Stocks Snap Three-Week Winning Streak
October 23 2020 - 4:39PM
Dow Jones News
By Joe Wallace and Gunjan Banerji
The S&P 500 edged higher Friday, but finished the week with
a decline, snapping a three-week winning streak.
The broad stock market index rose 0.3% for the day, ending the
week down 0.5%. The Dow Jones Industrial Average was down 0.1%, or
28 points. The Nasdaq Composite added 0.4%. Both indexes turned in
weekly losses of about 1%.
Money managers say stocks are likely to lack clear direction in
the coming weeks as investors 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.
"It's so hard to take this information from the election and
translate it into anything concrete," said Matt Rowe, managing
partner at Headwaters Volatility. "We just don't know."
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 the 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. Stocks 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 of regional
U.S. banks, which stand to benefit from a strengthening economy, he
said.
In another sign that investors expect quicker growth and
inflation, the bond market's yield curve has steepened. The yield
on 10-year Treasury notes rose to 0.85% Friday, from 0.847%
Thursday, as it attempted to climb for a seventh consecutive
trading day. Yields on two-year notes haven't risen as fast, to
0.157% Friday from 0.143% at the end of last week.
On Friday, fresh data showed that overall business activity in
the U.S. quickened its expansion pace. The flash reading for the
U.S. Composite Output Index came in at 55.5 in October, up from the
54.3 registered in September. That's the fastest increase in
private sector business activity since February 2019.
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 parsing the latest batch of quarterly
earnings. Shares of American Express fell 3% after third-quarter
profits missed expectations. Intel shares dropped more than 10%
after quarterly revenue and earnings fell, a sign the chip giant
may be seeing an end to the work-from-home boost. Capital One
Financial's profit and revenue rose in the recent quarter, lifting
shares 2%.
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.
Shares of Gilead Sciences rose 0.6% after the Food and Drug
Administration gave final full approval to the company's remdesivir
drug, which has been widely used to treat hospitalized Covid-19
patients since May.
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 and Gunjan Banerji
at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
October 23, 2020 16:24 ET (20:24 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.