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Stocks Rally as US Election Nears Conclusion

Weekly Update – November 06, 2020

  • The S&P 500 index climbed 7.3% last week in a strong reversal as investors looked forward to the end of a contentious election that has been weighing on US stocks in recent weeks.
  • The S&P 500 ended the first week of November at 3,509.44, up from last week’s closing level of 3,269.96. This more than makes up for last week’s 5.6% fall and marks the index’s biggest weekly advance since April. The market benchmark is now up 8.6% for the year to date.
  • All of the index’s 11 sectors rose this week, with the largest gains posted by the technology sector, up 9.7%, followed by an 8.2% climb in health care, gains of 7.6% each in materials and communication services, and a 6.9% boost in consumer discretionary.
  • The broad advance came as the US presidential election finally neared a conclusion after days of vote counting and weeks and months of speculation. As of Friday afternoon, former Vice President Biden appeared closer to securing the US presidency as Biden led President Donald Trump in Pennsylvania and Georgia on the fourth day of vote counting. A win in Pennsylvania would give Biden enough electoral votes to win the presidency.
  • The week’s climb in US stocks came despite a continued rise in COVID-19 cases, with new daily infections in the US setting new records several times this week.
  • Also Friday, monthly jobs data from the Labor Department showed employment growth slowed in October but came in ahead of expectations as private payrolls climbed and the jobless rate decreased. Non-farm payrolls rose by 638,000 last month while the unemployment rate dropped by one percentage point to 6.9%.
  • The technology sector’s gainers included Arista Networks (ANET), whose shares jumped 26% this week as the cloud networking company reported forecast-beating Q3 results and revenue guidance. The performance prompted a slew of price target increases and an investment rating upgrade to buy from neutral from BofA Securities.
  • In health care, shares of Biogen (BIIB) soared 30% as a Food & Drug Administration document appeared to indicate support for its aducanumab Alzheimer’s drug candidate ahead of a committee meeting Friday to review its marketing application.
  • Albemarle (ALB) boosted the materials sector with a report of Q3 adjusted earnings and revenue that were above analysts’ expectations while the company also forecast 2020 results above Street views. Shares climbed 20%.
  • In communication services, shares of Alphabet (GOOGL) rose 8.9% as many analysts raised their price targets on the Google parent’s stock following its report last week of stronger-than-expected Q3 results.
  • The consumer discretionary sector was boosted by Mohawk Industries (MHK), whose shares were also surging this week amid a number of positive analyst actions following better-than-expected Q3 results and Q4 guidance last week. Shares of the flooring manufacturer were up 17% for the week.
  • Next week’s economic data are expected to be light earlier in the week but reports on the consumer price index and producer price index for October are set to be released Thursday and Friday. Consumer sentiment for November is also due Friday.

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