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Market Commentary

Stocks continue to slosh around 3% to 5% off the all-time highs as we are now just two weeks from the highly anticipated and heavily debated 2020 U.S. Presidential election.

There still seems to be a large number of investors bracing for a "contested election" and the possible fallout that could happen in its wake.

Bulls want to argue that a bigger stimulus bill will come after the election regardless of who wins. Bears are wondering if there will be any bipartisanship left in Washington after the election or will both parties be more heavily divided after the fallout and turbulence from the fight after the election? What happens if President Trump keeps control of the White House but the Democrats win control of both the House and Senate? There are just so many "what if's" in the air?

Many Wall Street insiders say the stock market is now acting similar to a deer in the headlights, i.e. knowing something crazy is about to happen but just uncertain as to which way to jump.

Bulls still see plenty of optimism with improving economic data, especially the housing sector. The latest National Association of Home Builders (NAHB) survey showed builders are the most confident they've ever been in history with the index climbing to a record high of 85.

Daily airline passenger levels are trending higher as U.S. air travelers reached +1 million for the first time since March. Keep in mind, however, nearly one-third of the world's commercial jets are still grounded.

Restaurant reservations via OpenTable are steady but more mixed even trending lower as of late in some of the northern states, which seems to correlate with increasing coronavirus outbreaks. Gasoline usage, mobility, and hotel occupancy remain relatively flat. Bears continue to argue that the recovery has stalled and believe the economy will begin taking on more permanent damage without more government support.

Today brings September Housing Starts and Permits which are expected to rise this month continuing the strong bounce-back that began this summer.

Today also brings some exciting earnings results including Procter and Gamble, which is expected to have benefitted from the continuing high demand for cleaning and paper products. P&G reports before the open.

Netflix is the other big name reporting today, after the closing bell. The company reported impressive user growth last quarter driven by homebound consumers but analysts questioned whether the momentum was sustainable. Earnings are also due out from Albertson's, Canadian National, Carlisle Companies, Interactive Brokers, Lockheed Martin, Snap, Texas Instruments, and The Travelers Companies.

China may be Only Major Economy to Grow in 2020: Crediting increased exports and sustained consumer demand, China today said its economy grew 4.9% in the third quarter. People in China are back out shopping, traveling and eating. Retail sales bounced back for the first time this year in August, and then rose again by 3.3% in September. But for Chinese consumers to keep spending more, they’ll need help. China’s official unemployment rate dropped to 5.4% from the usual 6%, but some experts said this figure doesn’t factor in millions of workers from the countryside who are jobless in the cities. Many more people went for months on half wages or with no pay at all. Unlike the U.S. government, China’s Communist Party has not offered relief money to workers, leaving many to dig into their savings to survive. The fourth quarter started off with a weeklong holiday. People spent $70 billion on travel — 70% of what they spent last year. Even then, China is on track to be the only major economy to grow in 2020. (Source: Marketplace, CNBC)

Options Activity Spiking Again: Investors are once again chasing upside in shares of tech companies after a sharp sell-off in U.S. equities last month. Despite last week’s market dip, the tech-heavy Nasdaq remains around 3% away from its record high. Traders - many of them retail investors - have plowed back into call options. Since its recent trough on Sept. 23, the Nasdaq has climbed nearly 10%. Speculators in the futures market have had a dramatic change of heart. Funds have pulled back from one of the biggest short positions in U.S. tech stocks in over a decade, in a near-record buying spree of Nasdaq futures, CFTC data from last week showed. Moreover, volume has rebounded in equity call options, particularly for single-stock contracts. The ratio of call options relative to put options, a measure of how bullish traders are, has climbed since late September and is close to the peak reached just before the sell-off that month. Previously, activity in single-stock options had surged as a large investor, later reported to be SoftBank Group Corp 9984.T, made significant option purchases in August Source Reuters

Wildfires Bring on Catastrophic Year for Ranchers: As California’s wildfires spread across more than 4 million acres in the state, cattle ranchers have been among the most vulnerable parts of the agriculture industry. The fires have ripped through national forests used for grazing, killing cattle and destroying parts of the 38 million acres of rangeland, more than a third of the state, managed by ranchers. As the Creek and Zogg fires ravage the Sierra and Mendicino national forests, ranchers have struggled to evacuate areas threatened by fire and smoke, with many producers unable to get into evacuation areas to rescue their livestock. Along with power outages also spurred by extreme heat, the wildfires have threatened the world’s fifth-biggest economy. While the losses from California’s cattle industry, which accounts for less than 2% of the total U.S. herd, are unlikely to cause beef shortages across the country or drive up prices, the wildfires have been devastating for ranchers whose cattle have grazed in the forests for decades. Some have lost more than three-quarters of their herds. Source Bloomberg

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