Markets React to Rising Virus Cases and Stimulus Uncertainty

No movement on a new stimulus package last week left investors watching and waiting. Stocks fell slightly on the lack of movement, with the S&P 500® index losing 0.5 percent. That broke a string of three consecutive weekly gains and left the index roughly flat over the past two weeks. With the election just one week away, volatility barely budged, and has itself been mostly flat for the past six weeks. 

Stocks Delivered Another Week of Gains Despite Mixed Data and Virus Concerns

Despite no additional fiscal stimulus, surging virus infections, and an election now just two weeks away, U.S. equities managed to deliver another week of gains, albeit by the slimmest of margins. The S&P 500® index gained only 0.2 percent, but it was the third straight week of higher prices, after four straight weeks of declines. The index remains 2.7 percent below its September 2nd peak of 3580. The VIX index of implied volatility rose slightly to 27.4 from 25 the prior week, and although that is down from early September, it is elevated relative to the five-year average of 17. History suggests that volatility should peak approximately two weeks ahead of the election, followed by a steady decline, but that remains to be seen. 

Investors Focus on Third Quarter Earnings Season


U.S. stocks enjoyed their best week in several months, as the S&P 500 gained 3.8 percent. Variously ascribed to the on again off again stimulus talks in Washington and the potentially salutary effects of possible blue wave election, stocks edged within less than one percent of their early September high. The index has now gained 7.4 percent since its recent September 23 low.

Markets React as COVID-19 Reaches the White House

President Trump’s coronavirus infection adds a significant element of uncertainty to the conduct of business in Washington. With just four weeks to go before the election, the campaign for re-election is essentially suspended, the confirmation of his Supreme Court nominee is clouded by the infection of several senators who must vote in-person, and potentially clouds discussions about another stimulus package. 

Volatility Increases as Investors Grapple with Mixed Data

The S&P 500® index fell for the fourth straight week, although this time it wasn’t the fault of technology stocks. The tech sector actually rose 2.0 percent, but it wasn’t enough to prevent the broader average from falling 0.6 percent, leaving it 7.9 percent below its September 2 peak. The worst of last week’s declines were centered in the cyclical sectors of the index, which had recently been the beneficiary of the selloff in tech and other related momentum trades. Energy stocks fell more than 10 percent, but account for little more than just 2.1 percent of the index market cap. Materials fell 5.0 percent, but themselves account for just 2.6 percent of the index.