October 21, 2021

Dow surges nearly 500 points to set upbeat tone for week, with presidential debate, jobs report ahead

U.S. stock indexes traded higher at midday Monday, kicking off the week on a positive note as investors brace for a period in which the race for the White House and the state of the economy may come into greater clarity.

How are stock indexes performing?

The S&P 500 SPX rose 47 points, or 1.5%, to 3,346. The Nasdaq Composite COMP climbed 121 points, or 1.1%, to 11,035. The Dow Jones Industrial Average DJIA advanced 484 points, or 1.8%, to 27,657.

Last week, the Dow finished down 1.8% and the S&P 500 index booked a 0.6% decline, both marking their longest losing streaks since August of 2019. The Nasdaq Composite Index gained 1.1% for the week, ending its three-week losing skid.

What’s driving the market?

Wall Street got off to a positive start on Monday amid upbeat reports out of China and fresh talk in Washington of a coronavirus stimulus package, a hoped-for development that has been viewed as a key driver of the market’s next bullish phase.

House Speaker Nancy Pelosi over the weekend said there’s a chance that a deal on new aid can be achieved.

“I trust Secretary [Steven] Mnuchin to represent something that can reach a solution, and I believe we come to an agreement,” Pelosi said on CNN’s “State of the Union.” Reports indicated that an aid package could be voted on at the beginning of next month, with Pelosi advocated for a $2.2 trillion deal to help out-of-work Americans and businesses hard hit by the COVID-19 pandemic.

But bargain shopping also could be a potential catalyst for the push higher in stocks, after weeks of consecutive selling in U.S. equities.

“Markets are trying to regain their footing, but with so much election uncertainty looming that may take time,” said James Meyer, chief investment officer for Tower Bridge Advisors.

Investors were bracing for the first televised presidential debates on Tuesday between President Donald Trump and Democratic challenger Joe Biden, which could help to influence the trajectory of the 2020 race for the White House, with Biden leading by 7 percentage points, 49.8 to 42.8, in an average of national polls by RealClearPolitics.

See: What stock-market investors will be watching for in first Trump-Biden debate

Wall Street has largely viewed a Trump second term as a continuation of business-friendly policies, while Biden’s has been read as a higher tax regime for American corporations and tighter regulations.

Investors last week have grown increasingly anxious about the election, with Trump last week implying that he wouldn’t easily hand over power to Biden, citing concerns about mail-in ballots, without providing specific evidence.

A number of deals, including so-called merger of equals between Devon Energy
DVN,
+12.18%

and WPX Energy
WPX,
+16.77%
,
was providing some additional optimism for Wall Street.

Meanwhile, China’s national statistics office said industrial profits surged in August, signaling the world’s second-largest economy was moving past the effects of the coronavirus-induced downturn. 

Separately, rising tensions between China and the U.S., however, continue to simmer, with the fight over TikTok raging. The Trump administration’s ban of the popular social-media platform was overturned by a federal judge over the weekend. The U.S. Commerce Department plans to implement a full ban of the China-based platform on Nov. 12 if a deal for at least the U.S. arm of the operation isn’t consummated.

The unusual deal, given it is being seemingly dictated by governments, has been viewed as a proxy for the state of Sino-American relations.

In public health news, the U.S. reported nearly 37,000 new cases of the novel strain of coronavirus that causes COVID-19, with the world-wide tally approaching one million.

Rising cases of the deadly infection last week, particularly in Europe, were at least partially blamed for the weakness, along with elections worries and a lack stimulus, in the equity market.

“Sentiment has taken a significant hit as a result of surging Covid cases in Europe and the risk of further restrictions, even lockdowns,” wrote Craig Erlam, senior market analyst at Oanda, in a research report. “That risk hasn’t gone away which makes me cautious about these spurts of optimism.”

Investors also will be looking ahead to the key piece of data this week, the update on the monthly U.S. jobs report due on Friday. MarketWatch-polled analysts are penciling in a gain of 810,000 for September, down from 1.37 million in August.

“That optimism will certainly be put to the test this week, with the first US Presidential debate taking place Tuesday evening, jobs report coming Friday,” Erlam wrote.

In other news, investors may be poring over a New York Times report that alleges, citing two decades of tax documents obtained by the paper, that Trump paid just $750 in federal taxes in 2016 and 2017, and nothing in the past 10 of 15 years.

Which stocks are in focus?
  • Devon Energy and WPX Energy said they reached an all-stock merger deal with an enterprise value of $12 billion. Devon Energy was up 2.6%, while shares of WPX Energy were up 4.4%.

  • MobileIron, a mobile security platform serving the work-from-home market, said Monday it will be acquired by Ivanti Inc. in an all-cash deal valued at about $872 million. MobileIron’s shares gained 5%.

  • Amazon.com Inc.
    AMZN,
    +2.08%

    has announced the dates for this year’s Prime Day: Oct. 13 and 14. The e-commerce giant’s stock was up 1.6%.

  • Shares of Inovio Pharmaceuticals Inc.
    INO,
    -28.21%

     were halted in premarket trading on Monday before the company said the Phase 2/3 clinical trial for its COVID-19 vaccine candidate was in a “partial clinical hold” while it answered additional questions from the Food and Drug Administration. The company’s shares tumbled 30%.

  • Cal-Maine Foods Inc. shares
    CALM,
    +2.59%

     rose 21% Monday, after the egg producer posted a smaller-than-expected loss for its fiscal first quarter and sales that topped estimates. 

  • Shares of Uber
    UBER,
    +3.29%

    gained 5% after the ride-hailing app won an appeal allowing it to continue to operate in London, its biggest European market.

  • Shares of Virgin Galactic Holdings Inc.
    SPCE,
    +22.06%

    rocketed 21% after the space tourism company was issued a buy rating by Susquehanna International Group and Bank of America.

How are other markets trading?

The 10-year Treasury note yield
TMUBMUSD10Y,
0.665%

was up a basis point at 0.67%. Bond prices move inversely to yields.

U.S. benchmark crude futures for November delivery
CL.1,
+0.74%

 was trading 26 cents, or 0.7%, higher at $40.50 a barrel on the New York Mercantile Exchange. Gold futures were up 0.6% to $1,878.10 an ounce.

In global equities, the Stoxx Europe 600 index
SXXP,
+2.21%

was up 2.2% and the U.K.’s FTSE 100
UKX,
+1.45%

rose 1.5%. Meanwhile in Asia, Japan’s Nikkei
NIK,
+1.32%

gained 1.3% and Hong Kong’s Hang Seng Index
HSI,
+1.03%

rose 1%.

The ICE U.S. Dollar index
DXY,
-0.39%
,
a gauge of the greenback’s strength, made a sharp swing lower on Monday. The index was trading down 0.4%.

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