1. Moving the markets

The never-ending stimulus saga continued to govern the headlines, as artful rhetoric by skilled politicians kept the hope alive that a compromise will still be a possibility—soon.

Posted CNBC:

Pelosi said Thursday a deal on new coronavirus aid was “just about there.” She also said: “If we were not making progress, I wouldn’t spend five seconds in these conversations. … This is not anything other than I think a serious attempt. I do believe that both sides want to reach an agreement.”

To be sure, Pelosi noted that both sides have yet to reach an agreement on certain key issues, including state and local funding. She also cautioned it could take “a while” for lawmakers to actually write and vote on any aid bill.

That was enough to pull the indexes out of their mid-day doldrums, and all closed moderately to the upside. GLD was the odd man out, as a sudden rally in the for dead declared US dollar pushed the precious back down towards its hard-fought for $1,900 level. The drop was further aided by higher bond yields.

On the economic front, we learned that Existing Home Sales soared to their highest since 2006, according to ZH, scoring a gain of 9.4% MoM in September vs. a 5% expectation. Initial Jobless claims dipped a little from last week, registering 787k vs. 870k expected, but the Pandemic Emergency Claims number soared, as Bloomberg shows here.

Concerning for the bulls could be the broad push higher to across the Treasury yield spectrum with the 10-year rising to 0.85% early in the session. Remember that higher yields tend to be bull market killers.

On deck is the biggest event in 4 years, when “The Debate #2” is scheduled to take place. For sure, as last time, I don’t expect real issues to be discussed, but no matter how this sparring match ends, the markets will be affected.

1. Moving the markets

A roller coaster ride best describes today’s session with the markets homing in on every stimulus word uttered, then jumping on hopeful comments while slipping on disappointing news. Nothing else seemed to matter.

Goldman Sachs economist Alec Phillips noted that “the biggest issues remain unresolved and a deal doesn’t seem particularly close.”

“With big differences and little time, it seems unlikely that Pelosi and Mnuchin will reach a deal before the election. More importantly, even if a deal in principle is announced in coming days — this seems possible, but not likely — it looks very unlikely that it would pass before Election Day,” he added.

In the end, the major indexes dropped moderately, but gold stood out and solidified its position above the much fought for $1,900 level.

Other areas of the market were more active, as the US dollar was dumped to a level last seen on September 1^st, while US bond yields rose for the 5^th day in a row, as Bloomberg shows in this chart.

Added ZH:

Markets are currently not just pricing in an increase in volatility around Election Day, but also a sustained high-volatility environment thereafter – both in the post-election period and in the long run. Does that sound like an environment to be buying every dip at record highs?

That is exactly why we have reduced our exposure, since sharply increasing volatility on and after election day can wreak havoc with market sentiment.

1. Moving the markets

An early 100-point bounce in the Dow turned into a late trounce again with the major indexes accelerating to the downside late in the session. With only 1 day left until a key deadline for an aid package set by Pelosi becomes effective, traders took the lack progress as a bad omen and selling sped up.

Added CNBC:

Tom Block, Washington policy strategist at Fundstrat Global Advisors, thinks it is possible that a deal between the Trump administration and Pelosi can be reached.

“Both sides seem to have an incentive to get a deal done,” Block said in a note to clients. He also added that “the dynamics of the lame duck could be poisonous if Trump loses, or Republicans lose control of the Senate. The safer course of action seems to be to pass a bill now, and if there is a blue wave more stimulus early in 2021.”

While the Dow and the S&P 500 had their worst day since September 23^rd, the Nasdaq logged its first 5-day losing streak since August.

Even though Pelosi and Mnushin were scheduled to talk later today, any potential deal was “not sounding imminent,” according to the Washington Post. However, should the warring parties suddenly come to an agreement, a relief rally would be a foregone conclusion; however, the duration of such would be questionable.

That also brings up the question, as to whether the big tech unwind, charted here by ZH, can be reversed, or not. How about the sliding FANG stocks? Or the skidding banking sector?

More questions than answers…