Picking up the Pieces… Get knocked down, get back up again! Ok maybe it’s a bit premature to say that US equities are already moving past the absolute bruising taken yesterday (and Monday), but the market’s outlook is at least a little brighter today with a once in a blue moon mega-earnings slate on its way after the bell (more below). That optimism was a little shakier this morning, as futures pared overnight gains and slipped into the red at one point, but solid Q3 GDP data and jobless claims were enough to get the ball rolling again (along with some ECB commentary on a “recalibration” of stimulus in December), despite the fact the Covid second wave is clearly going to be an ongoing concern. Though backward looking, the data does seem to help the market feel better about the lack of pre-election stimulus – just for good measure US indices barely reacted to Trump’s mid-morning promise of “a very big package as soon as the election’s over” (that you Santa?). US indices are now at their sprinting higher heading into the afternoon, led by Tech and Media (again, earnings on the way), as well as Transports and Autos which are repairing some of yesterday’s damage as Ford (F +3%) and Aptiv (APTV +5%) both easily beat expectations. Pharma and Healthcare are lagging, with a disappointing outlook from Abiomed (ABMD -8%) the most noticeable culprit. Energy is faring well (Exxon higher by +3.7% after announcing job cuts) even as Crude continues its tumble – it’s especially interesting to note as many pointed to Oil early in the year as an indicator of the Covid damage that would come…

Risk off! Stimulus negotiations seem to be done for now (without an agreement), earnings are in full swing, the Presidential election is five days away, and two of Europe’s largest economies are moving towards lockdowns.  One of those generally can halt investors, but all occurring at the once are making investors rethink their risk profile.  Risk assets are getting hit hard across the board, with Oil -6%, Silver -4.7%, Equities -2.8%, and “safe” havens Treasuries/ Dollar moving higher.  In equities, the pain is across the board.  Insurers are the best sector (only down 1.2%), while industries exposed to lockdowns are underperforming (Hotels -3.4%, Airlines -4.3%).  While the tape is very red, it is interesting to see the Value down less than Growth, by about 72bps (SPYV -2.53%/ SPYG -3.23%). 

Back on Your Feet…. It’s not quite a Turnaround Tuesday, but US stocks are holding their own in the aftermath of yesterday’s bout of repositioning. A full slate of earnings and some M&A developments have provided a handy distraction for investors with only a week until the election and stimulus still a question mark, though trading has been choppy and the S&P hasn’t strayed too far from its flatline in either direction. It’s not surprising the buy-the-dip crew is sitting tight for the most part given the timing, but it remains to be seen if the mega-cap earnings ahead force investors off the sidelines. Already the big guys (AMZN +2.1%, FB +2.3%, AAPL +1.1%) are showing some subtle signs of FOMO today as NYFANG+ makes a new relative high vs SPX (chart below) and with MSFT (+1.9%) set to dish after the bell (why did they have to spoil the perfect 5/5 FAAMG lineup on Thursday?). After all, yesterday’s SAP blowup was a reminder of 2 things: 1) There is no alternative to the US, and 2) Covid isn’t going anywhere… So it’s easy to see why some are convinced the winners will keep on winning (notice PTON +2.3%, ZM +1.4%, DOCU +1.2%)

Zoom, Doom & Gloom…Risk-off has been heard throughout the land as the violent combo of a stim stalemate, panicky responses to a renewed COVID case wave (note the death rate remains flat) and fading hopes of a blue wave (polls suggest Senate races are tightening), have triply hit market optimism today. Corona has dominated the headlines to start the week as the US saw its 7-day average for cases hit a new record. WHO Chief Tedros called for “sacrifice” to meet resurging cases and the Surgeon General issued a Thanksgiving warning that said as many as 12 states may need to cancel their holiday plans if cases don’t subside. The corona quick re-escalation impact has been dramatic — US equity markets accelerated lower as the morning wore on. The Vix went above 30 and the Dow, Nasdaq (see chart below) and S&P all broke below their 50dma. The Travel&Leisure sector, COVID’s whipping boy, has also been hardest hit today, led lower by Royal Caribbean (-11.6%), Marriott (-6.2%) and United Airlines (-7.4%). With a big week ahead, including everything from macro data to blue chip earnings to a pending ELECTION, the risks to investors are not small. There was optimism in the air last week in the form of PMIs and possible stim, but the SAP (-22%) meltdown in Germany this morning was a stark reminder of what can happen when expectations aren’t matched. SEE: Alphabet, Amazon, Apple and Facebook on Thursday.

Keep Those Shoulders Warm…. There’s been so much to shrug off today that investors’ shoulders must be tired. Foreign interference in the election, jobless claims data, rising Covid cases, earnings galore… the list goes on, yet indices are not far from unchanged as focus remains stubbornly fixated on stimulus negotiations (though UST yields are on the move higher again). A few murmurings of progress were enough to pull stocks off morning lows, but we’re now back in wait and see mode (my guess is more waiting than seeing to come). Also plenty more to see and hear tonight as Biden and Trump square off in a final debate, but it’s interesting to note how little anticipation there seems to be for the event at this point in the race (and after the first one). Banks are leading after some more earnings pops from the regional banks (HBAN +6.6%, MTB +5.3%, KRE +9% since last Wed), with Financials also in the green with Goldman Sachs (GS +1.4%) seeing some relief from its 1MDB settlement despite the massive price tag. Telecoms are higher at AT&T (T +5.7%) rang up some wireless gains and Energy is outperforming as Oil fights to partially regain yesterday’s slide. Kimberley Clark’s q3 (KMB -4.5%) disappointment is dragging Household Goods; Transports are lower as CSX (+3.8%) and Union Pacific (UNP -5.8%) presented dueling outcomes for the freight cos and as airlines gained despite American (AAL +2.8%), Alaska (+3.2%), and Southwest (LUV +5.1%) adding to the parade of quarterly losses.

All about the stim – Negotiations are still occurring on stimulus, and while the range narrows between Pelosi and Mnuchin, traders need to be mindful of Congressional approval. Stocks are trading with each headline, but a deal is not likely before the weekend, so the uptick in volatility will remain. The Beige Book showed that the economy improved across the board, so positives are there. Media is outperforming as it gets a lift from Twitter (+7.5%), Facebook (+4.9%) and Interpublic (+3.1%). With an uptick on UST yields (see below), Homebuilders (ITB -3.1%) are seeing some profit taking. Plus, a fresh Existing Home print is tomorrow morning (another high btw).

3 O’Clock, By the Flagpole… Markets are waiting on bated breath for what’s essentially been billed as a final showdown between Pelosi and Mnuchin at 3pm EST that marks the last chance to get a stimulus bill passed ahead of the election only 2 weeks away. US stocks have been characteristically positive ahead of the showdown, and all 3 indices moved higher midday after Pelosi told BBG TV she is “optimistic” (never heard that one before). Apparently Fed heads aren’t convinced: Charles Evans admitted he is “nervous” fiscal stim won’t come but reassured that the Fed can do more if necessary, sending stocks to fresh intraday highs (though coming off a bit over the last 15 minutes). Plenty of single stock movers are helping to dictate sector moves, not all of them earnings related: in fact Autos are the best S&P performer as towed higher by General Motors (GM +8.3%) after announcing it will invest an additional $2bn into EV production. Banks are also higher powered by earnings beat from Comerica (+7.4%) and Regions Financial (+6.3%), helping solidify Value outperformance over Growth (VLUE +1.1, MTUM +0.6%). On the other side of that equation, IBM’s (IBM -5.9%) sales decline and lack of outlook have weighed on Software, and a less enthusiastic second look at Intel’s memory unit sale chipped away at Semi’s ytd gains. Defensives Food/Bev (Philip Morris vape shipments disappointed [PM -4.3%]) and Telecoms round out the laggards.

Cling-On. The theme for the rest of 2020…Currently, we are clinging onto these last 2 weeks. Two weeks of high drama, unrealistic fiscal demands, and what some might call, brinkmanship. Also, possibly the ugliest election to ever grace the United States, with the last debate coming Thursday (can’t be any worse than the last….omg, can it?!). Mr. Murdoch has apparently already made up his mind on the outcome, but two weeks is a political eternity. We are also clinging on to the words of Nancy Pelosi, who gave a Tuesday deadline for stimulus agreement to the White House this past weekend. Previously, the mere mention of the word stimulus had upside potential. Not today, though. Investors are feeling numb to the stim stalemate today as the start of the week has proven lacklustre, at best. Nasdaq’s usual rip-roaring Monday is MIA with tech dragging (AAPL -0.3%, Amazon -1.1%). Further, despite plenty of talk over the weekend that the Astrazeneca/Oxford vaccine could be rolled out to the most vulnerable shortly after Christmas, the Pharma sector isn’t feeling much thrill, down -1.3%. Over the next 2 weeks we can expect to cling on to hope, as well as quite a bit of volatility.

We Don’t Need No Stim(-ulation). Apparently, investors don’t need stim to go from bottom left to top right when hope is driving the boat. As a choppy week comes to an end, stocks were given a little gift this morning in the form of better retail sales and consumer sentiment, which has been good news taken as good news for once, rather than data potentially solidifying Republicans’ stance on stim. Further, leading indicators TRAN/S5RAIL/FDX all closed at all-time highs (though JB Hunt and Kansas City Southern reports weighing today). Investors have had a lot on their shoulders of late (ya think!?) between insecurity about the economy, renewed corona concerns, an impending election and the fiscal stim tug-of-war (in no particular order). However, after 3 days this week of declines, all three major US benchmarks have been able to re-route into positive gains on this day of options expiry. From where does this confidence stem? FOMO, for one. Also, earnings have been ok (who needs Banks anyway), and Covid is Europe’s problem (this week). Not to mention, stocks look ever shinier when one looks at yields. So, why let future potential problems get in the way of gains now!?

Everyone Remain Calm… Apparently the S&P posting its first consecutive down days in a month was enough to ruffle some feathers, as US indices are lower once again on the heels of a somewhat ugly red day across the rest of the globe. With regard to the main narratives the market has been watching (stimulus, Covid, economic recovery, election) nothing has drastically changed, but that itself doesn’t bode well for a pre-election fiscal injection as the Nov 3 countdown clocks ticks and the virus situation continues to look incrementally worse in Europe. Still the damage in the US today remains limited (S&P only back to last Friday’s levels) and some profit taking can be excused when stocks are near their all-time highs in the middle of a pandemic-fueled recession. It’s premature to say this is the start of a real “wakeup call” as opposed to a pause for thought, and it’s precisely at these moments of doubt that FOMO is at its most potent. Banks are making a guest appearance near the top of the sector chart after taking an earnings season beating the last few days, along with its more successful cousin Financials, which have charted a smoother path by delivering the beats, today coming from Morgan Stanley (MS +1.1%) and Charles Schwab (SCHW + 3.6%). The Transport space remains a tug of war zone between red hot shipping/logistics players (JBHT +1.4%) and the airlines, weighed upon today by another depressing earnings report form United (UAL -4.4%). Pharma is worst performing; Vertex (VRTX -20%) is patient zero there after stopping development of a promising rare disease drug. The usual high flyers Software, Media, Tech are also lagging as the FANG endures some selling… but with indices pushing new highs on the day, it would only take a little buy the dip action in those names to sneak out a surprise green finish for the S&P…