Market Update: Stocks Dip Ahead of Presidential Election
The S&P 500 Index ($SPX) (SPY) closed down -0.28% on Monday, while the Dow Jones Industrials Index ($DOWI) (DIA) fell -0.61%. Similarly, the Nasdaq 100 Index ($IUXX) (QQQ) decreased by -0.35%.
Market Trends and Major Influences
On Monday, stocks ended lower, with the S&P 500 reaching a 4-week low and the Dow Jones hitting a 1.5-month low. This decline followed long liquidation pressures as investors prepared for the upcoming US presidential election on Tuesday. The decrease in megacap technology stocks also impacted the market negatively.
On the downside, US power stocks were affected when the Federal Energy Regulatory Commission voted 2-1 against a proposal to boost power supply to an Amazon.com AI facility. In addition, Marriott International saw a decline of more than -2% after reporting a lower-than-expected Q3 adjusted Ebitda and revising its full-year forecast downward.
Positive Performers Amidst Weakness
Energy stocks, however, experienced a rally as crude oil prices increased by more than +2%, reaching a 1-week high due to OPEC+’s decision to delay planned production increases. Sherwin-Williams saw a rise of over +4% after being announced as the replacement for Dow in the Dow Jones Industrial Average ahead of trading on November 8. Additionally, Fox Corp reported stronger-than-expected Q1 revenue, increasing by over +2%.
Economic Indicators and Upcoming Events
In economic news, US factory orders for September decreased by -0.5% month-over-month, aligning with expectations. As the week progresses, the market anticipates several key events: (1) Tuesday’s presidential election, projected to be highly competitive, (2) the October ISM services index, expected to drop to 53.8, (3) the outcomes of the Federal Open Market Committee (FOMC) meeting, with speculation of a -25 basis point rate cut, and (4) Q3 earnings reports from nearly 20% of S&P 500 companies.
Among S&P 500 companies that have reported Q3 earnings so far, 78% surpassed estimates. Bloomberg Intelligence indicates an expected average quarterly earnings increase of +4.3% year-over-year for Q3, down from the +7.9% growth expected in July.
Interest Rates and Global Markets
The markets are currently price in a 99% chance of a -25 point rate cut in the FOMC meeting on November 6-7, with no anticipation of a -50 point reduction.
Globally, stock markets were mixed on Monday. The Euro Stoxx 50 closed down -0.53%, while China’s Shanghai Composite Index increased by +1.17%. Japan’s Nikkei Stock 225 was unavailable for trading due to the Culture Day holiday.
Bonds and Economic Indicators
December 10-year T-notes (ZNZ24) increased by +10.5 ticks, with the yield on the 10-year T-note decreasing by -7.1 basis points to 4.313%. The rise in T-note prices followed polling results favoring Democratic candidate Harris, and anticipation of a rate cut from the FOMC supported the bonds further. Additionally, solid demand in the Treasury’s $58 billion auction of 3-year T-notes contributed to gains.
In Europe, government bond yields presented a mixed performance. The 10-year German bund yield fell by -1.1 basis points to 2.395%, while the 10-year UK gilt yield rose by +1.3 basis points to 4.458%.
The Eurozone’s November Sentix investor confidence index increased by +1 to -12.8, slightly underperforming the -12.6 expectation.
Moreover, the Eurozone’s October manufacturing PMI was revised upward by +0.1, reaching 46.0 from the previous 45.9.
US Stock Highlights
Intel (INTC) led the declines in the Dow Jones, closing down more than -2% after S&P Dow Jones Indices indicated that Nvidia would replace it in the Dow under the upcoming changes. The overall market remained under pressure due to declines in major tech companies. Tesla (TSLA) dropped by over -2%, and Alphabet (GOOGL), Meta Platforms (META), and Amazon.com (AMZN) each fell by more than -1%.
Power stocks faced challenges as the Federal Energy Regulatory Commission’s recent ruling affected companies like Constellation Energy (CEG), which dropped more than -12%. Other notable declines included Vistra Corp (VST) down over -3% and Talen Energy Corp (TLN) down over -2%.
B. Riley Financial (RILY) fell by more than -14% after announcing the need for an additional $120 million impairment. Public Service Enterprise Group (PEG) reported higher-than-expected Q3 expenses, declining by more than -6%. Marriott International and Dow Inc also fell over -2% amidst disappointing earnings reports and upcoming changes in the Dow index.
In contrast, Mosaic (MOS) surged by over +5% following news of potential coordinated production cuts in Belarus. Fox Corp (FOXA) experienced a boost of over +2% after announcing higher-than-expected Q1 revenue. Several energy stocks, including Exxon Mobil (XOM) and Diamondback Energy (FANG), rose significantly due to rising crude prices.
Sherwin-Williams (SHW) gained over +4% following its announcement regarding the Dow changes. Notably, Air Transport Services Group (ATSG) jumped over +25% after reports of a potential acquisition by Stonepeak Partners. Yum China (YUMC) also saw a rise of more than +6% after reporting better-than-expected Q3 earnings.
Upcoming Earnings Reports
On November 5, 2024, several companies will report earnings, including Archer-Daniels-Midland Co (ADM), Assurant Inc (AIZ), Cummins Inc (CMI), and Yum! Brands Inc (YUM).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
