Market Update: Thurs, Oct 1, 2020 | LPL Financial Research

Daily Insights

Stimulus hopes give stocks a lift. Stocks ended a down month with solid gains on Wednesday, the fourth gain in five sessions. Markets are looking to add to those gains this morning to kick off October (and the fourth quarter) on the possibility that the White House and House Democrats can agree on a stimulus package. Asian markets were mostly closed—or in the case of Japan, halted for an outage—but those that were open generally moved higher; European stocks are higher in midday trading.

Jobless claims fell. Filings for initial jobless claims fell by 33,000 to 837,000 for the week ending September 26 (source: US Department of Labor), better than Bloomberg’s consensus expectations calling for 850,000. Continuing claims fell by roughly 800,000 to 11.8 million (week ending September 19). The pace of job recovery had slowed some, evidenced by the 2.7% decline in personal consumption expenditures for August reported by the Bureau of Economic Analysis. Additional stimulus may still be needed.

Economic data that may impact the election. As the election draws nearer, there will be increased scrutiny on the state of the economy by voters. We take a look at some of the key economic releases over the past month to provide an update on the current state of the US economy, what’s improving, and what may be deteriorating later today in the LPL Research blog.

Emerging markets paced global markets in Q3. The MSCI Emerging Markets Index returned 9.7% in the third quarter, led by strong gains in China and outpacing the S&P 500 Index’s 8.9% return. Both major market benchmarks solidly outpaced developed international stocks, measured by the MSCI EAFE Index, which returned 4.9%. Stocks in both Europe and Japan lagged, though the latter fared slightly better based on the MSCI country indexes. The pandemic remained the primary theme, with countries faring best in containment trends leading the way.

Stocks and elections don’t mix. Investors are asking if they should sell off stocks prior to the election. In this 2-minute Street View video, LPL Financial Research Chief Market Strategist Ryan Detrick explains that how the economy is doing matters more than who is in the White House. View Stocks and the Election Don’t Mix.

Welcome to October. Stocks in October are known for some spectacular crashes, thanks to 1929, 1987, and 2008. Overall October hasn’t been that bad—up 0.8% on average since 1950, which ranks seventh among the 12 months, and the second-best month over the past decade. However, October has been the worst month of the year during an election year. We will take a closer look later today on the LPL Research blog.

Q3 was another big quarter. After gaining 20% in the second quarter, the S&P 500 bounced back with an 8.5% gain (8.9% total return) in the third quarter, the best third quarter since 2010. Large cap tech led, while growth outperformed value. The consumer discretionary sector was the top group, up 15%. Materials gained 13%, and industrials added 12%. Energy lagged once again, down 21%, with real estate up only 1%.

Technical update. Stocks are rallying in early trading on the back of Wednesday’s 0.8% gain for the S&P 500. The index closed a hair above its 50-day moving average on Wednesday, and another gain today would mark its fifth daily advance in the past six days. The 10-year Treasury yield’s 8 basis point (.08%) rise over the past two days is the largest in nearly a month.

COVID-19 news. On Wednesday new case growth in the United States rose nearly 15% week over week to nearly 44,400, though the seven-day average around 43,000 was little changed compared with the prior week (source: COVID Tracking Project). Hospitalizations rose 10% week over week. Moderna does not expect to apply for emergency use authorization for its vaccine candidate until at least late November.



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