Dow books 423-point gain, stocks close higher on eve of presidential election

U.S. stock-market benchmarks closed higher on the eve of Election Day, despite selling in technology shares, as markets continued to monitor rising COVID-19 cases and the potential for a return to March-style lockdowns in the U.S.

The Dow Jones Industrial Average
DJIA,
+2.86%
rose 423.45 points, or 1.6%, to finish at 26,925.05. The S&P 500
SPX,
+3.39%
gained 1.2%, up 40.28 points, closing at 3,310.24. The Nasdaq Composite
COMP,
+4.44%
advanced 46.02 points, or 0.4%, ending at 10,957.61, after flipping between positive and negative.

The small-cap Russell 2000
RUT,
+0.94%
outperformed, adding 2%, or 30.11 points, to close at 1,568.59.

Stocks ended lower Friday, capping a losing week and month for major indexes. The Dow fell 4.6% last week, leaving the blue-chip gauge with a monthly loss of 6.5%. The S&P 500 saw a 5.6% weekly loss, leaving it down 2.8% for the month; the Nasdaq Composite suffered a 5.5% weekly fall, leaving it down 2.3% in October.

Last week’s declines for the Dow, S&P 500 and Nasdaq were the largest since March.

What drove the market?

Equities closed higher Monday, a day before the U.S. election, even as major stock indexes saw selling in the technology sector.

Twitter Inc.
TWTR,
+0.43%
shares fell 4.6%, while Apple Inc.
AAPL,
+4.46%
ended 0.1% lower and Amazon.com Inc.
AMZN,
+5.99%
slumped 1%, keeping the S&P 500’s daily gains in check.

“From a trader’s standpoint, as we go further into a potential lockdown state as COVID cases rates come back, tech again is front and center,” said Anthony Denier, chief executive officer of Webull, a trading platform popular with retail investors.

He pointed to Wall Street calls on Monday for investors to reduce technology exposure “because of crazy valuations” during the pandemic, as a pressure, but also said technology companies remain a favorite among retail traders.

Read: It’s time to take your profits from tech stocks, JP Morgan says

“Stimulus, it’s going to happen,” Denier said, pointing to expectations that additional pandemic relief will eventually flow from Congress, regardless of who occupies the White House.

But Cameron Brandt, director of research at EPFR, said funds already flowing into industrials and consumer-goods sectors could point to other “material comforts,” beyond iPhones, laptops or streaming services, as benefiting from any additional pandemic aid from Congress or a return to March-style lockdowns in the U.S.

“The message the fund flows seem to be sending is that the winners in the second wave may be driven by deferred consumption,” he said.

Still, worries of a drawn-out ballot count and an unclear election outcome this week remained the biggest risk to markets, analysts said.

A final Wall Street Journal/NBC News poll published Sunday showed Democratic challenger Joe Biden holding a 10-percentage-point lead — 52% to 42% — over President Donald Trump. Biden’s lead was essentially unchanged from an 11-point lead seen in mid-October, but the survey did portray a tightening race in battleground states that could determine the outcome in the electoral college.

“There is so much uncertainty,” said Jason Ader, chief executive at SpringOwl Asset Management, in an interview. “The pollsters were wrong last time. Nobody knows what to believe.”

But he also pointed to European lockdowns, particularly in France, as COVID cases climb, as a key worry. “That’s got everybody nervous,” he told MarketWatch. “What does the market hate more than anything? Uncertainty.”

Read: Investors pine for a ‘clear victory’ — what’s at stake for markets in the Biden-Trump election showdown

Meanwhile, analysts said upbeat economic data appeared to provide some support to equities on Monday.

The IHS Markit final U.S. manufacturing index rose to 53.4 in October versus an initial reading of 53.3. And the Institute for Supply Management’s more closely watched manufacturing activity index climbed to a 13-month high of 59.3 last month from 55.4 in September. Readings over 50 indicate growth.

Outside the U.S., the Caixin manufacturing purchasing managers index, a gauge of activity in China’s manufacturing sector, rose in October — a positive sign for domestic demand that provided a lift to Asian markets early Monday. It was a similar story in Europe after upbeat PMI readings.

Total U.S. deaths from COVID-19 rose above 231,000 on Monday, with cases rising in 42 states, as Trump continued to criticize the White House’s top infectious-disease expert, Dr. Anthony Fauci, and even hinted he might fire him if he wins Tuesday’s presidential election.

Investors also face another torrent of corporate results in the week ahead, with 128 S&P 500 companies due to issue results. Earnings for the S&P are set to decline for a third straight quarter as they deal with the pandemic, but the drop appears set to be less drastic than initially feared.

After last week’s barrage of earnings, including strong results from technology heavyweights, FactSet said its model now looks for a 9.8% blended profit decline for the S&P 500 versus its initial call for a 20.5% drop before the start of earnings season.

Which companies were in focus?
  • Clorox Co. CLX shares rose 4.2% after the provider of home cleaning and care and health and wellness products reported a profit that significantly exceeded expectations, boosted by strong sales growth due to the COVID-19 pandemic and as people spend more time at home.

  • Shares of Estee Lauder Cos. EL advanced 1.9% after the company reported a fiscal first-quarter profit and sales that beat expectations, with a strong performance in skin care sales offsetting weakness in makeup, but provided a downbeat outlook for the current quarter.

  • Lumber Liquidators Holdings Inc. LL shares advanced 16.4% after the wood-flooring seller reported third-quarter profit and sales that rose well above expectations.

  • Wingstop Inc.
    WING,
    +7.16%
    shares closed 0.2% higher after the chicken chain said in preliminary third-quarter earnings that systemwide sales rose 32.8% to $509.2 million.

  • Shares of Norwegian Cruise Line Holdings Ltd.
    NCLH,
    -0.15%
    slumped 2.8% after the cruise operator said it was extending suspension of its cruises to include those scheduled through Dec. 31.

  • Shares of Nio Inc.
    NIO,
    +8.43%
    soared 9% Monday, after the China-based electric-vehicle maker reported October deliveries that doubled to a monthly record of more than 5,000 vehicles.

What did other markets do?

The yield on the 10-year Treasury note
TMUBMUSD10Y,
0.780%
  fell a basis point to 0.848%. Yields and bond prices move in opposite directions.

The pan-European Stoxx 600 Europe
SXXP,
+2.05%
 rose 1.6%, while London’s FTSE 100 stock index
UKX,
+1.66%
 gained 1.4%.

Oil futures rebounded, with the U.S. benchmark for December
CLZ20,
+3.53%
closing nearly 2.9% higher at $36.81 a barrel on the New York Mercantile Exchange Gold rose for a second straight session, with the December contract
GCZ20,
-0.74%
 booking a 0.7% gain and settling at $1,892.50 an ounce.

The ICE U.S. Dollar Index
DXY,
-0.11%,
 a measure of the currency against a basket of six major rivals, was up 0.1%.

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William Watts contributed to this article.

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