The Markets – as of Market Close November 7, 2020

Stocks fell for the second consecutive month in October as rising COVID-19 cases and related deaths shunted signs of an economic rebound. The month began on an upswing with both the Nasdaq and S&P 500 posting their best weekly gains since July, and the Dow finally pushed ahead of its 2019 year-end value.

Reported virus cases began to soar by mid-month, both here and in Europe. Word that Great Britain may impose stricter lockdowns hit stocks there and eventually in the United States.

Nevertheless, there are signs that the economy is gradually picking up steam. Gross domestic product rebounded in the third quarter and job growth continued in September, albeit far below its August pace. Several companies reported strong earnings in the third quarter.

Employment increased by 661,000 in September after adding 1.4 million jobs in August. Claims for unemployment insurance continued to drop in October. The insured unemployment rate was 5.3% (8.1% a month earlier). Notable job gains occurred in leisure and hospitality, in retail trade, in health care and social assistance, and in professional and business services. Employment declined in government, mainly in state and local government education. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed.

Another reason for investor trepidation in October was the ongoing debate over whether and when another round of fiscal stimulus would be in the offing. Throughout the month, there were indications that some aid would be forthcoming before the November election. However, that wasn’t in the cards.

Since the end of October, stocks soared to record highs following announcements from major pharmaceutical companies of positive data on a COVID-19 vaccine. That news helped buoy investor optimism. Cyclicals and bio-tech stocks led a powerful rally, which drove the Dow Industrial Average index and the S&P 500. The Nasdaq lost value as money moved from tech stocks to value shares. Energy shares jumped more than 14%, while financials advanced more than 8.0%. Crude oil prices, the dollar, and Treasury yields all rose.

For the week ended November 7, there were 709,000 new claims for unemployment insurance, a decrease of 48,000 from the previous week’s level.

Surging COVID-19 cases prompted a sell-off last Thursday however markets finished well with the Dow and the S&P 500 which each gained 1.4%, the Global Dow which rose 1.1%, and the Nasdaq that gained 1.0%.