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Week in Review: November 6, 2020

Recap & Commentary

All eyes were on the US election this week as coronavirus cases continue to surge and many Americans anxiously await more stimulus. After a long week, Joe Biden emerged as the presumed 46th President and markets appeared to be buoyed by the Republicans’ likely continued control of the Senate. The S&P 500 posted its largest weekly increase since April and best election-week performance since 1932. The tech-heavy Nasdaq 100 gained 9.4% as tech stocks resumed their reign in equity markets. Treasury yields surged the most in a month as investors were encouraged by October labor market improvement.

As of Sunday, the CDC had reported nearly 237k coronavirus-related deaths in the United States. This week, the US became the first country to report daily infections over 100k. Across the nation, new safety ordinances were imposed, targeting business capacity limits, curfews, and event sizes as public health officials point to gatherings as the main driver behind surging cases.

Through Friday, 89% of S&P 500 companies had reported third quarter earnings, with 86% beating their consensus estimate. In aggregate, the companies that have reported so far have beat earnings expectations by 19.3%.  Currently, third quarter earnings are expected to contract 7.5%. Though this figure continues to be revised upwards weekly, the index is still reporting its third largest year-over-year decline in earnings since 2009.

Economic Bullet Points

Economic data was little more than a footnote in a week dominated by coverage of the Presidential election. In any other week, October’s employment report would have received plenty of coverage, especially given the 1.0% decline in the unemployment rate to 6.9%. Nonfarm payrolls added 638K jobs, ahead of the expected 600K, led by a much better-than-expected 906K increase in private payrolls. Partially offsetting the strong private sector gains, was a loss of 268K government jobs, including 147K temporary census workers. Notably, 159K state and local education jobs were also lost during the month.

The manufacturing recovery continued to accelerate in October with the ISM manufacturing index reaching its highest level since November 2018.  Strength was broad based across nearly every underlying sub-component. New orders were particularly strong, surging to their highest level since January 2004.

The services sector pulled back modestly in October, but remained solidly in expansion territory. Business activity, new orders, and employment all decelerated in the month, with the latter nearly returning to contraction territory. Renewed restrictions in response to surging coronavirus cases could have a meaningful impact on the services sector moving forward.

After hitting a 14-year high in August, the U.S. trade deficit shrank nearly 5% in September, to $63.9B, thanks to a 2.6% rise in exports and just a 0.5% increase in imports.

Of Note

US and foreign equity markets are up meaningfully Monday morning on continued positive developments related to a forthcoming vaccine for Covid-19.  Both Pfizer and Johnson & Johnson noted positive results from current testing with increased belief that a vaccine could be available prior to year-end.

Market Indices Week of 11/06

S&P 5007.3%
Small Caps6.9%
Intl. Developed8.1%
Intl. Emerging6.6%
Commodities1.4%
U.S. Bond Market0.5%
10-Year Treas. Yield0.82%
US Dollar-1.9%
WTI Oil ($/bl)$38
Gold ($/oz)$1,952

The Week Ahead

  • Small Business Optimism
  • Consumer Inflation (CPI)
  • Business Inflation (PPI)
  • Weekly Jobless Claims
  • Consumer Sentiment

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