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The Stimulus Beat Goes on In Tired Fashion



Chief Market Analyst

There is a lot of optimism in Washington reportedly about the status of stimulus talks. That optimism, however, has yet to lead to an actual agreement; and there is more murmuring today that the passage of any deal, if one is reached by the weekend, will ultimately have to wait until after the election.

The stock market seems to have grown tired of the politicking, though, and has grown restless at the thought of having to play the waiting game, which could conceivably stretch into the first quarter pending the election results.

Those election results are a separate but equal matter that has cast a pall on the market this week, as crunch time is here and polling data, no matter what it says, gets greeted with circumspection.

The election waiting game is another tiresome activity that has mitigated the enthusiasm on the part of both buyers and sellers this week.

Sellers have the edge. Ten of 11 sectors are lower for the week, with nine of them down at least 1.2%. That is the case irrespective of Q3 earnings results that have continued to blow past expectations.

The latter trend hasn’t changed at all this morning. Sure, there have been a few disappointments, but the vast majority of companies are topping estimates and doing so by huge margins.

To wit: Lam Research (LRCX) beat by $1.55, Align Technology (ALGN) beat by $1.52, Whirlpool (WHR) beat by $2.71, Penske Auto Group (PAG) beat by $1.24, Snap-On (SNA) beat by $1.16, and Discover Financial Services (DFS) beat by $0.91.

The list goes on, but noticeably, the broader market does not — and that’s even taking into account that the likes of Tesla (TSLA)Chipotle Mexican Grill (CMG)Coca-Cola (KO)CSX Corp.(CSX)Freeport McMoRan (FCX)Northrop Grumman (NOC)PulteGroup (PHM), and Southwest Airlines (LUV) also reported better than expected earnings results.

Currently, the S&P 500 futures are down eight points and are trading slightly below fair value, the Nasdaq 100 futures are down 25 points and are trading slightly above fair value, and the Dow Jones Industrial Average futures are down 56 points and are trading slightly below fair value.

In other words, the opening move isn’t expected to create much separation from where the major indices closed yesterday.

One might have thought this morning’s initial jobless claims report would have been a stronger separation factor, as it was much better than expected.

Initial claims for the week ending October 17 decreased by 55,000 to 787,000 ( consensus 860,000) while continuing claims for the week ending October 10 decreased by 1.024 million to 8.373 million.

The key takeaway is that this is perhaps a better take on things, as California completed its pause in processing of initial claims and reported actual unemployment insurance claims; nonetheless, initial jobless claims remain at unacceptably high levels.

The tempered enthusiasm for the latest report also is connected to the understanding that the delay in passing a stimulus plan, along with new restrictions in some places to contain the spread of the coronavirus, raises the specter of a slower jobs recovery.

The Existing Home Sales Report for September ( consensus 6.10 million; prior 6.00 million) and Leading Indicators Report for September ( consensus 0.6%; prior 1.2%) will be released at 10:00 a.m. ET. Both should produce relatively good news.

How the market chooses to react to these reports is unclear. Its current disposition is mixed, as it continues to get pelted with exhausting stimulus headlines that are laced with everyone’s favorite buzz word — optimism — but continue to sting with the lack of an agreement.

Originally Posted on October 22, 2020 – The Stimulus Beat Goes on In Tired Fashion

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