E-mini S&P 500 (December): Settled at 3393.50, down 58.50
E-mini Nasdaq-100 (December): Settled at 11,492.25, down 171.25
U.S. benchmarks are stable and edging higher ahead of the bell. Although risk-assets remain vulnerable, yesterday’s bludgeoning did not finish at its worst, and this opens the door for repair. It is easy to point to Washington’s inability to pass a Coronavirus Aid bill as the main catalyst; however, we never expected the added stimulus before the election. Furthermore, if it were passed, our fear was it would underwhelm the market. Whereas the impasse certainly played a role, we look to SAP’s earnings, Chinese sanctions, and the virus resurgence as equal catalysts in piercing support and opening the door to pent up selling ahead of the election at a technical air pocket.
Software’s resilience through the pandemic has given it an indestructible notion, and this was a chink in the armor. SAP lost 23% yesterday, Salesforce lost 3.4% but was down as much as 5%, and IGV, the iShares Tech-Software ETF, lost 2.5%. Yesterday, Salesforce CEO Benioff called SAP’s troubles “unique to them.” He criticized their cloud execution and blamed a CEO shuffle as the root of their problems. Salesforce is up about 1% ahead of the bell.
Yesterday’s board was a sea of red, but Industrials next to Energy was the worst performer. Yesterday, we noted that China said it would impose sanctions on Boeing’s defense unit, Lockheed Martin and Raytheon after the U.S. approved arms sales to Taiwan. Those names were down 3.9%, 1.5%, and 2.8% respectively.
Energy and Materials together were the most beaten-down sectors. As Covid-19 cases hit record numbers in the U.S. and Europe, restrictions and lockdowns have expanded. This is a direct hit on demand forecasts and at a time where the wind was already being sucked out of the sails upon deadlock in Washington.
Lastly, Treasuries rose with safe-havens in demand. Lower yields and broad fears weighed on Financials, which lost a composite 2.2%. Although every sector finished lower yesterday, it is important to note that some of the leadership did not; Apple +0.01% and Amazon +0.08%.
In conclusion, traders should continue to have nothing but a cautious near and intermediate-term outlook. Patience heading into the election will open the door to buying at better levels or after a more solidified bullish confirmation.
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