Monday Morning Reads
- Post-Election Landscape
- They’ve Been Writing America’s Obituary
- It’s the End of an Era for the Media
- The Quiet Architect
- Why Are Home Prices Up?
- U.S. Businesses Are Fighting Insurers
- Expect Many More
- How Stocks Performed Under Each President
- Do Not Be Seduced by Analogies
The major averages are coming off their worst monthly performance since March amid surging coronavirus infections, extinguished stimulus talks and a slump for Big Tech following quarterly earnings reports. The Dow closed out October with a 4.6% loss, the S&P 500 and the Nasdaq fell 2.8% and 2.3%, respectively, while volatility last week saw the VIX "fear gauge" spike to a four-month high. Traders seem a little more cheerful this morning as U.S. stock index futures climbed 1.5% to start the month, as the selloff leading up to Election Day may give the market less downside risk to a contested result. "Even though we're worried that there could still be one more wave down if we get another big influx of uncertainty, we think the stock market is now setting up nicely for a nice net advance over the next two months or so," said Matt Maley, chief market strategist at Miller Tabak.
While recent pressure on equity markets could be easing, oil prices slid on lingering worries that international lockdowns will sap energy demand. Off by nearly 6% overnight, crude futures have pared some losses, down 2.7% to $34.82/bbl. Libya and Iraq are also boosting their production, causing a rise in overall supply from OPEC+, despite having reduced quotas across its other members. While the group meets again on Nov. 10 and Dec. 1 to discuss policy, there doesn't appear to be a great deal of leeway for further reductions.
Keep an eye on tomorrow's edition of Wall Street Breakfast for potential stock and sector winners and losers of the upcoming U.S. presidential election. Democratic nominee Joe Biden remains ahead of President Trump nationally and in battleground states, though some state races remain extremely close and we all know how the pollsters turned out in 2016. "Markets will have to figure out what will change in the next Congress and in the next administration," said Paul Christopher, head of global market strategy at the Wells Fargo Investment Institute.
Large parts of Europe are locking down again, while other countries are trying to resist the approach. The U.K. has announced a one-month national lockdown starting Thursday - that will ensure workers who are temporarily laid off receive 80% of their pay - joining France, Germany, Ireland, Austria and Belgium with pandemic-containment regimes similar to those imposed in the spring. Meanwhile, debt-averse Switzerland is trying to avoid another lockdown with a set of lighter restrictions, including mask mandates and bar/restaurant curfews, even as infection rates surpass those in neighboring France and Germany.
S&P Global Ratings sees global debt, as a percentage of GDP, swelling to a record 265% this year, and insolvencies and defaults rising to levels not seen since the 2009 crisis. A near-term crisis, though, is unlikely given the expected economic recovery, a COVID-19 vaccine by mid-2021, favorable financing conditions, and sovereign, corporate and household spending and borrowing behaviors. "The heavier corporate debt will delay the recovery of credit metrics beyond 2022 for the hardest hit sectors (such as airlines, leisure and oil and gas)," according to the report.
The New York Stock Exchange (NYSE:ICE) is on pace to regain the U.S. stock market listings crown from rival Nasdaq (NASDAQ:NDAQ) this year after attracting bigger blank-check company IPOs than Nasdaq. So far, companies have raised $66B through listings on NYSE this year vs. $61B on Nasdaq (almost two-thirds of the proceeds raised on NYSE came from special purpose acquisition companies. The numbers from Dealogic, cited by the FT, don't include direct listings; Palantir (NYSE:PLTR) and Asana (NYSE:ASAN), both turning to NYSE, raised capital through the process in September.
Doing away with the Tri-State Travel Advisory, Governor Andrew Cuomo is now requiring people coming to New York to test negative, with the exception of residents from the contiguous states of New Jersey, Connecticut and Pennsylvania. Travelers must get tested for COVID-19 three days before arriving in the Empire State, and then quarantine for three days once they arrive (another test will be required on the fourth day, which could release them from quarantine). New York residents returning from travel under 24 hours outside the state do not need to take a test before coming back, however, they must take a test after returning.
Besides casting their votes for the presidential election, voters in Oregon this week will decide on decriminalizing hard drugs via a ballot initiative called Measure 110. The bill would decriminalize personal possession of less than one gram of heroin or methamphetamine; two grams of cocaine; 12 grams of psilocybin mushrooms; 40 doses of LSD, oxycodone or methadone; and one gram or five pills of MDMA. Instead of being arrested and facing possible jail time, users would have the option of paying $100 fines or attending free addiction recovery centers that would be funded by retail marijuana tax revenues. Oregon was the first state in the U.S. to decriminalize marijuana possession in 1973, and later approved medical use in 1998 and recreational use in 2014.
Go Deeper: A flurry of psychedelic companies have hit the capital markets.
What else is happening...
Pandemic claims first U.S. retail REIT casualty.
U.S. Commerce Department will 'vigorously defend' TikTok ban.
China's manufacturing sector expands for sixth straight month.
In Asia, Japan +1.4%. Hong Kong +1.5%. China flat. India +0.4%.
In Europe, at midday, London +0.9%. Paris +1.6%. Frankfurt +1.8%.
Futures at 6:20, Dow +1.7%. S&P +1.5%. Nasdaq +1.2%. Crude -2.7% to $34.81. Gold +0.4% at $1887.70. Bitcoin -1.7% to $13530.
Ten-year Treasury Yield flat at 0.86%
Today's Economic Calendar