Benchmarks ended at their highest levels in one-month on Thursday after comments from President Trump raised hopes of fresh fiscal stimulus. The Dollar, Pound and Aussie Dollar are top currencies to monitor as themes and event risk converge ahead for possible volatility Here’s what happened to stocks during the 36 days when no one knew whether George Bush or Al Gore would be the next leader of the free world. Each card has the officer’s photograph and a short biography, including a list of his or her hobbies on the back. Collect all 25!
Benchmarks ended at their highest levels in one-month on Thursday after comments from President Trump raised hopes of fresh fiscal stimulus.
The Dow Jones Industrial Average (DJI) advanced 122.05 points, or 0.4%, to close at 28,425.51 and the S&P 500 rose 27.38 points, or 0.8%, to close at 3,446.83. The Nasdaq Composite Index closed at 11,420.98, adding 56.38 points, or 0.5%. The fear-gauge CBOE Volatility Index (VIX) decreased 6.1%, to close at 26.36. Advancing issues outnumbered declining ones for 3.05-to-1 ratio on the NYSE and a 1.60-to-1 ratio on the Nasdaq favored advancers.
All the 11 major sectors of the S&P 500 closed in the positive territory on Thursday, led by a 3.8% gain in the energy sector tracking a jump in oil prices.
International Business Machines Corporation (IBM – Free Report) emerged as the top gainer of the Dow, shares rose nearly 6% after the company reported that it will be splitting itself into two public companies to diversify away from its legacy businesses and focus on high-margin cloud computing.
Among other winners of the Dow components are American Express Company (AXP – Free Report) that rose 3% and The Goldman Sachs Group, Inc. (GS – Free Report) , JPMorgan Chase & Co. (JPM – Free Report) and The Boeing Company (BA – Free Report) that closed at least 2% higher yesterday. International Business Machines carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Sell) stocks here.
Overall, the S&P 500 posted 55 new 52-week highs and no new lows, while the Nasdaq Composite recorded 106 new highs and eight new lows.
On Thursday, two days after calling off negotiations on a comprehensive stimulus package, President Donald Trump said that some discussions with Democrats are in progress. The hope of negotiations regarding additional support for American airlines and providing citizens with $1200 stimulus checks, helped investors cheer up and stocks rally.
House Speaker Nancy Pelosi told reports on Oct 8, that “there is no stand-alone bill without a bigger bill. There is no bill.” Pelosi made it clear that stimulus measures for the airlines was a matter of national security, but this stand-alone bill could only move through the Congress with guarantees of negotiation on the comprehensive deal.
Solid gains on Thursday has now put major indexes higher for October, after rebounding from losses suffered in September, the first negative month since March this year. However, investors continue to keep a close watch on looming risks remaining in the market especially, the rising coronavirus cases across the globe as a second wave hit in many countries and a slowdown in the economic recovery rate.
On Thursday, the Labor Department reported that initial jobless claims for the week ending Oct 3 came in at 840,000, lower than the revised figure of 849,000, from the previous week. Though the figure is higher than the consensus estimate of 824,000, the number of actual or unadjusted new claims now stands at 1.27 million which is also a pandemic low. Initial claims declined the most in New Jersey and Pennsylvania.
The decline in claims indicates that the labor market could be experiencing a setback amid another wave of corporate layoffs. However, initial jobless claims rose the most in the states of Florida, Ilinois and Virginia.
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Dollar Forecast Follows Stimulus Hopes, Growth Update, Trade Wars and Politics
S&P 500, EURUSD, GBPUSD, AUDUSD Talking Points:
- Stimulus was still a top discussion point this past week as markets depended more on hope than action that US fiscal support could eventually buoy markets
- Growth will be a key fundamental theme ahead between the IMF’s updated forecasts and a range of data that taps into the systemic trends
- The Dollar, Pound and Aussie Dollar are top currencies to monitor as themes and event risk converge ahead for possible volatility
It is hard to close out this past week without a technical appreciation of the general risk appetite to our backs. From the S&P 500 – one of the most representative benchmarks for traded derivatives – a confirmed fifth consecutive bullish opening gap would secure lean into a prevailing trend. If there was any skepticism to arise from that series, the clearance of a month-long range resistance (at 3,430) would go a long way to erode the skepticism. That progress addressed, there remains a serious fundamental gap to the technical charge. Where is the enthusiasm originating? Is there an groundswell in economic activity, rates of return or some other speculative outlet? That seems particularly impractical in recent conditions. So while the SPX and Dow have earned five consecutive bullish daily opening gaps, the actual progress from the series serious lacks speculative and fundamental weight. Such recognition doesn’t preclude further lift, but it can certainly shift the probability/potential spectrum moving forward.
Chart of S&P 500 with 50, 100-Day Moving Averages, Gaps and 1-Day Range (Daily)
Chart Created on Tradingview Platform
With market movement on the mind from a fundamental perspective, I asked social media (‘Fintwit’) what participants believed the most loaded theme/event was heading in his next week. By a large margin, early voting ‘favored’ the potency in US stimulus talks. This past week, the discussions between the GOP-led Senate and Democrat-fronted House proved particularly unproductive as negotiations seemed to present a wider disparity rather than a move towards compromise. Through the end of the week, it was remarkable to see headlines attach new indices highs to optimism on stimulus terms while Mitch McConnell made clear that he was no closer to agreeing to terms. If this is a source of bullish interest, traders beware the impact of reality. And extrapolating from my poll, it seems there is a lot of weight built into this assumption.
Twitter Poll on Most Market Moving Theme Next Week
Poll from Twitter.com, @JohnKicklighter
Stimulus can impact both ways. If there is an ultimate fulfillment of an expected infusion of external government support into the world’s largest economy, the risk spectrum will shift materially. Then again, if the outside financial prop never comes, there is good reason to believe that the disappointment can result in a significant speculative adjustment. According to my own poll, the speculative rank doesn’t expect a compromise before the election, yet a charge on record highs inherently assumes such an outcome is at least a possibility. At what point does an unfulfilled backdrop starts to cut down speculative appetite?
Twitter Poll on Timing of Next US Fiscal Stimulus
Poll from Twitter.com, @JohnKicklighter
Shifting our focus forward, the sensitivity of the market’s performance depends heavily on what fundamental themes are that drive investors’ actions as well as the benchmark that we use to represent the market’s preferences. Baselines like the S&P 500 or Dow Index are certainly indicative of traditional risk appetite and should be followed for such systemic assessment. However, a singular asset that may provide more scope in its own performance is the US Dollar. The Greenback closed out this past week with a slide that looks like the actions of a safe haven under pressure. However, I believe the disadvantage of the United States’ inability to sign off on a much-needed relief stimulus has even more representation in this slump. Add in the economic implications of a truncated economic growth projection and the added political uncertainty picking up less than a month before the Presidential elections, and a pressure on he Dollar finds more motivation.
How has the Dollar traded around previous US elections? Read this article to see analysis on previous cycles.
Chart of DXY with 50, 100-SMA Overlaid with Trump-Biden Crypto Ratio (Daily)
Chart Created on Tradingview Platform
To further highlight the fundamental disadvantages faced by the US Dollar, we can further refer to EURUSD. This principal counterpart of the currency’s performance ‘allowed’ for a break above the 50-day moving average through this past week. Rather than a statement on ‘risk trends’, this drive can alternatively project divergent growth potential owing to the fiscal stimulus between the two economic leaders. With the IMF/World Bank due to update its global growth and financial stability reports this week, this is channel that will receive some charge. Further, with the US earnings season kicking off with the banks’ reporting and ‘Amazon Prime Day’ presenting another unique consumer spending update, there are multiple facets upon which US health will be measured.
Chart of EURUSD with 50, 100 Day Moving Averages and COT Net Spec Futures (Daily)
Chart Created on Tradingview Platform
When using EURUSD as a checkpoint, the Euro’s fundamental health can be just as important to the market equation as the Dollar’s – so long as its winds are as substantial as its counterparts. Looking at the Eurozone an major component economies’ dockets, there is notable event risk to digest, but very little that stands out as systemically influential. The British Pound on the other hand faces fundamental swell that could compete with the influence of the US event risk. To close out this past week, the Sterling managed to edge higher despite a particularly disappointing August GDP an ancillary statistics thanks to the news from Chancellor of the Exchequer that the government was pursuing a stimulus effort to replace two-thirds of citizens’ wages whose jobs were affected by the pandemic. Both issues will factor into the Pound’s performance ahead, but recognition that we are approaching a key deadline in the trade negotiations between the EU and UK on October 15th is likely acting as a throttle to GBPUSD and other crosses.
Chart of GBPUSD with 50-Day and 100-Day Moving Averages (Daily)
Chart Created on Tradingview Platform
Another Dollar-based pair that closed out this week with an interesting technical performance is USCNH. The exchange rate between the US and Chinese currencies slipped to its lowest level in two years on a sharp end-of-week adjustment. The motivation for such a drive can be explained by a number of factors including ‘risk trends’ considerations. However, I believe the spark here is a little less systemic. Chinese markets have been closed through the week for holidays during which the government urged its citizens to travel in order to stoke domestic economic growth. If the internal demand swelled to offset the growing pressure against flagging export relations, their may be a strong dynamic at work for this cross. Alternatively, the convention may be one that is more manufactured than market driven. It will be tough to draw that out of USDCNH, but a frequent correlation via AUDUSD is likely to weigh in on belief more readily. With a break above range high at 0.7200, the stakes were raised.
Chart of AUDUSD with 50,100-Day SMA and Overlaid with Inverted USDCNH (Daily)
Chart Created on Tradingview Platform
If you want to download my Manic-Crisis calendar, you can find the updated file here.
Author: John Kicklighter
What the Stock Market Did Last Time There Was a Contested Election
A contested presidential vote tops the list of investors’ fears — despite coronavirus, widespread unemployment, and the deadlock over another stimulus bill.
A recent poll of 700 investors by financial consultancy deVere Group found that 72% of respondents said a disputed election is their biggest 2020 investment worry. Those who were already worried that on Nov. 3, there won’t be a clear winner, got little comfort during the first presidential debate, as President Donald Trump again raised the possibility of challenging the vote in his face-off against Democratic challenger Joe Biden.
While 2020 has been filled with unprecedented events, a disputed presidential vote would not be among them. Twenty years ago, the nation spent 36 days in limbo wondering whether George Bush or Al Gore would be the next leader of the free world.
To understand what a contested election could mean for investors, let’s look at how markets reacted to the Bush vs. Gore showdown of 2000.
Image source: Getty Images.
The stock market doesn’t react well to uncertainty, so it’s not surprising that stocks fell in 2000 when no clear winner emerged from the election. Between Election Day on Nov. 7, 2000 and the end of November 2000, the S&P 500 fell by 8.1%. The tech-heavy Nasdaq nosedived by nearly 24%.
But let’s not forget the bigger picture: The economy was already in bear market territory after the dot-com bubble started to implode in March 2000. David Kelly, chief global strategist for JP Morgan Funds, recently wrote that the overall stock market had already dropped 6.3% from its March 2000 peak by Election Day. In fact, Nov. 7, 2000 will live in infamy not only as the day that would bring us hanging chads and Florida jokes, but also as the day Pets.com collapsed following a spectacularly terrible initial public offering (IPO) the prior February.
CNN reported at the time that the 280 stocks in the Bloomberg U.S. Internet Index had already lost $1.755 trillion of value, most of which had occurred between March and September. Still, Kelly writes that the disputed election results probably did contribute to the short-lived recession of 2001.
Due to the uncertainty, “consumer confidence fell sharply, with the University of Michigan index of consumer sentiment slumping from a very healthy 107.6 in November to 94.7 by February,” Kelly wrote. “This probably did contribute to a sharp decline in investment spending in the first quarter and a slowdown in the growth of consumer spending.”
The CBOE Volatility Index (VIX) gauges how much volatility investors predict in the next 30 days based on pricing in the options market. Often referred to as Wall Street’s fear index, the VIX shot up by 11.2% between Election Day and late December. But it actually peaked on Nov. 30, 2000, the day after Gore appealed to the Supreme Court, according to an analysis by investment consultant DeMarche.
While election chaos contributed to the volatility, it’s worth noting that volatility is usually higher during election years.
Gold prices barely budged in the three weeks following the election. That’s somewhat surprising, given that investors flock to gold in times of uncertainty. It was only during late November and early December that gold prices showed a modest uptick of about 4% — right around the time that volatility was also at a high.
The Supreme Court ruled 5-4 in favor of Bush on Dec. 12 — and that day, the S&P 500 still fell by 0.65%. Even an end to election mayhem wasn’t enough to calm investors’ nerves as bad news from the tech sector abounded.
The S&P 500 continued to tumble, closing out 2000 by dropping another 3.7% from its Dec. 12 close. The picture was even bleaker for the Nasdaq Composite, which would still fall another 15% before year’s end.
The S&P 500 ended the year 15% lower than its March 2000 peak. The Nasdaq lost nearly 54% of its value from its March high. The haywire presidential election was a small blip in the wider meltdown.
Consider that dot-com companies ran 17 ads in the 2000 Super Bowl. But by 2001, with election chaos behind us, their numbers had dwindled to three.
While our current political and economic situations are far different than they were two decades ago, the big takeaway from 2000 is — yes, stocks will drop if there’s balloting turmoil. The VIX Index would probably spike, which has already occurred, and some investors would seek safe-haven investments like gold and Treasuries.
But a disputed vote would be unlikely to have a huge long-term impact or change the overall course of the stock market. The worst impact on markets typically occurs in the first four trading days after a disputed election, according to a recent report by Thomas McLoughlin, head of Americas fixed income at UBS.
Also remember that in 2000, the election came down to 537 votes in Florida. It’s unlikely that the 2020 vote will come down to such a razor-thin margin. As Goldman Sachs economists Alex Phillips and Michael Cahill recently noted, markets will probably have enough information available from states to determine the winner quickly. “In other words, the S&P can trade the likely outcome, even if the AP does not call the race,” they wrote.
Ultimately, even if we have another contested vote, the resulting pain will be short-lived. Election uncertainty isn’t a reason to change your investment strategy. If stocks take a major plunge, it’s unlikely that the election will be the cause. In the overall picture of your portfolio’s long-term performance, you can expect the impact of not having an official election winner right away to be minuscule.
Author: Robin Hartill, CFP
Mt. Washington Police offer trading cards to build community relationships
MOUNT WASHINGTON, Ky. (WDRB) — A local police department has a new way for police and the community to connect.
For months, the nation has endured nightly protests sparked by public distrust of police officers.
“[It] certainly takes a toll on you to see what’s going on around the country and the negative opinion of police,” said Chief Col. Troy Pitcock of the Mt. Washington Police Department.
While Pitcock said they’ve felt the support of their Mount Washington community, the need for officers to strengthen those relationships is front and center.
“What we all need to be thinking about is where we are going to be in 15, 18, 20 years from now, if our youth doesn’t have respect for the police?” he asked.
The department recently introduced trading cards, a simple idea that the chief remembers from when he was a child.
“Some of the officers that rode that neighborhood would drop by, and they would drop off baseball cards to us,” he said.
Twenty-five cards — each featuring a different Mt. Washington police officer — make up a set and serve as an ice breaker for kids.
“It gives them an opportunity to approach us and not be afraid of us, so, I like that,” said Officer Michael Roberson.
Each card has the officer’s photograph and a short biography, including a list of his or her hobbies on the back.
“We may have something in common,” said Roberson.
Each officer will have their cards on hand. To collect a trading card, police encourage kids to look for safe opportunities, like a sporting event, neighborhood or school, to flag down officers on patrol.
“I’ve got a bag in my car, and I was at Louisville hospital this morning conducting business, and I actually got stopped by EMS,” Roberson said. “They wanted cards. They said, ‘we heard about it. We want cards.'”
Kentucky Farm Bureau and FCi covered the costs for all 25,000 cards made.
“I didn’t expect the outpouring that we’ve seen,” said Tom Sullivan of Kentucky Farm Bureau.
“It’s been overwhelming. We have adults calling, asking if they’re eligible,” said Pitcock.
The chief has gotten calls from other departments also considering the idea.
“The big message would be law enforcement is here for you. We cannot do this alone,” he said.
The first two kids to collect the entire set of 25 should call the police office at (502) 538-8143 and schedule a visit with the chief to receive a gift.
Copyright 2020. WDRB News. All rights reserved.
Author: Gina Glaros