Stocks add to last week’s solid gains. While most attribute the recent bump up in stocks to stimulus and position jockeying ahead of Election Day, earnings season has quietly snuck up on us and will be a big focus for investors this week. The US bond market is closed for the Columbus Day holiday while a full day of trading is on tap for the equity market. Asian markets closed mostly higher led by China and Hong Kong on hopes for more financial market reforms. European markets are higher in midday trading.
Upgrading consumer discretionary view to neutral. This move, which we have paired with a downgrade of the consumer staples sector, reflects the early cycle bull market phase, booming e-commerce activity, and positive technical trends. For this and more on the potential impacts from the election and a possible stimulus package on equity sectors and asset classes, fixed income, commodities, and alts, check out LPL Research’s October Global Portfolio Strategy.
Earnings season has arrived. This week investors will turn at least part of their attention away from stimulus talks and the election to see what corporate America has to say. Banks will kick off the season as they make up the bulk of the 30 S&P 500 Index companies slated to report this week. We share why we expect solid upside and highlight three things to watch this season in this week’s Weekly Market Commentary: Earnings Growth is Approaching. The Weekly Market Commentary will be available later today on the Resource Center, Automated Campaign Tool, and Broadridge beginning at 1 p.m. ET today.
Busy economic calendar. A busy economic calendar this week is highlighted by the September National Federation of Independent Businesses (NFIB) Small Business Index, consumer and producer inflation, weekly jobless claims, retail sales, manufacturing and industrial production, and University of Michigan sentiment. The UK’s self-imposed deadline for a trade deal is October 15.
Technical update. The S&P 500 surged nearly 4% last week, closing on Friday at its highest level since the September 2 all-time high. Small caps led, as the Russell 2000 gained more than 6%, yet another sign that breadth continues to improve and participation remains strong. The ratio of the Russell 2000 to S&P 500 Index is now above its 200-day moving average for the first time in over two years.
COVID-19 news. New cases in the United States have risen by double digit percentages for five straight days, which we haven’t seen since mid-July (source: COVID Tracking Project). The seven-day average is approaching 50,000, a two-month high. Hospitalizations have also increased by double digits five straight days, but the recent trend is still only pointing modestly higher. More than a dozen states have positivity rates over 10%. Hospitalizations in the United Kingdom are on track to surpass the previous peak.
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