The Dow led as stocks angled higher Monday, after a dose of solid October manufacturing data helped feed a rally of ahead of Tuesday’s U.S. presidential election. Earnings news sent CDW and Nielsen Holdings soaring in early trade. Analyst actions put Honeywell at the top of the Dow Jones today.
The Dow Jones Industrial Average and S&P 500 quickly came off their opening highs to trade 1.1% higher on the stock market today. The Nasdaq notched a 1% gain, with CDWCDW and Idexx LabsIDXX leading the Nasdaq 100.
Growth stocks and China-based names were active in early trade. IBD Leaderboard listings PayPal Holdings (PYPL) and Palantir Technologies (PLTR) each rose more than 2%. China-based Alibaba Group (BABA) and JD.com (JD), also on the Leaderboard list, about 1% each.
Alibaba ended Friday in a buy range from 299.10 entry. JD.com is below an 85.49 buy point.
Gear up for the week’s market action by reading IBD’s Investing Action Plan.
Market In Correction
The market’s status shifted to a ‘In correction” on Friday, and there were some early warning signs amid Monday’s early gains. Cruise lines took the hardest early hits among S&P 500 stocks, led by Norwegian Cruise Lines Holdings (NCLH). Shares slumped 5.9% after the company extended its suspensions on all cruises through December.
Oil prices dropped, which is unusual following strong manufacturing data out of China. West Texas Intermediate dropped 1.6%, to just above $35 a barrel. That is back near last week’s low, which was its lowest level since June. Oil producers logged many of the worst early declines on the S&P 500.
Although there were stocks rising near buy points on Monday, investors should keep exposure limited for now. 100% cash would certainly be acceptable.
China Electric Automakers Rally
China-based makers of electric autos rallied early, after strong October delivers data. U.S. traded shares of Nio (NIO) bolted 14% higher after the Shanghai-based automaker reported delivering 5,055 vehicles in October. That was a year-over -year increase of 100%. Year-to-date deliveries also more than doubled, up 111%, to 41.430 vehicles. Shares of Guangzhou-based Xpeng Motors (XPEV) also rallied 14% in opening trade. The company reported deliveries up 229% year-over-year to 3.040 vehicles. Shares of Nio were extended on Friday. Xpeng was well below a potential buy point in a nine-week base.
Dow Jones Today: Nike, Intel, Honeywell Rise
On the Dow Jones today, almost half of the index’s 30 issues were up more than 1% in early trade. Honeywell (HON) topped the list, upo 2.6% as four analysts give the stock price hikes following the company’s third-quarter report on Friday.
ProIntel (INTC) lodged a 1.5% gain, as Northland upgraded shares to outperform, from underperform, based on the potential breakup value of units including Mobileye and Altera.
Nike (NKE) climbed 2%, while Microsoft (MSFT) added 0.7% and Apple (APPL) tacked on a 0.2% gain. Nike dropped 7.6% last week to a test of support at its 10-week moving average. It remained extended almost 15% following a mid-August breakout.
U.S. Manufacturing Outpaces In October
A heavy week of economic news includes a Federal Reserve meeting and a critical October payrolls report. Earnings season rolls toward its peak with wireless chipmakers, back-office software leaders and mobile payments brands all due to report.
Researcher Markit said rates of output and new order growth helped drive U.S. manufacturing slightly ahead of expectations in October. Markit’s U.S. Manufacturing PMI came in at 53.4, up from 53.1 in September and vs. views for 53.3.
The manufacturing purchasing managers index from the Institute for Supply Management is due at 10 a.m. ET. September construction spending numbers from the Commerce Department are also set for release at 10 a.m. ET.
Coronavirus Stocks: Humanigen, BioNTech Jump
Biotech Humanigen (HGEN) jetted8.7% higher after announcing its lenzilumab was used as a coronavirus treatment by MedStar Washington Hospital Center in Washington, D.C. The phase 3 trial will attempt to determine whether the drug, designed to treat a immune hyper-response called “cytokine storm,” can improve outcomes for Covid-19 patients.
Germany-based biotech BioNTech (BNTX) popped 2.9% in premarket action. A coronavirus vaccine candidate jointly developed by BioNTech and Pfizer (PFE) is undergoing clinical trials. BioNTech shares ended Friday below a 97.39 buy point in a cup-with-handle base, according to IBD MarketSmith chart analysis.
Zoom Video Communications (ZM) jumped 1.5%, setting up a possible rebound from 10-week support.
U.S. Coronavirus Update: New Cases, Testing Increase
In the U.S., the seven-day average for new coronavirus cases rose from a low of 36,000 per day in mid-September, to nearly 83,000 on Sunday. That 130% increase put new cases well above the prior high of just below 70,000 in July. Testing has also increased steadily during that period, with the 10-day average of tests administered in the U.S. rising almost 75% from mid-September to the end of October, with a daily average of 1.237 million tests administered in the 10-days through Sunday.
Virus-related deaths in the U.S. began to trend mildly higher in mid-October, but continue to track well below prior highs. The seven-day average of deaths reported across the U.S. rose from 704 on Oct. 17 to an average of 851 for the seven days through Sunday. The seven-day average had hit a high of around 1,200 in early August, after peaking above 2,200 deaths per day in April.
Dow Jones Today: Eyeing A Bounce
October came to an appropriately ghoulish end for the market on Friday, with the Dow, Nasdaq and S&P 500 all registering their the worst weeks since the coronavirus market crash in March.
Performance for the month was much less horrific, with the Nasdaq slipping 2.3%, the S&P 500 down 2.8% and the Dow posting a 4.6% decline. Markets have tended to lose ground in the past eight pre-election Octobers. The Dow’s loss for the month was much worse than its average decline of 1.5% over pre-election months since 1988. The Nasdaq’s October loss was much better than its 3.2% average pre-election decline. The S&P 500’s drop was worse than its average October slip of 1.8%.
Futures for the Dow Jones today were leading an early rebound from Friday’s lows. That is in character, as the Dow has tended to rise in election-year Novembers, regardless of which party takes the White House. Since 1988, the Dow has gained an average 0.7% in Novembers following the election of Republican presidents. The index has climbed 1.3%, on average, following Democratic victories.
November: Post-Election Averages
Post-election performances from the Nasdaq and S&P 500 have been more mixed. The S&P 500 has gained an average 0.8% in Novembers after Democrats win the White House. It has lost an average of 0.7% in years when Republicans succeed. The Nasdaq has gained an average 0.3% in Novembers following Democrat presidential wins, and lost an average 4.3% for the months following Republican victories.
Those averages include steep losses following George Bush’s hotly contested win during the market crash in 2000 (Nasdaq -22.9%). The averages also include the market sell-off that was already in motion when Barack Obama won his first presidential term in 2008 (Nasdaq -10.8%).
For more detailed analysis of the current stock market and its status, study the Big Picture.
The largest November rally among the top three benchmarks following a presidential election during that period was the Dow’s 8.2% advance after Bill Clinton was elected to a second term in 1996. The Nasdaq’s strongest post-election November advance was a 7.9% gain in 1992, on the heels of Clinton’s first election win.
Yardeni Research points out that many investors fear the current election could lead to a”Blue Wave,” giving the Democrats control of the House, Senate and the White House. A look at market performance during periods in which previous Blue Waves left Democrats with such broad control, shows the S&P 500 increased 56% on average. During the previous three Republican Red Waves, the index rose 35% on average. During the seven periods of divided government, the S&P 500 rose 60% on average.
As for total market performance over presidential terms, CFRA Research’s Sam Stovall reports the S&P 500 posted the highest compound annual growth rates under Presidents Clinton (+16.5%), Trump (+11.24% through Oct. 30), and Bush-41 (+11.19%). The weakest performances occurred under Presidents Carter (+5.8%), Nixon (-4.0%), and Bush-43 (-4.3%).
Find Alan R. Elliott on Twitter @IBD_Aelliott
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