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Election Jitters and COVID Concerns Pull on the Markets

Weekly Update – October 30, 2020

  • The S&P 500 index fell 5.6% last week, causing the market benchmark to end October in the red, as US stocks tumbled broadly amid escalating COVID-19 cases just days before the US election.
  • The S&P 500 ended the week at 3,269.96, down from last week’s closing level of 3,465.39. A week ago, the index had still been in positive territory for October, but this week’s slide put the index into the red for the month; it recorded a 2.8% drop for October. With just two months remaining for 2020, the S&P 500 is now up just 1.2% for the year to date.
  • All of the S&P 500’s sectors fell this week. Consumer discretionary had the largest percentage drop of the week, down 6.6%, followed by a 6.5% slide in the industrial sector, and a 6.4% slip in technology.
  • The broad decline came as COVID-19 cases continued to climb across the country and world, raising concerns that some of the restrictions seen in the spring could be reinstated and cripple the US economy just as it was beginning to recover from the last round of shutdowns.
  • Underscoring the worries, France and Germany unveiled new restrictions this week, including a national lockdown in France and a one-month shutdown in Germany of restaurants, bars, fitness studios, concert halls and theaters. Adding to investors’ jitters, the US is just days away from its presidential election.
  • The industrial sector’s decliners included American Airlines Group (AAL), whose shares fell 10% as the airline operator reported it swung to a Q3 adjusted loss from a profit in the year-earlier quarter although the loss was narrower than analysts feared. Revenue tumbled from the same quarter a year earlier but still topped the Street view. Airlines have been hit hard by the pandemic as travel demand has tumbled.
  • Boeing (BA) shares shed 14% as the aerospace company said it swung to a Q3 core loss per share, although the per-share loss was narrower than analysts expected. The company has been hurt not only by lower demand amid the pandemic but also due to the ongoing grounding of its 737 Max planes for safety concerns.
  • In the technology sector, Intel (INTC) shares tumbled 8.3% as investors continued to react negatively to guidance the chip maker issued last week for its data center revenue to fall by 25% year over year in the fourth quarter. The stock decline came as many analysts cut their price targets on the stock this week.
  • Among consumer discretionary stocks, shares of Royal Caribbean Group (RCL) fell nearly 13% as the cruise operator reported it swung to a wider-than-expected Q3 adjusted loss per share. Royal Caribbean also said it expects a loss on both GAAP and adjusted basis for Q4 and fiscal year 2020, depending on the timing and extent of return to service.
  • The focal points on next week’s calendar will be the election Tuesday and the Labor Department’s release of October employment data Friday. Investors will also keep an eye on manufacturing readings due Monday from Markit and the Institute for Supply Management as well as service-sector readings from Markit and ISM due Wednesday.
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