The S&P 500 and the Dow opened flat on Friday after a sharp rally this week, as Democrat Joe Biden took the lead in the key states of Pennsylvania and Georgia, putting him on the verge of winning the White House.
The Dow Jones Industrial Average rose 8.95 points, or 0.03%, at the open to 28,399.13, while the S&P 500 opened lower by 2.11 points, or 0.06%, at 3,508.34.
The Nasdaq Composite dropped 21.03 points, or 0.18%, to 11,869.90 at the opening bell.
The TSX was modestly in positive territory, getting a boost from a trio of dividend stocks that reported earnings that largely surpassed analyst expectations. Magna International, Enbridge and Telus are all higher in early trading.
The U.S. reported a slightly higher than expected job count for October but it was still the fewest hired in five months. Canadian net job gains during the month were a little below Street forecasts.
Stocks have risen every day this week leading to today’s session, in one of the biggest advances in U.S. stocks since early this spring and erasing most losses suffered from the big equity drops of last week.
The return to a negative trading tone this morning wasn’t accounted to any one factor, and was more seen as profit-taking in a still highly uncertain political and economic backdrop that has surging coronavirus cases persisting and the undecided U.S. election at the forefront of market players' attention.
“It’s not that the market is expecting something dramatic to happen, but just de-risking after a strong performance,” said Ingo Schachel, head of equity research at Commerzbank in Germany.
Matt Sherwood, head of investment strategy at Perpetual in Sydney, said markets had already moved to price in a Biden presidency and a divided Congress.
“We can get all of the good things about a Biden presidency, such as stable leadership and foreign policy, without any of the bad things from the far Left of his party, such as taxation,” he said.
But economist David Rosenberg is cautioning this morning about the positive market reaction so far this week following the U.S. election results. “The initial market reaction to an election result typically is not the one that proves enduring. In other words — the initial response is just plain wrong and to be faded, in either direction,” he said in a note today. “This ‘heads I win, tails I win’ backdrop has as much chance at being successful as Donald Trump’s legal challenges (I attach zero odds that the courts will put themselves into position to determine the outcome...and even Fox News has treated Mr. Trump’s fraud claims with a huge dose of skepticism).”
Technology mega-caps including Apple Inc, Amazon.com Inc, Facebook Inc and Alphabet Inc fell about a percent in premarket trading after logging strong gains this week.
While market participants still widely expect a fiscal stimulus package after the election, the size of a deal reached in a divided Congress is likely to be much smaller than it would be under a Democrat-led Congress. That could pressure the Federal Reserve to ease monetary policy further, analysts said.
The central bank on Thursday kept its loose monetary policy intact and again pledged to do whatever it can to sustain an economy crippled by the COVID-19 pandemic.
Biden had a 253 to 214 lead in the state-by-state Electoral College vote that determines the winner, according to most major television networks, putting him closer to the 270 Electoral College votes needed to win.
In Pennsylvania, which has 20 electoral votes, Biden cut Trump’s lead to just over 18,000 by the early hours of Friday. His deficit in Georgia, which has 16 electoral votes, shrunk to about 450.
MSCI’s all-country index of the world’s 49 markets was flat after gains earlier in the week, still close to the record reached in September.
Europe’s main stock index with down 0.6% this morning, with investor sentiment dimmed by the economic toll of new lockdowns in Europe to contain the coronavirus. Italy and France registered record numbers of COVID-19 cases.
Japan’s Nikkei average rose 0.9% to a 29-year high while MSCI’s broadest gauge of Asian Pacific shares outside Japan rose 0.3%, near a three-year high..
Cannabis-related stocks, which have been identified by analysts as potential winners under a Biden administration, were among the rare gainers in early premarket trading. Canopy Growth shares were up more than 7% in early trading.
Equities
Commodities
Oil fell well below US$40 a barrel on Friday as new lockdowns in Europe to halt surging COVID-19 infections sparked concern about the outlook for demand, while markets remained on edge over drawn-out vote counting in the U.S. election.
Gold is at a six-month high, continuing to benefit from a weaker greenback and safe-haven flows.
Currencies and bonds
Despite the weakness in equities, U.S. Treasuries are slightly softer this morning. The U.S. dollar is also lower at near two-year lows. The loonie is modestly softer, with a drop in oil prices not helping, after having a strong week.
Other corporate news
Canadian auto parts maker Magna International Inc posted a better-than-expected quarterly profit on Friday, as its key customers ramped up production to meet recovering demand for new cars in Europe, China and the United States. Shares are up almost 3% in the premarket.
Canadian telecoms company Telus Corp said on Friday it will buy data service provider Lionbridge AI in a C$1.2 billion ($918.55 million) deal. The telecom also released quarterly results that appeared to beat analyst expectations on revenue, but come up short on profits. The company also hiked its dividend. U.S.-listed shares are up nearly 2% in the premarket.
Canada’s largest pipeline operator Enbridge Inc reported a 14.5% fall in quarterly adjusted profit on Friday, as it moved lower volumes of crude on its mainline system due to a coronavirus-led slump in demand. That drop in earnings appeared priced into the stock, however, as U.S.-listed shares of Enbridge were up 2% in premarket trading. Excluding items, the company earned 48 Canadian cents per share, compared with 56 Canadian cents per share last year.
Economic news
U.S. employers hired the fewest workers in five months in October, offering the clearest evidence yet that the end of fiscal stimulus and exploding new COVID-19 infections were sapping momentum from the economic recovery. Nonfarm payrolls increased by 638,000 jobs last month after rising by 672,000 in September, the Labor Department said in its closely watched employment report on Friday. That was the smallest gain since the jobs recovery started in May and left employment still well below its peak in February. The unemployment rate fell to 6.9% from 7.9% in September. Economists polled by Reuters had forecast payrolls advancing by 600,000 jobs in October and the jobless rate dipping to 7.7%.
Canada added 83,600 jobs in October, less than markets had anticipated, and the unemployment rate dipped to 8.9%, Statistics Canada data indicated on Friday. Analysts in a Reuters poll had predicted a gain of 100,000 jobs and for the unemployment rate to fall to 8.8% from 9.0%.
(10 a.m. ET) U.S. wholesale inventories for September. Estimate is a decline of 0.1 per cent from August.
With files from Reuters
Darcy Keith