'Dead Heat' Election Leaves Stocks Playing Defense: Markets Wrap

(Bloomberg) — Stocks lost traction, bonds rose and the dollar fell, with polls continuing to point to a close race in the U.S. presidential election ahead of the Federal Reserve's decision.

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Stocks hovered near session lows after the Wall Street Journal reported, citing Western security officials, that Russia was suspected of plotting to send incendiary devices to planes heading to the United States. Even ahead of this report, options markets show that many on Wall Street remain defensive as numerous polls showed U.S. voters narrowly divided both nationally and in the crucial swing states that will decide the election . Treasury yields fell along the curve and the dollar fell by the most since August.

The other positioning challenge is the number of additional catalysts related to the vote that are likely to move the market. Election Day will be followed shortly by the Fed's decision on Thursday and Jerome Powell's press conference, where he will announce details of the central bank's interest rate stance. And a large portion of U.S. companies still have to report their profits.

“Normally the Fed's interest rate announcement would dominate this week's discussion, but this isn't just any week,” said Chris Larkin of Morgan Stanley's E*Trade. “Traders and investors who have been waiting for the outcome of the election need to prepare for the possibility of a delayed outcome and the potential impact of this uncertainty on markets.”

When it comes to stock market performance, the S&P 500 tends to produce positive returns one year after Election Day, according to Bespoke Investment Group. For all years since 1990, the median increase has been 3.3%, with positive returns achieved in 25 of 34 cases. Performance tended to be slightly better in election years, with an average increase of 3.9% and increases in six out of eight cases.

The S&P 500 fell 0.5%. The Nasdaq 100 fell 0.4%. The Dow Jones Industrial Average fell 0.9%.

The 10-year Treasury yield is 9.8 basis points at 4.30%. The Bloomberg Dollar Spot Index fell 0.4%.

Oil prices rose after OPEC+ agreed to delay its December production increase by a month and tensions rose in the Middle East.

“Of course, the U.S. election will play a prominent role in moving financial markets this week,” said Anthony Saglimbene of Ameriprise. “However, a policy decision from the Federal Reserve on Wednesday, some light economic releases later in the week and about 20% of the S&P 500 scheduled to report third-quarter results should also have a reasonable impact in guiding stock traffic.”

With both US presidential candidates in a “dead heat” ahead of next week's election, markets are bracing for an outcome that could lead to a variety of policy decisions. Still, it's notable that since 1933, stocks have almost always risen by double digits by the end of a president's term, regardless of party affiliation, according to Seema Shah of Principal Asset Management.

“Investors should be careful. Those who allow their political opinions to cloud their investment decisions could miss out on the potential benefits that come from investing in the market for the long term,” she noted.

For Dan Wantrobski and Janney Montgomery Scott, U.S. stocks remain largely in consolidation mode ahead of what could be a historic week. Investors should expect “more choppy, range-bound trading” in the coming sessions, he noted.

“Depending on how things develop, the markets themselves are facing either new highs (the main trend is still bullish) or major declines (overbought conditions remain, with some current support levels broken),” Wantrobski said.

Company highlights:

Berkshire Hathaway Inc.'s cash pile reached $325.2 billion in the third quarter, a record for the conglomerate, as Warren Buffett continued to back away from major acquisitions while reducing some of his most significant stock holdings.
- Berkshire has again reduced its stake in Apple Inc., the Omaha, Nebraska-based company said in a statement on Saturday. Its stake in the iPhone maker was valued at $69.9 billion at the end of the quarter, down from $84.2 billion in the second quarter, suggesting that Berkshire reduced its stake by about 25%.
Nvidia Corp., the chipmaker at the heart of the artificial intelligence boom, is joining the oldest of Wall Street's three main stock benchmarks.
According to Fox Corp. A record amount of political advertising contributed to strong revenue and profit growth in the company's first fiscal quarter.
New data from Viking Therapeutics Inc. on an obesity pill that will eventually compete with blockbuster shots from Eli Lilly & Co. and Novo Nordisk A/S sent shares of the small biotech company higher and fueled further speculation about take- away speculation.
Palantir Technologies Inc.'s premium valuation will be put to the test when the data analytics and software company reports results after the market close on Monday.
Peloton Interactive Inc. received a rare “buy” rating on Monday as Bank of America Corp. upgraded the fitness company two notches while touting its earnings outlook and a positive view of its new CEO.
Talen Energy Corp. shares and other U.S. energy companies collapsed on Monday after the country's top energy regulator rejected Talen's plan to deliver a data center.
BCE Inc. agreed to buy a Pacific Northwest Internet provider, making a surprise push into the U.S. market to achieve faster growth.
AstraZeneca Plc said its experimental obesity pill was well tolerated by patients with type 2 diabetes as it presented data from several trials testing its three new weight loss drugs.
Bettina Orlopp, chief executive of Commerzbank AG, wants to free up more capital to cash out or invest as she pushes for an independent bank in the face of a possible takeover by rival UniCredit SpA.

Important events this week:

China Caixin Services PMI, Tuesday
US ISM Services, Tuesday
US presidential election, Tuesday
Eurozone HCOB Services PMI, PPI, Wednesday
China trade, foreign exchange reserves, Thursday
British BOE interest rate decision, Thursday
US Federal Reserve interest rate decision, Thursday
University of Michigan Consumer Sentiment, Friday

Some of the key moves in the markets:

The S&P 500 fell 0.5% at 12:05 p.m. New York time
The Nasdaq 100 fell 0.4%
The Dow Jones Industrial Average fell 0.9%
The Stoxx Europe 600 fell 0.3%
The MSCI World Index fell 0.3%

Currencies

The Bloomberg Dollar Spot Index fell 0.4%
The euro rose 0.4% to $1.0881
The British pound was little changed at $1.2936
The Japanese yen rose 0.6% to 152.07 per dollar

Cryptocurrencies

Bitcoin fell 2.3% to $67,520.7
Ether fell 2.4% to $2,408.63

Bonds

The 10-year Treasury yield fell nine basis points to 4.30%
The yield on 10-year German government bonds fell by one basis point to 2.39%
The 10-year UK government bond yield rose one basis point to 4.46%

raw materials

West Texas Intermediate crude oil prices rose 2.6% to $71.27 a barrel
Spot gold fell 0.1% to $2,733.50 an ounce

This story was produced with support from Bloomberg Automation.

'Dead Heat' Election Leaves Stocks Playing Defense: Markets Wrap

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