US Close – Mixed Session, Ant IPO, Strong durable goods, Soft Consumer Confidence, Microsoft on deck, Commodities rally on softer dollar

The Dow and S&P 500 Index struggled to match the NASDAQ’s M&A momentum and mega-cap earnings optimism gains as stimulus hopes faded until after election and as investors temper ‘blue wave’ optimism.  Tech stocks are riding higher on optimism that Microsoft, Apple, Alphabet, and Amazon will deliver solid results this week.  Industrials sank the S&P 500, following 3M’s tepid outlook and Caterpillar’s abysmal construction sales results and cautious outlook.  On the virus front, France had over 500 deaths, the most since April 22nd and New York City mayor De Blasio advised residents not to travel during the holidays as hospitalizations rise across 36 states.

Wall Street is convinced a ‘blue wave’ will signal massive infrastructure spending but it will also be accompanied with higher taxes, tougher regulation, and eventual inflation that will force the Fed’s hand.  Equity trading seems destined for choppy conditions until Election Day results are clear.

Microsoft

Microsoft continues to be a favorite COVID trade that will likely continue to see strong demand even once the world is on the other side of the virus.  Revenue growth might not be as robust as recent quarters, but it will remain a favorite holding for many.

Ants

Chinese tech giant Ant Group is poised to be the biggest IPO ever.  Demand has been so strong that they were able to close their orderbook in Hong Kong a day early.  The IPO is oversubscribed, with the institutional book closing at 5pm HKT on Wednesday and retail traders book wrapping up on Friday.  The listing is expected to occur on November 5th.   The Ant IPO is a signal from China that they no longer need to rely on US for successful stock market listings.

Data

Durable goods data delivered another impressive gain, boosted by the aircraft component as Boeing had less cancellations.  The Conference Board consumer confidence reading declined as the COVID-19 third wave disrupts the outlook.  The present situation impressed and possibly provides some optimism for next week’s employment number.  All in all the data didn’t matter today.

Oil

Crude prices are rallying as Hurricane Zeta triggers further disruptions to crude output in the Gulf of Mexico and as the dollar slides.  Risk aversion took a break today and that gave oil a chance to stabilize a bit before the lower boundaries of its two-month trading range.

The demand outlook is not going to get a boost anytime soon and energy traders seem prepared for choppy conditions until the virus surge eases in both the Americas and Europe.  WTI crude will likely see strong support in the mid-$30s as OPEC+ and US production will not immediately bring back oversupply concerns.

Gold

Short-term risks are making gold once again very attractive:  The coronavirus surge in the Europe will put added pressure on both central banks and government to become more acommodative. The race for a vaccines and treatments to fight COVID-19 could see some setbacks before we get a couple of green lights.  Lastly, Election Day might not have a clear picture of who holds a majority in the Senate until much later, thus providing huge uncertainty on the prospects of how big stimulus will be in 2021.

Gold will ultimately benefit the most from fresh stimulus, but it should also attract safe-haven flows over the next week.

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