials (+1.9%) sectors.

The health care (+1.5%) and utilities (+1.5%) sectors followed suit, but losses in the information technology (-0.5%), real estate (-0.8%), and consumer staples (-0.2%) sectors limited the rebound effort.

Interestingly, even before Ms. Pelosi's comments, the 10-yr yield was trending higher for the sixth straight day on burgeoning inflation expectations resulting from a large stimulus package. The upwards trajectory in rates was cited as a drag on highly-valued growth stocks, which had benefited from persistently low rates.

The 10-yr yield finished the session higher by three basis points to 0.85%. The 2-yr yield remained unchanged at 0.15% due to the Fed's stance of keeping the fed funds rate near zero for the next few years. The U.S. Dollar Index advanced 0.4% to 92.95. WTI crude futures rose 1.6%, or $0.62, to $40.65/bbl.

Highlighting some of today's earnings movers, Tesla (TSLA 425.79, +3.15, +0.8%), Coca-Cola (KO 50.68, +0.69, +1.4%), AT&T (T 28.29, +1.57, +5.9%), CSX (CSX 81.73, +3.01, +3.8%), and Dow Inc. (DOW 48.82, +0.27, +0.6%) closed higher following their results. Union Pacific (UNP 187.14, -12.34, -6.2%), however, was a notable earnings laggard.

Reviewing Thursday's economic data, which featured the weekly Initial and Continuing Claims report:

Initial claims for the week ending October 17 decreased by 55,000 to 787,000 (Briefing.com consensus 860,000) while continuing claims for the week ending October 10 decreased by 1.024 million to 8.373 million.
The key takeaway is that this is perhaps a better take on things, as California completed its pause in processing of initial claims and reported actual unemployment insurance claims; nonetheless, initial jobless claims remain at unacceptably high levels.
Existing home sales increased 9.4% m/m in September to a seasonally adjusted annual rate of 6.54 million (Briefing.com consensus 6.10 million), bolstered in part by a 34% annual increase in sales in vacation destination counties.
The key takeaway from the report is that it reflects robust demand for existing homes. That is constraining supply even further, which is going to be a pressure point that feeds higher prices, shuts out an increasing number of first-time buyers, and bolsters the prospects for new home sales.
The Conference Board's Leading Economic Index increased 0.7% m/m in September (Briefing.com consensus +0.6%) following an upwardly revised 1.4% increase (from 1.2%) in August.
The key takeaway from the report is that the strength among the leading indicators has become somewhat more widespread, although the slower pace versus August points to a possible slowdown in recovery momentum entering the fourth quarter.

Looking ahead, investors will receive the preliminary Markit Manufacturing and Services PMIs for September on Friday.

Nasdaq Composite +28.2% YTD
S&P 500 +6.9% YTD
Dow Jones Industrial Average -0.6% YTD
Russell 2000 -2.3% YTD