Market Sell-Off – Monday Morning Market Memo – November 2, 2020

Market Sell-Off – Monday Morning Market Memo – November 2, 2020

Good morning,

The major stock market averages fell sharply last week, registering their worst weekly decline since March.  The Dow Jones Industrial Average tumbled 6.5%, the tech-heavy NASDAQ Composite lost 5.5%, and the Standard & Poor’s 500 Index shed 5.6%.  Major factors behind the declines included – increasing COVID-19 cases, election uncertainty/volatility, and the lack of another round of economic stimulus out of Washington – as traders gave up hopes there would be a relief a package before the election.

Mixed in with those big-picture issues last week, was a notable batch of third quarter earnings reports, highlighted by big tech.  FacebookAmazon.comApple and Google’s parent Alphabet all posted earnings results that were better-than-expected.  Despite the strong earnings numbers from this group however, Alphabet was the only stock to follow with a gain.  Things such as sector rotation, some “under the headline” metrics/lack of guidance, profit-taking and overall market weakness all combined to push technology shares lower.

Overall so far this earnings season, with 64% of the companies in the S&P 500 having reported actual results, 86% have reported a positive EPS (earnings per share) surprise, according to FactSet.  If this is the final percentage, it will mark the highest percentage of S&P 500 companies reporting a positive surprise EPS since FactSet began tracking the metric in 2008.

Along with being certain the same 3 issues (COVID-19, the election, and economic stimulus) will still be in focus during the week ahead, we’ll also get a fresh round of earnings reports along with a major economic data point, the October Jobs Report.  Expectations are the U.S. Department of Labor will report the economy added approximately 650,000 jobs in October, and for the unemployment rate to come in at 7.7 percent (a couple notches better than the September reading).

On the earnings front, expect results from companies including CloroxMondelez InternationalPayPal HoldingsExpedia GroupDuke EnergyConsolidated EdisonAlibaba GroupBooking HoldingsGeneral MotorsDuke EnergyUber TechnologiesCVS HealthZillow, and The Hershey Company.  Clearly, there are many significant items in the news, economy, markets, and politics right now.

Overall, our advice is to keep your seatbelt on.  Further, don’t let a flurry of headline news and what may be some pronounced market volatility coming our way take you off your long term plan.  Stay on the right course for you, and remember, investing is a marathon, not a sprint!

All the best – Southport Station Financial Management, LLC