Bulls Continue to Run…..
U.S. equities finished solidly higher for a fourth-straight session to add to a post-election rally, as market participants appeared to shrug off a still-undecided presidential outcome and instead focus on the implications of the likelihood of a potential split Congress. Earnings from GM and Qualcomm gave their respective shares a boost, with the latter helping the Information Technology sector lead today’s gains. News on the economic front was mixed, with jobless claims data showing continued moderation but at a persistently-elevated rate, while Q3 productivity and unit labor costs missed expectations. Meanwhile, the Fed kept its accommodative policy intact and continued to voice the need for fiscal relief. Treasury yields were little changed and the U.S. dollar was decisively lower following the Fed’s decision and subsequent presser by Chairman Jerome Powell, while crude oil prices were down and gold rallied. Markets in Europe and Asia finished with widespread gains.
The Dow Jones Industrial Average rose 543 points (2.0%) to 28,390, the S&P 500 Index was up 67 points (2.0%) at 3,510, and the Nasdaq Composite jumped 300 points (2.6%) to 11,891. In heavy volume, 924 million shares were traded on the NYSE and 3.8 billion shares changed hands on the Nasdaq. WTI crude oil was $0.36 lower at $38.79 per barrel and wholesale gasoline added $0.01 to $1.12 per gallon. Elsewhere, the Bloomberg gold spot price rallied $47.73 to $1,950.65 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.8% to 92.65.
Fed keeps accommodative policy intact, jobless claims slightly higher than expected…..
The Federal Open Market Committee (FOMC) concluded its two-day monetary policy meeting today, opting to leave its stance and interest rates unchanged, as was widely anticipated. In its statement, the Committee said that while the recovery from the disruption of the COVID-19 pandemic is continuing at a moderate pace, “The path of the economy will depend significantly on the course of the virus,” adding that, economic activity and employment “have continued to recover but remain well below their levels at the beginning of the year.” As well, the FOMC indicated that the ongoing public health crisis “will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term” and that accommodative policy will remain in place until inflation reaches or exceeds its 2% target and the unemployment rate falls to a level deemed sustainable without leading to higher inflation. The FOMC also said that it will continue its bond buying program at the current rate of $80 billion in Treasuries and $40 billion in mortgage-backed securities per month.
In his scheduled press conference following the statement, Chairman Jerome Powell said the Fed is committed to achieving its dual mandate of price stability and full employment, and that while economic activity has continued to recuperate and that half of the jobs lost in March have been recovered, it has moderated. Powell also continued to pound the table on the need for some sort of fiscal aid, noting that fiscal policy can do what the Fed can’t.
Weekly initial jobless claims came in at a level of 751,000 for the week ended October 31st, above the Bloomberg estimate of 735,000 but below the prior week’s upwardly-revised 758,000 level. The four-week moving average declined by 4,000 to 787,000, while continuing claims for the week ended October 24th fell by 538,000 to 7,285,000, north of estimates of 7,200,000. The four-week moving average of continuing claims dropped by 827,250 to 8,244,500.
Preliminary Q3 nonfarm productivity rose by 4.9% on an annualized basis, versus expectations of a 5.6% increase, and following the upwardly-revised 10.6% increase seen in Q2. Unit labor costs fell by 8.9%, versus the forecast calling for an 11.0% drop. Unit labor costs were revised lower to an increase of 8.5% in Q2.
Treasuries were nearly unchanged, as the yield on the 2-year note and the 30-year bond were flat at 0.15% and 1.55%, respectively, while the yield on the 10-year note ticked 1 basis point (bp) higher to 0.78%.
Bond yields had edged higher before the election amid the backdrop of mostly positive economic data, solid earnings reports, and as inflation expectations have shown signs of warming up a bit. However, the host of uncertainties have remained.
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