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The Good Life Newsletter - No Stimulus, Stocks Lag

No Stimulus, Stocks Lag

Weekly Update - November 2, 2020

The Week on Wall Street

Stock prices dropped last week as hopes for a fiscal stimulus bill faded and investors focused on rising COVID-19 infections, here and abroad.

The Dow Jones Industrial Average slid 6.47%, while the Standard & Poor's 500 tumbled 5.64%. The Nasdaq Composite index lost 5.51% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slumped 5.02%.[1][2][3] 

A Difficult Week for Stocks

Stocks opened the week lower as lawmakers failed to pass a fiscal stimulus bill and a pick up in the number of new COVID-19 cases in the U.S. and Europe. Hardest hit were companies most exposed to pandemic-related economic impacts, including energy, travel and leisure, and industrials.

Losses accelerated mid-week on reports of rising coronavirus-related hospitalizations, along with news that Germany and France were reinstating partial shutdown restrictions.[4]

Stocks attempted to recover on Thursday, but took another leg lower on Friday as earnings reports from the mega-cap technology companies failed to impress investors.

Positive Economic News

There were several strong economic reports during the week, but investors paid little attention. Among the highlights were durable goods orders, which rose for the fifth consecutive month, a sharp drop in initial jobless claims that were the lowest since March 14th, and a 33.1% annualized jump in economic growth during the third quarter.[5][6][7]

Investors also ignored a strong start to earnings season, which has seen 85% of reporting companies in the S&P 500 index beating earnings estimates by an average margin of 19%.[8]

THIS WEEK: KEY ECONOMIC DATA

Monday: ISM (Institute for Supply Management) Manufacturing Index. 

Wednesday: ADP (Automated Data Processing) Employment Report. ISM (Institute for Supply Management) Services Index.

Thursday: Jobless Claims. FOMC (Federal Open Market Committee) Meeting Announcement.

Friday: Employment Situation.

Source: Econoday, October 30, 2020
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

 

THIS WEEK: COMPANIES REPORTING EARNINGS

Monday: Paypal Holdings (PYPL), The Clorox Company (CLX), Mondelez International (MDLZ), Eversource Energy (ES) 

Tuesday: Humana, Inc. (HUM), Prudential Financial (PRU), Emerson Electric (EMR)

Wednesday: Qualcomm (QCOM) 

Thursday: Alibaba Group (BABA), Square, Inc. (SQ), Bristol Myers Squibb (BMY), General Motors (GM), Duke Energy (DUK), Cigna Corp. (CI), T-Mobile:US (TMUS), Booking Holdings (BKNG), MetLife (MET) 

Friday: CVS Health Corp. (CVS), Marriott International (MAR) 

Source: Zacks, October 30, 2020
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
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The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia.
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[1] The Wall Street Journal, October 30, 2020
[2] The Wall Street Journal, October 30, 2020
[3] The Wall Street Journal, October 30, 2020
[4] CNBC, October 27, 2020
[5] The Wall Street Journal, October 27, 2020
[6] CNBC, October 29, 2020
[7] The Wall Street Journal, October 29, 2020
[8] CNBC, October 29, 2020