Market Update: Mon, Oct 26, 2020 | LPL Financial Research

Daily Insights

COVID-19 concerns dominate markets. Stocks started the week off with losses as COVID-19 case counts continued to rise steadily in the United States over the weekend, increasing prospects for renewed restrictions.

  • US stocks opened nearly 1% lower amid concerns that virus spread could slow the economic recovery as stimulus talks remained at an impasse.
  • European stocks are down about 0.7% in midday trading, weighed down by earnings-driven weakness in German software giant SAP. The German Ifo Business Climate Index fell for the first time in six months.
  • Asian markets closed broadly lower as the Chinese communist party issues its five-year plan.

COVID-19 vaccine news. The Financial Times reported that AstraZeneca’s COVID-19 shot showed a promising immune response in elderly patients. Johnson & Johnson said the first batches of its shot may be ready in January.

Impressive earnings upside so far. S&P 500 Index earnings for the third quarter are tracking to a 16% year-over-year decline, up 2 percentage points over the prior week and a solid 5 points above September 30 estimates. Forward 12 months’ estimates have risen 0.6% during October, an indication that the post-recession earnings recovery remains on track. Over 175 S&P 500 companies will report results this week including the biggest five market cap companies in the index.

Why the election could be very close. Former Vice President Joe Biden is ahead in the polls, but there are clues this could be a very close race. The expected big jump in gross domestic product (GDP), stock strength, weak US dollar, and rising incomes all historically have supported the incumbent president. Find out more in this week’s Weekly Market Commentary:  Are the Polls Wrong Again?, available on the Resource Center, Automated Campaign Tool, and Broadridge beginning at 1 p.m. ET today.

GDP report releases this week. This week’s economic calendar features the much-anticipated third quarter GDP report on Thursday (Bloomberg’s consensus 31.9%). Other data this week includes new and pending home sales, consumer confidence, durable goods orders, and personal income and consumption.

Election 2020 update. With 8 days remaining until Election Day, nearly 43% of the total votes cast in 2016 have already been submitted for the 2020 election as of October 25, according to the US Elections Project. Texas has tallied over 80% of its 2016 vote already. Amid concerns that mail-in voting could encounter postal delays, it appears in-person voters have compensated by voting earlier.

Technical update. The S&P 500 broke a three-week win streak last week, but that didn’t stop small caps from advancing on the week. The Russell 2000 Index is outperforming the S&P 500 by 5.6% in the month of October and has held support in absolute terms at the 1600 level. Markets are lower in early trading, and the S&P 500 will look to remain above 3425, a level it tested nearly every day last week.

COVID-19 news. The latest COVID-19 surge continued over the weekend with cases surpassing the 80,000 mark on Friday and Saturday, pushing the seven-day average up by more than 25% week over week (source: COVID Tracking Project). Unfortunately, hospitalizations are starting to follow that trend and may be headed for record highs nationally.

LPL Research in the Media

Burt White on WSJ “Outspoken” panel. LPL Chief Investment Officer Burt White participated in a Wall Street Journal panel discussion on the US economy and finding opportunities amid COVID-19. Watch Searching for Yield in a Low-Rate World.



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