Top Story: What to Watch Election Night
Florida, Georgia, and North Carolina are key swing states that can count or process ballots before Election Day and whose polls close relatively early. They’ll be the bellwethers and should have most of their votes counted by late Tuesday. Pennsylvania could be the tipping point state for the presidential race, but it may take days for ballots to be counted, as early votes can’t be processed until Election Day.
S&P 500 Index opens higher. Following a solid gain on the first trading day of November, the S&P 500 opened solidly higher this Election Day morning. Even though election results may be delayed, market participants may be anticipating election season uncertainty beginning to wind down.
- European markets are rallying at midday and extending global gains.
- Asian markets are sharply higher overnight, led by Hong Kong, Australia, and South Korea.
10-year yield trends higher. As inflation expectations normalize, the economy continues to surprise to the upside. After almost sleeping through the end of September despite the extended stock market rally off March lows, the 10-year Treasury yield trended higher in October, reaching multi-month highs. We expect the trend to continue in 2021, although an additional stimulus bill will be the key to further support in the near term.
Election Day 2020 coverage
Election Day 2020 will be quite unique, as nearly 100 million Americans have already cast their votes. If you haven’t already, we encourage everyone to go out and vote today. LPL Research recaps our election coverage in today’s LPL Research blog.
Booming ISM. The Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) for October, reported Monday, came in at 59.3, up about 4 points from September and 3 points above Bloomberg consensus.
- The big headline number was driven by the strongest new orders growth since January 2004—up 7.7 points to 67.9.
- Production and employment also expanded.
- The robust manufacturing recovery is a positive indicator of near-term corporate profits.
Insights into October markets. The major market indexes were down in October, although there were several interesting takeaways. Small caps had a strong month, which could indicate increased confidence in a durable economic expansion. Utilities have finished strong the past two months.
Technical update. Stocks are rallying into Election Day as Monday’s more than 1.2% gain for the S&P 500 is being followed with another advance this morning. Monday’s rally was led by more cyclical value stocks, as the energy and materials sectors gained more than 3%. The small cap Russell 2000 Index also outperformed, extending its streak of outperformance versus the S&P 500 to 14.7% since the March lows.
COVID-19 news. New US COVID-19 cases rose 33% to near 83,000 on Monday, pushing the seven-day average to 83,400 and keeping the weekly growth trend near 20% (source: COVID Tracking Project). United Kingdom (UK) Prime Minister Boris Johnson is working on a plan to have entire cities tested as lockdowns go into effect this week. A small study in the UK suggested infection-fighting T-cells persisted for at least six months in previously infected individuals (source: Bloomberg), which may help ease concerns that eventual vaccines may not provide lasting protection.
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