Stock Market Update: Monday, Nov. 2, 2020
Wall Street started the first trading day of November with a win while rebounding from the worst week since March — and more in Monday’s stock market update. The Nasdaq was choppy midday after President Donald Trump suggested anti-trust action against some of the major Tech giants, but it was able to close higher.
The selling pressure was limited to the Tech sector as the small caps and the blue chips led the bounce higher with solid gains. Volatility remained slightly elevated but avoided a higher high heading into Tuesday’s presidential election.
Stock Market Update
The Russell 2000 rallied 2% while closing on the session high of 1,568.
The Dow was up 1.6% after tapping a first half high of 27,043.
The S&P 500 soared 1.2% with the morning peak reaching 3,330.
The Nasdaq gained 0.4% after testing a high of 11,071 shortly after the opening bell.
Energy and Materials were the strongest sectors after zooming 3.4% and 3.3%, respectively. Communication Services were the only sector laggard after slipping 0.05%.
Stock Market Movers
Shares of Clorox Co. (NYSE: CLX) advanced 4% after sales and earnings topped Wall Street’s forecasts. The company reported a profit of $3.22 a share on revenue of $1.92 billion versus expectations of $2.32 a share on sales of $1.75 billion.
CEO Linda Rendle said the company delivered another quarter of outstanding results for a strong start to the fiscal year. The cleaning products maker also raised its fiscal year outlook to reflect strong first-quarter sales results as well as the expectation for double-digit sales growth in the second quarter.
Stock Market Outlook
Typically, the stock market reacts to the economy — good or bad — and both could weigh on the outcome of Tuesday’s election. History shows that if a president can avoid a recession in the two years leading up to an election, the chances of reelection are a lock.
In fact, over the last 100 years, every president who averted a recession during this period was reelected. When there was a recession heading into the two years before the presidential election, only one, Calvin Coolidge, went on to win reelection.
Another key indicator Wall Street is watching is the stock market’s performance leading up to a presidential election. The performance of the S&P 500 in the three months before votes are cast has predicted 87% of elections since 1928, and 100% since 1984.
When returns were positive in the S&P 500, the incumbent party wins. If the index suffered losses over this three-month time frame, the incumbent loses. The S&P 500 closed at 3,271 on the last trading day in July, and was at 3,310 as of Monday’s close.
Global Economy
European markets closed higher across the board.
France’s CAC 40 jumped 2.1% and Germany’s DAX 30 surged 2%. The Stoxx 600 rocketed 1.6% and UK’s FTSE 100 was higher by 1.4%. The Belgium20 gained 1.1%.
Asian markets showed strength following upbeat economic news out of China.
South Korea’s Kospi and Hong Kong’s Hang Seng soared 1.5% while Japan’s Nikkei rallied 1.4%. Australia’s S&P/ASX 200 added 0.4% and China’s Shanghai edged up a half-point, or 0.02%.
The Caixin/Markit Purchasing Managers’ Index for Chinese manufacturing came in at 53.6 for October, better than forecasts of 53.
U.S. Economy
ISM Manufacturing Index jumped 3.9 points to 59.3 in October, topping expectations for a print of 55.7, after dipping -0.6 points to 55.4 in September. Gains were broadbased with the employment component climbing 3.6 ticks to 53.2 after rising 3.2 points to 49.6 previously. New orders popped 7.7 points to 67.9, recovering the -7.4 dive to 60.2 in September. New export orders rose to 55.7 versus 54.3, with imports surging to 58.1 versus 54. The inventories index increased to 51.9 from 47.1 while prices paid rose to 65.5 from 62.8.
Stock Market Sentiment
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) snapped a two-session slide after testing a morning high of $159.19. Lower resistance at $159-$159.50 was cleared but held with more important hurdles at $160-$160.50 and the 200-day moving average.
Support remains at $158-$157.50 followed by $157-$156.50 with the monthly low at $156.75.
Volatility Index
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was down for the second time in three sessions after tapping an intraday low of 36.13. Upper support at 36.50-36 was breached but held. A close below the 34 level would be a more bullish signal of a near-term top.
Resistance remains at 40.50-41 with last week’s peak at 41.16. A move above 41.50 would likely indicate upside towards 42-44 and levels from June.
Stock Market Analysis
The SPDR S&P 500 ETF (NYSEArca: SPY) rebounded after trading to a high of $332.36. Lower resistance at $332-$332.50 was cleared but held. A close above the latter would indicate additional strength towards $334.50-$335.
Current support is at $328.50-$328 followed by $325-$324.50.
RSI is in a slight uptrend with lower resistance at 40-45 getting cleared and holding. A move above the latter would signal additional momentum towards 50-55. Support is at 35 and a level that has been holding since late September.
Sector
The Consumer Discretionary Select SPDR (NYSEArca: XLY) showed strength for just the second time in six sessions with the first-half peak hitting $145.35. Lower resistance at $145-$145.50 was breached but held. A move above the $146.50 level would be a more bullish setup for a retest towards $148-$148.50 and the 50-day moving average.
Support is at $143-$142.50. A close below Friday’s low at $141.74 would be a renewed bearish development with additional downside risk towards $140-$139.50 and levels from late September.
RSI is back in a slight uptrend with key resistance at 40 holding. A close above this level would suggest additional strength towards 45-50. Support is at 35 with a move below this level indicating weakness towards 30-25 and levels from early March.
Check back after the closing bell for the most important news and numbers in the WealthPress stock market update.