1. Moving the markets

The markets took a steep dive right after the opening, with the Dow down some 300 points, after which a slow but choppy ascent pulled major indexes out of the doldrums, but they fell short of reclaiming their respective unchanged lines.

The culprits for the early weakness were the same as yesterday, namely no progress among the warring parties regarding the stimulus package and renewed threats of lockdowns in those areas with most of the new Covid-19 cases.

Reported CNBC:

“Market volatility is set to continue in the weeks ahead as investors brace for a host of uncertainties—the timing of vaccine availability (after a setback for Johnson & Johnson), the size and timing of additional US fiscal stimulus, and the election outcome,” wrote Mark Haefele, chief investment officer of global wealth management at UBS. “The uneven recovery in the US economy also adds to investor concerns as the results season kicked off this week.”

Headlines were in chaos mode adding to market uncertainty. Here are a few I came across:

• WHO Europe Director Says Governments Should Stop Enforcing Lockdowns
• European governments reinstate pandemic restrictions to curb a second wave of the coronavirus.
• Behind The Nasdaq Weakness: Goldman Downgrades Tech To Neutral
• Twitter, Facebook Go Full Tilt Protecting Biden Just Weeks After Execs Join Transition Team
• Senate Judiciary To Subpoena Jack Dorsey After Twitter Suspends Trump Campaign, House GOP Accounts Over Biden Scandal
• Traders Rattled After Morgan Stanley Sees 80% Odds Result Won’t Be Determined On Election Night   

Not helping was the jobless claims report showing that almost 900k Americans filed for first-time benefits last week, which was worse than the 825k expected.

But that’s only part of it with ZH adding this important fact:

So, that’s the reported data – do with it what you will, depending on your agenda – but bear in mind that it is practically useless noise given the fact that issues with data from California, the most populous state, continue to remain frozen as they deal with the massive fraud that permeated their unemployment rolls.

I believe that volatility will ramp up over the next few weeks, which is why I took the opportunity to ease up on our market exposure by liquidating one of our holdings to lock in profits before they might turn into losses.

I think a more measured approach in this highly uncertain environment is advisable. After all, I see the downside risk as a graver danger as opposed to a couple percentage points of gains to be made on the upside—at least for the next 3 weeks.

The insanity is sure to continue.

1. Moving the markets

Even though the markets started the session on the plus side, early enthusiasm waned, and the major indexes closed in the red for the second day in a row. The losses were modest, and a late day rebound attempt failed to push equities back above the unchanged line.

Weakness appeared to accelerate after Treasury Secretary Mnuchin threw cold water on hopes of a coronavirus stimulus deal being reached prior to the elections.

Added CNBC:

Mnuchin said around midday that getting a deal done before the election would be difficult, adding that both sides were still far apart on certain issues. He also noted, however, that Democrats and Republicans are making progress in some areas.

The latest earnings reports turned out ok with Goldman Sachs beating expectations, while BofA’s report cart received mixed reviews sending the financial sector south, as Bloomberg shows here.

The US Dollar index did an about face and dropped, thereby giving gold a reason to rally with the precious metal gaining +0.53%.

The overall feeling in the markets seems to be one of uncertainty with a “let’s wait and see” attitude prevailing in both bullish and bearish camps.

However, analyst Sven Henrich was spot is with this observation:

The bull case: Nothing matters.

Not debt, not growth, not earnings, not layoffs, not valuations, not forward multiples, not tax hikes.

Keep buying historic valuations because the magic money fairy will keep bailing us out.

I could not have said it any better.

1. Moving the markets

Equities headed south right after the opening bell with the Dow ending its 4-day win streak. Bringing the recent rally to a halt was news that several pharmaceutical companies were facing challenges with their Covid-19 vaccines due to side effects causing 2 companies to pause its trials.

Earnings season got started with banking giant JP Morgan delivering better-than-expected earnings but slightly weaker than expected revenues. One of the items that made me go “Hmm…” was their reduction in loan loss provisions, which dropped by 90%. As if potential future loan losses no longer are of any concern…

Also not helping the mood on Wall Street were the stalled talks in Congress with another coronavirus stimulus package questionable, as the warring parties appear in no mood for any concessions.

Precious metals got hammered today as the dollar spiked with gold trying to hang on to its $1,900 level, while bonds rallied as yields fell.

The Nasdaq fared the best among the major indexes, while the S&P 500 was unable to keep recent upward momentum going and therefore failed to take out its recent highs.

In the end, it was a whipsaw day with nothing gained but not much lost either.

1. Moving the markets

The futures already indicated this day to be one for the bulls, as renewed stimulus hopes, the upcoming earnings season and just general market optimism formed the basis for another day of levitation with especially the Nasdaq receiving a nice boost of +2.6% thanks to a massive melt-up squeeze.

It was the tech sector’s best day since September 9, when it rallied +2.7%.

Added ZH:

On the stimulus front, Nancy Pelosi and Steven Mnuchin were expected to (what else) talk more this week about an economic stimulus plan. Still, even if they manage to strike a deal, there’s almost no chance of getting legislation written and passed by Congress before the election. “There is not a denying of the fact that investors would appreciate easier accessibility to cash and cheaper cash as a result of even more stimulus,” said Jameel Ahmad, director of investment strategy at Naga Group AG in London, also pointing out the obvious.

This most recent ramp has moved the S&P 500 within striking distance of some 50 points of taking out its September 2nd all-time high of 3,581.

On the other hand, reality had nothing to do with today’s bullish theme. Pelosi rejected the White House offer, bond markets were closed, the Fed was quiet, and MSM focused on the Supreme Court justice hearings.

The US Dollar whipsawed and ended unchanged, while growth stocks outperformed value for the second day in a row, as ZH remarked.

Though it was a wild day, it went in favor of the bullish crowed, while the bears got mauled and now have some serious thinking to do.