The ending week on the stock markets started positively. Investors continued to react to the inevitability of new measures to support the American economy in the post-election period. They were no longer intimidated by the likelihood that Democrats and Republicans might not agree on incentives before November 3, besides Donald Trump and Nancy Pelosi actively threw up options for this agreement, which were ultimately failed by opponents.
But then gradually, the topic of incentives began to fade into the background and the market completely switched to the corporate reporting season, which with all hopes, turns out to be uneven, and, of course, the focus was on the situation around the coronavirus pandemic. Earlier this week, Johnson&Johnson and AstraZeneca announced a vaccine trial failure and a consequent suspension of work, prompting a new wave of fears that vaccines will not be available until the end of this year.
Another bad news was that some European countries, for example, the UK, are trying to find a way to maintain acceptable economic activity while somehow protecting themselves from the impact of COVID-19. The US’s situation was also tough. The whole media was reporting about more and more cases of infection in the country. Under these conditions, it was complicated for investors to find positive reasons for buying company shares.
Although they have completely switched their attention from the incoming economic data to the election and the coronavirus pandemic, the outgoing statistics turned out to be uneven. Data from the United States showed a sharp rise in industrial inflation, which may pull consumer inflation in the long run. It may become the basis for limiting all kinds of support measures in the country due to the growing fears of a sharp increase in inflationary pressure.
On Thursday, American investors missed the economic data from the labor market, the unimpressive NY Empire State manufacturing activity index for October, and also, probably, and the perfect manufacturing activity index from the Philadelphia Frs. The values of the number of applications for unemployment benefits showed growth over the past week. It added to 898,000 against 845,000 a week earlier. The NY Empire State manufacturing activity index fell to 10.5 points from 17.0 points. The index of manufacturing activity from the Federal Reserve Bank of Philadelphia, on the contrary, soared to 32.3 points from 15.0 points. Again, I remind you that investors did not react to this data in any way.
Today, the market will focus on the values of the basic index of US retail sales, which growth rate is expected to decrease to 0.5% from 0.7% and s a large package of statistics from the University of Michigan. In my opinion, this data, no matter good or bad, unlikely, will have a noticeable impact on the market’s sentiments.
Thoughts and conclusions:
The next week, investors’ attention will continue to be on the election topics, corporate reporting, and the situation around COVID-19. I expect the high volatility sideways dynamics to continue.