Before The Bell - This past Friday brought to an end one of the better weeks for the stock market this year. In fact, with four winning performances in those five sessions, In all, it was the beat aggregate showing since August. The major reason for this strength, was optimism that Congress would be able to fashion a comprehensive fiscal stimulus deal that the President would sign. The on again, off again talks looked to be going in the right direction as the week ended, but since then optimism has cooled somewhat.
Elsewhere, investors were buoyed by increased merger and acquisition activity as well as a planned divestiture of some old-line assets at IBM (IBM). Conversely, there was little substantial good news on the COVID-19 front, where the rate of infections has continued to rise across much of the country, and the number of deaths climbs past 215,000. Then, there is the coming election and all of the questions surrounding that bitter contest.
Nevertheless, stocks continued to give a good account of themselves, as investors seem nonplussed by the looming election. Meanwhile, there was little of note on the news front, though the past week did contain constructive tidings from the services sector, where activity continued to improve in most categories. However, data from the jobs front was less compelling, as weekly jobless filings remained stuck in the 840,000 range, evidencing little firming in recent weeks.
As for Friday's action, the Dow would reach its best levels late in the morning and more or less plateau through the late afternoon, while the NASDAQ would peak as we hit the close. All told, the Dow would add 161 points and the NASDAQ would climb 159 points on a lower base. It was a good showing and a nice launching pad for October. This optimism, though, was dented somewhat over the weekend when both sides in Congress seemed to down play the chances for new stimulus before Election Day.
Looking out to a new week now and following comments by House Speaker Pelosi that stimulus talks remain at an impasse, we see that the White House is calling for a separate vote on various parts of a package. As to the weeks ahead, all eyes will be on the stimulus talks and on the first few companies, notably the big banking institutions, which will be reporting their third-quarter results. Meantime, ahead of such key market issues, the futures were showing little change last evening.
Finally, after a relatively quiet week for economic news in the most recent five-day span, save for the release of the Federal Reserve minutes last Wednesday, the week ahead will feature reports on price inflation with the issuance of both the CPI and the PPI. Also, we will get data on industrial production and retail sales on Friday. In regards to the day ahead, after a flattish showing by the futures early last evening, the stock market appears set to open the new session solidly to the upside once again. – Harvey S. Katz, CFA