U.S. Stocks Head for Muted Weekly Loss
October 23 2020 - 5:41AM
Dow Jones News
By Joe Wallace
U.S. stock futures wavered Friday as investors awaited clues on
the pace of the economic recovery from manufacturing and services
data, putting the S&P 500 on track to snap a three-week winning
streak.
Futures tied to the broad stocks gauge flitted between tepid
gains and losses, while contracts for the technology-heavy
Nasdaq-100 ticked up 0.1%. The S&P 500 had lost 0.9% for the
week through Thursday.
Money managers say stocks are likely to lack clear direction in
the coming weeks as they avoid placing big bets ahead of the Nov. 3
election. They are looking instead to a flurry of economic and
corporate-earnings reports for a clearer picture of the economic
outlook, as rising coronavirus cases threaten to slow the
recovery.
White House officials and Democratic leaders are continuing
negotiations over a nearly $2 trillion coronavirus-relief package,
which many investors view as crucial to maintaining the economic
recovery. Reported coronavirus cases in the U.S. have risen to
their highest level since July. And earnings season is in full
swing, with technology companies that have powered the stock market
higher due to report next week.
Investors are increasingly optimistic that a second dose of
stimulus will be delivered, even if many think the odds of a deal
before the election are slim. Shares in sectors that are sensitive
to the outlook for the economy, including energy and banks, have
outperformed this week. Information-technology stocks have
faltered.
"The message from markets is that fiscal stimulus is coming and
it should have a positive impact on U.S. growth," said Paul
O'Connor, head of multiasset at Janus Henderson Investors. Janus
has booked profits from tech stocks and bought shares in regional
U.S. banks, which stand to benefit from a strengthening economy, he
said.
Democrats look likely to take control of the White House and
both houses of Congress, making a fresh stimulus package more
likely in 2021, Mr. O'Connor added.
I
n bond markets, the yield on 10-year Treasury notes rose to
0.853% Friday, from 0.847% Thursday, putting them on track to climb
for a seventh consecutive day.
The WSJ Dollar Index, which measures the currency against a
basket of others, slipped 0.1%.
Investors looked past the final presidential debate, in which
President Trump and Democrat candidate Joe Biden offered differing
views of the administration's handling of coronavirus. Thursday
night's meeting was less combative than the pair's first, three
weeks earlier. More than 47 million Americans -- more than a third
of the total 2016 vote -- have already cast ballots.
"They essentially held their own," said Seema Shah, chief
strategist at Principal Global Investors. The debate will do little
to change investors' expectations of a Biden victory, Ms. Shah
added, though she thinks markets are overestimating the chances of
a blue wave.
Investors will scour preliminary surveys of purchasing managers
in the manufacturing and services sectors in October at 9:45 a.m.
ET. The indexes are expected to indicate that the U.S. economy is
continuing to grow, albeit at a slower pace.
In Europe, the economic outlook is gloomier amid a large second
wave of coronavirus infections that has prompted governments to
restrict travel and leisure. Data firm IHS Markit said Friday its
composite purchasing managers index for the eurozone fell to 49.4
in October, indicating a decline in manufacturing and services
activity.
Investors were also awaiting another batch of quarterly
earnings. American Express and Illinois Tool Works are due to
publish results before the opening bell. More than a quarter of
companies on the S&P 500 had reported through Thursday, and 83%
of them had beaten analysts' forecasts for earnings-per-share,
according to FactSet.
"It has been pretty decent," Ms. Shah said of the earnings
season. Companies in the third-quarter benefited from the reopening
of economic activity, falling levels of infection, and continued
support in the form of government spending.
In overseas markets, banking stocks helped push the Stoxx Europe
600 up 0.7%, clawing back some recent losses. Barclays gained 6.8%
after the U.K. lender said it swung to a profit in the three months
through September. Shares in Airbus jumped 5.7% after the Financial
Times reported that the plane maker is aiming to boost production
of a popular family of aircraft.
Asian markets were mixed, with the Shanghai Composite Index
closing 1% lower and Japan's Nikkei 225 eking out a 0.2% gain.
Write to Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
October 23, 2020 05:26 ET (09:26 GMT)
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