Stocks opened sharply lower. Stocks opened sharply lower in the face of dimming hopes of a pre-election stimulus package, rising jobless claims, and surging COVID-19 cases, particularly in Europe. Concerns that renewed restrictions would slow Europe’s economic recovery and some poorly received earnings results are sending European stocks down more than 2% in midday trading. Asian markets closed mostly lower, including a 2.1% decline in Hong Kong’s Hang Seng. China’s Shanghai Composite edged down just 0.3%.
Big jump in jobless claims. Weekly claims for unemployment rose to 898,000 (source: US Department of Labor), above Bloomberg analyst expectations for 825,000 and the highest weekly level since late August. However, continuing claims fell to 10 million, below estimates for 10.6 million. With California’s data remaining frozen at its prior level, the sharp rise in jobless claims confirms that the job market rebound continues to fade following the weaker than expected payrolls gain in September.
What do the US and emerging markets have in common? Both markets have significant technology exposure—19% in the MSCI Emerging Markets Index compared with 28% for the S&P 500 Index. Add internet retail, and emerging markets matches the S&P 500 with a 33% weighting. These groups are responsible for all of emerging markets’ gains year to date; if those two groups made up the entire index, emerging markets would be up double digits this year.
High-frequency data update. A recent surge in COVID-19 cases in many European countries and the corresponding containment efforts from local governments appear be affecting the pace of the economic recovery in Europe, as we see in some of the high-frequency data that we monitor. We take a look in more detail later today on the LPL Research blog.
Brexit deadline extended. Negotiations over the United Kingdom’s (UK) withdrawal from the European Union (EU) are set to go beyond the UK’s self-imposed deadline of today’s European council summit. British Prime Minister Boris Johnson’s office reported Wednesday night that he was willing to wait for the outcome of the two-day summit before determining the UK’s next steps. Johnson also noted the desirability of a deal, adding to LPL Research’s belief that a deal or agreement for a further extension will be reached eventually.
Technical update. US equities fell roughly half a percent for the second straight day Wednesday. The S&P 500 closed at 3488 and is lower again in early trading. 3425 remains the level to watch short-term on the S&P 500, while the Russell 2000 Index, which has been a standout performer in October, has support at the 1600 level.
COVID-19 news. New cases in the United States have now risen by double-digit percentages for eight straight days, pushing the seven-day moving average up nearly 16% over the prior week to more than 52,000 (source: COVID Tracking Project). On Wednesday hospitalizations jumped to their highest level since August 13 at more than 2,500. Paris implemented a curfew, London banned mixing across households indoors, and Germany announced new restrictions amid a record number of cases.
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