Stocks struggled for direction, bonds rose and the dollar fell, with polls continuing to depict a tight race in the US presidential election ahead of the Federal Reserve decision.
Options markets show many on Wall Street staying defensive, with the S&P 500 wavering as flurry of polls showed US voters narrowly split both nationally and across the pivotal swing states that will decide the election. Several traders see volatility coming, with the likelihood of a disputed result dragging the vote count out for weeks or even months. This explains why the Cboe Volatility Index remains stuck above 20, a level that typically signals rising jitters. Treasury yields fell across the curve and dollar dropped the most since August.
The other positioning challenge is the number of additional catalysts surrounding the vote that are likely to move the market. Election Day will quickly be followed on Thursday by the Fed decision and Jerome Powell’s press conference, where he’ll give details on the central bank’s interest-rate path. And a big chunk of US companies are still due to report their earnings.
“Normally, the Fed rate announcement would dominate the week’s discussion, but this isn’t just any week,” said Chris Larkin at E*Trade from Morgan Stanley. “Traders and investors who have been waiting for the outcome of the election have to prepare themselves for the possibility of a delayed outcome, and the potential impact of that uncertainty on the markets.”
Regarding equity market performance, the S&P 500 tends to see positive returns to close out the year after Election Day, according to Bespoke Investment Group. For all years since 1990, the median gain has been 3.3% with positive returns 25 out of 34 times. For election years, performance has tended to be modestly stronger with a median gain of 3.9% and gains six out of eight times.
The S&P 500 rose 0.1%. The Nasdaq 100 added 0.2%. The Dow Jones Industrial Average dropped 0.3%.
Treasury 10-year yields declined eight basis points to 4.30%. The Bloomberg Dollar Spot Index fell 0.5%. Oil advanced after OPEC+ agreed to push back its December production increase by one month and tensions heightened in the Middle East.
With both US presidential candidates at a “dead heat” heading into next week’s election, markets are bracing for a result that could lead to a wide range of policy outcomes. Yet, it is notable that, since 1933, equities have almost always risen by double-digits by the end of a president’s term, regardless of their party affiliatio according to Seema Shah at Principal Asset Management.
“Investors should take caution. Those who allow their political opinions to cloud their investing decisions could miss out on the potential rewards that come with staying invested in the market over the long-term,” she noted.
To Dan Wantrobski at Janney Montgomery Scott, US equities remain largely in consolidation mode ahead of this potentially historic week. Investors should expect “more choppy, range-bound trading” in sessions ahead, he noted.
“Depending on how things develop, the markets themselves are teed up for either new highs (the primary trend is still bullish) or bigger drawdowns (overbought conditions remain, with some recent support levels broken),” Wantrobski said.
Corporate Highlights:
Berkshire Hathaway Inc.’s cash pile reached $325.2 billion in the third quarter, a record for the conglomerate, as Warren Buffett continued to refrain from major acquisitions while trimming some of his most significant equity stakes.
Berkshire once again cut its holdings in Apple Inc., the Omaha, Nebraska-based company said Saturday in a statement. Its stake in the iPhone maker was valued at $69.9 billion at the end of the quarter, down from $84.2 billion in the second quarter, indicating that Berkshire cut its stake by about 25%.
Palantir Technologies Inc.’s premium valuation will be put to the test when the data analysis and software company reports results after the market close on Monday.
Nvidia Corp., the chipmaker at the heart of the artificial intelligence boom, is joining the oldest of Wall Street’s three main equity benchmarks.
The company will replace rival Intel Corp. in the 128-year-old Dow Jones Industrial Average prior to the start of trading on Nov. 8, S&P Dow Jones Indices said in a statement late Friday.
Sherwin-Williams Co. is also joining, replacing Dow Inc.
New data from Viking Therapeutics Inc. on an obesity pill to eventually compete with blockbuster shots from Eli Lilly & Co. and Novo Nordisk A/S sent shares of the small biotech company soaring and stoked further takeout speculation.
Fox Corp. said a record amount of political advertising contributed to strong sales and profit growth in the company’s first fiscal quarter.
Talen Energy Corp. and other US power company stocks slumped following the rejection by the country’s top energy regulator of Talen’s plan to supply a data center.
Commerzbank AG Chief Executive Officer Bettina Orlopp is seeking to unlock more capital to pay out or invest, as she makes the case for an independent bank in the face of a potential takeover by rival UniCredit SpA.
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