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Large-cap growth stocks lift market higher after Election Day
04-Nov-20 16:15 ET
Dow +367.63 at 27847.60, Nasdaq +430.21 at 11590.71, S&P +74.42 at 3443.58

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

[BRIEFING.COM] The S&P 500 rallied 2.2% on Wednesday, as the prospect of a divided Congress appeared to outweigh the fact that there was no presidential winner announced. The Nasdaq Composite rallied 3.9% amid strength in its mega-cap/growth components. The Dow Jones Industrial Average gained 1.3% while the Russell 2000 increased just 0.1%.

The votes were still being counted by the market close, but the consensus was that the Democrats would retain majority in the House and the Republicans would retain majority in the Senate. Presumably, there were expectations that a massive stimulus bill, an increase in the capital gains tax rate, or a Medicare for All public option would not pass in Congress.

Furthermore, the presidential outcome uncertainty threatens to delay a potentially smaller-than-hoped stimulus deal, although Senate Majority Leader McConnell said a stimulus package should be passed by the end of the year. A delayed/smaller stimulus deal could mean a slower economic recovery, which would benefit growth stocks over cyclical stocks.

Accordingly, the health care (+4.5%), communication services (+4.3%), information technology (+3.8%), and consumer discretionary (+3.1%) sectors did the heavy lifting, while the materials (-1.7%), utilities (-1.6%), financials (-1.3%), and industrials (-1.0%) sectors closed sharply lower.

Longer-dated Treasuries rallied alongside the growth-oriented stocks amid the recovery concerns and election uncertainty. The resulting curve-flattening activity was a headwind for the banks due to the possibility of reduced net interest income. The SPDR S&P Bank ETF (KBE 33.08, -1.88, -5.4%) dropped 5.4%.

The 2-yr yield declined one basis point to 0.15%, and the 10-yr yield declined 11 basis points to 0.77%. The U.S. Dollar Index declined 0.1% to 93.49. WTI crude futures rose 4.1%, or $1.54, to $39.16/bbl.

Separately, shares of Uber (UBER 40.99, +5.22, +14.6%) and Lyft (LYFT 29.19, +2.96, +11.3%) jumped after California voters passed Proposition 22, allowing app-based drivers to be classified as contractors instead of employees. Biogen (BIIB 355.63, +108.62, +44.0%) surged 44% after the FDA published a positive report on the company's Alzheimer's drug.

Note, former Vice President Joe Biden led President Trump 237-214 in the delegate count as of 4:00 p.m. ET, according to The New York Times. Risk sentiment might have tempered in the afternoon for any surprises tonight or tomorrow.

Reviewing Wednesday's economic data:

The ISM Non-Manufacturing Index for October checked in at 56.6% (Briefing.com consensus 57.3%), versus 57.8% in September. October marked the fifth straight reading above 50.0% -- the dividing line between expansion and contraction -- but it was the lowest reading since May.
The key takeaway from the report is that it points to an ongoing expansion in the services sector, albeit at a somewhat slower pace than the prior month.
The trade deficit for September narrowed to $63.9 billion (Briefing.com consensus -$64.4 billion) from $67.0 billion in August, as export growth ($4.4 billion) outpaced import growth ($1.2 billion). The key takeaway from the report is that global trade activity improved, evidenced by the uptick in both exports and imports in September, yet that improvement belies the major hit to global trade activity amid the pandemic, evidenced by the fact that exports decreased 17.4% year-to-date to $329.0 billion while imports decreased 12.4% to $290.4 billion.
The weekly MBA Mortgage Applications Index decreased 3.8% following a 1.7% increase in the prior week.
The ADP Employment Change report for October estimated 365,000 jobs were added to private-sector payrolls (Briefing.com consensus 600,000). The September reading was revised higher to 753,000 from 749,000.

Looking ahead, investors will receive the weekly Initial and Continuing Claims report, the FOMC Rate Decision, and preliminary Q3 Productivity and Unit Labor Costs on Thursday.

Nasdaq Composite +29.2% YTD
S&P 500 +3.6% YTD
Dow Jones Industrial Average -2.4% YTD
Russell 2000 -3.2% YTD

Market Snapshot
Dow 27847.60 +367.63 (1.34%)
Nasdaq 11590.71 +430.21 (3.85%)
SP 500 3443.58 +74.42 (2.21%)
10-yr Note +11/32 0.777
NYSE Adv 1651 Dec 1376 Vol 994.6 mln
Nasdaq Adv 1768 Dec 1551 Vol 3.6 bln

Industry Watch
Strong: Health Care, Communication Services, Information Technology, Consumer Discretionary
Weak: Materials, Financials, Utilities, Industrials

Moving the Market

-- Expectations that Congress will remain divided outweighed the fact that there was no presidential winner announced

-- Large-cap growth stocks outperformed at the expense of the cyclical/small-cap stocks

-- Longer-dated Treasuries rallied amid recovery concerns attributed to potentially delayed/smaller stimulus deal

WTI crude futures rise 4%
04-Nov-20 15:25 ET
Dow +457.23 at 27937.20, Nasdaq +423.68 at 11584.18, S&P +81.91 at 3451.07

[BRIEFING.COM] The S&P 500 is up 2.4% after trading as high as 3.5% earlier today.

One last look at the S&P 500 sectors shows health care (+4.4%), communication services (+4.1%), information technology (+3.9%), and consumer discretionary (+3.2%) still in the lead. Conversely, the materials (-1.6%), utilities (-1.2%), industrials (-0.6%), and financials (-0.6%) sectors have returned into negative territory.

WTI crude futures settled higher by 4.1%, or $1.54, to $39.16/bbl.