A bang-on week in the markets, prompted by the prospect of a Biden presidency and GOP Senate, ended on Friday with a whimper.
MANHATTAN (CN) — Markets fizzled on Friday as ballot counting continues, though the week on Wall Street was one of the best since the Covid-19 pandemic began.
After four straight days of gains, all three equity markets in the United States dropped slightly at Friday’s morning bell. By the closing bell, the Dow Jones Industrial Average lost 66 points, a 0.24% increase. The S&P 500 also fell slightly, while the Nasdaq crept up just above the zero mark.
Despite Friday’s lackluster performance, each of the three indices had a fantastic week by all measures. All told, the Dow gained 1,822 points this week, the S&P 500 increased 240 points, and the Nasdaq — by far the star of the three — netted 984 points.
Friday’s drop in equities was also followed by another drop in the VIX, which is Wall Street’s measure of volatility in the markets and colloquially called the “Fear Index.” The VIX hit 24 points by the closing bell, a 10% decrease for the day.
The election remained front and center on investors’ minds. Joe Biden now remained firmly in the lead with 253 electoral votes, according to most projections, with counts in Georgia and Pennsylvania going Biden’s way. Mounting legal challenges and claims of fraud from the Trump camp could jam up the process, but the window for President Trump to win reelection is growing ever smaller.
The contentious election process has been good for Wall Street, but it has caused a dip in consumer confidence among Republicans, according to a Thursday poll by The Morning Consult. Confidence among Democrats remains steady and is now at around 83.2 points, while Republicans’ confidence dropped from nearly 114 points to 106.3 points, the poll found.
The increasing rancor over the election has not further damaged the economy, which continues to recovery, albeit at a sluggish pace.
Early Friday, the Bureau of Labor Statistics reporting that nonfarm payroll employment increased by 638,000 last month, about 50,000 higher than many forecast but slightly less than the 672,000 jobs gained in September. The unemployment rate slid to 6.9%, according to bureau records.
“An economy that reopens after almost a full shutdown gets back what it lost over time, but we know we are entering tougher months with respect to Covid and the pace will continue to moderate,” said Peter Boockvar, chief investment adviser at Bleakley Advisory Group.
The bureau found that the leisure and hospitality sector gained 271,000 jobs, which is quite smaller than the 406,000 gained in September. Much has been made of the colder weather pushing jobs back as bars and restaurants, still hamstrung by lockdown orders, are preparing for fewer customers.
The private sector gained 906,000 of the October gains, which were offset by a 268,000 loss in government jobs. That disparity could increase as state and local governments face increasingly harsh funding crises.
“The unemployment rate cratered and for all the right reasons. The labor force grew, the number of people unemployed declined, and the labor force participation rate popped,” consultant Joel Naroff wrote. “That indicates workers are confident enough that they will find a position if they start looking and that when they do look, they are getting jobs.”
Indeed, one-third of small businesses still report difficulty filling positions, according to a late Thursday report by the National Federation of Independent Business. The report also reflected a minor drop in hiring from September to October, with 55% of small business owners reported hiring or attempting to hire new employees last month, down 1 percentage point from September.
“The small business labor market is still recovering from the COVID-19 pandemic and the state and local regulations that further hindered small business operations,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Firms have more openings for skilled workers and are having trouble matching available workers with available jobs.”
Friday’s promising jobs data contrasts with the disappointing payroll report from ADP on Wednesday, which showed a gain of just 365,000 jobs last month compared with nearly double that gained in September. It also follows a meager drop in new unemployment claims of just 7,000 for the week ending Oct. 31, as total new unemployment claims remain more than 1 million per week.
“While the economy has reclaimed 12 million jobs from the trough of the crisis in April, it has barely passed the halfway mark in what promises to be a grueling marathon,” wrote Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.
“With policy gridlock likely in the wake of the U.S. election, our focus has shifted back to economic fundamentals,” she wrote. “Real-time data is quite sobering in that regard, with demand being restrained by rising Covid-19 infections and slower employment gains proving insufficient to offset fiscal aid.”
Federal Reserve Chair Jerome Powell on Thursday echoed the growing worry that the economy is slowing again and that further fiscal stimulus is needed.
“We are a long way from our goals, and we’re sort of halfway there on the labor recovery at best,” Powell told reporters on a webcast. “There are parts of the economy where it’s going to be hard until there’s a vaccine.”
Powell noted that the “tail risks” the central bank had expected were not likely to come to pass but that the economy is still fragile.
Forgotten but certainly not gone, cases of Covid-19 have skyrocketed, with more than 100,000 new cases in the United States on Wednesday and 121,000 new cases on Thursday. Both numbers set new one-day records.
According to data compiled by Johns Hopkins University, there are currently more than 49 million cases of the virus worldwide, and 1.2 million deaths. In the United States, more than 9.6 have contracted coronavirus, while about 236,000 have died.