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Stocks Climb, on Course for Best Week Since August

By Joe Wallace 

U.S. stocks edged higher Friday, putting the S&P 500 on track for its biggest weekly advance since late August as investors welcomed signs pointing to a decisive result in next month's presidential election.

The S&P 500 ticked up 0.6%, looking to notch its second straight week of gains. The Nasdaq Composite also edged up, gaining 0.7%, after the technology-heavy index closed Thursday at its highest level since early September.

The Dow Jones Industrial Average rose 150 points, or 0.5%.

There are now just 25 days before the U.S. election, and traders had for weeks been building up hedges and trades signaling they expected a particularly volatile period around the vote -- including the potential of a delayed outcome.

Now, former Vice President Joe Biden's increasing lead in opinion polls is seen as reducing the chances of protracted uncertainty after Election Day, according to Sophie Huynh, cross-asset strategist at Société Générale. That has prompted some investors who had been waiting until after the election to buy shares in sectors that depend on strong economic growth to act now, she said.

Mr. Biden's poll lead "has removed one source of uncertainty and raised the specter of a more routine transfer of power," said Candice Bangsund, vice president and portfolio manager at Fiera Capital. "That's providing investors with a little bit of solace heading into November."

Sentiment in the market has also been boosted this week by signs that Congressional leaders and White House officials are trying to bridge differences over a new batch of spending measures to help airlines, small businesses and households. House Speaker Nancy Pelosi said Democrats would be willing to move forward with support for airlines, but only if it goes hand-in-hand with talks for a deal to deliver broader relief.

Though few investors or lawmakers think sweeping measures will be introduced before the Nov. 3 election, the resumption of talks fueled optimism that spending targeted at certain sectors of the economy may be forthcoming. Many money managers say extra unemployment benefits that lapsed in August should be renewed to support consumer spending as coronavirus cases climb.

"For the market to move higher, we need to see further stimulus in the U.S., to ensure that the recovery that is still ongoing can be at least smoothed over," said Brian O'Reilly, head of market strategy at Mediolanum International Funds.

Still, he himself remains skeptical. "The market is probably overly optimistic at this stage that they're going to get some deal."

The U.S. reported more than 56,000 new coronavirus cases on Thursday, the highest daily total since mid-August. Fresh data have shown that the recovery in the labor market is slow and halting, with more businesses making layoffs permanent. Federal Reserve Chairman Jerome Powell said this week that there could be potentially tragic economic consequences if the government doesn't intercede.

Shares in sectors that are highly sensitive to economic growth have driven the week's gains, one sign of increasing confidence that new stimulus measures will arrive. Energy and materials companies' stocks have jumped, after trailing technology stocks for most of 2020.

In individual moves, Advanced Micro Devices slid 2.9% after The Wall Street Journal reported that the company is in talks to buy rival chip maker Xilinx. The deal could be valued at more than $30 billion and mark the latest tie-up in the rapidly consolidating semiconductor industry. Xilinx shares rose 16%.

In bond markets, the yield on 10-year U.S. Treasury notes ticked up to 0.781%, from 0.764% Thursday. The WSJ Dollar Index, which tracks the U.S. currency against a basket of others, slipped 0.5%, putting it on course for a third consecutive day of declines.

Other international markets broadly advanced, led by shares in China, where trading reopened after a holiday and a private gauge showed services activity accelerated in September. The Caixin China services purchasing managers index rose for a fifth straight month above the 50 mark that separates expansion and contraction. The Shanghai Composite Index jumped 1.7%.

Oil prices edged lower as traders tracked the progress of Hurricane Delta, which has brought offshore production in the Gulf of Mexico to a near standstill. U.S. crude futures dropped 0.4% to $41.03 a barrel. That still leaves them on course for their biggest one-week advance since June.

Jem Bartholomew contributed to this article.

Write to Joe Wallace at Joe.Wallace@wsj.com

 

(END) Dow Jones Newswires

October 09, 2020 10:18 ET (14:18 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.