Dow Jones futures rose slightly late Monday, along with S&P 500 futures and Nasdaq futures. With a stock market correction in force, a new stock market rally attempt is underway on the eve of Election 2020, with the latest IBD/TIPP Trump vs. Biden poll showing a tighter race.
PayPal stock, SolarEdge Technologies (SEDG), Freshpet (FRPT), Jazz Pharmaceuticals (JAZZ) and Apple (AAPL) iPhone suppliers Skyworks Solutions (SWKS) and Cirrus Logic (CRUS) reported earnings after the close.
Stock Market Rally Attempt: Day One
Despite some Nasdaq wobbles, Monday’s stock market action was fine just ahead of Election Day. This marks day one of a stock market rally attempt. For now it’s still a stock market correction. Investors should remain largely on the sidelines for now, waiting for a follow-through day to confirm a market rally.
Dow Jones giants Apple stock and Microsoft (MSFT) edged lower, paring intraday losses of around 1%. Amazon.com (AMZN) fell 1%, but off its worst levels. Zoom Video (ZM) fell 1.7% to just above its 50-day line, extending a recent retreat for many stay-at-home plays despite soaring coronavirus cases.
Microsoft stock is on IBD Leaderboard. Taiwan Semiconductor stock is on SwingTrader. Microsoft and PayPal are on IBD Long-Term Leaders list. Amazon, PayPal, Teradyne, Taiwan Semiconductor are on the IBD 50 list.
Preelection Stock Market
With the stock market in a correction as of Friday’s close, one good day isn’t going to signal a new uptrend. Coming on the cusp of elections, it’s hard to take any meaning from Monday’s stock market action, or Tuesday’s.
Election 2020 outcomes are still unclear. While Joe Biden holds a narrow lead in the latest IBD/TIPP Trump vs. Biden poll, President Donald Trump could still pull out a win. Meanwhile, the Senate’s fate is even less clear, with several too-close-to-call races. So Election 2020 uncertainty could last beyond Tuesday, perhaps even into 2021.
Dow Jones Futures Today
Dow Jones futures rose 0.4% vs. fair value. S&P 500 futures climbed 0.4% and Nasdaq 100 futures advanced 0.35%. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 47.31 million. Covid-19 deaths topped 1.21 million.
Coronavirus cases in the U.S. have hit 9.56 million, with deaths above 236,000.
Stock Market Correction Today
U.S. Stock Market Today Overview
Last Update: 4:06 PM ET 11/2/2020
The stock market correction came into force after Friday’s close, as the major indexes capped their worst weekly losses since March.
On Monday, a new stock market rally began, fueled by strong manufacturing data from the U.S. and China.
The Dow Jones Industrial Average gained 1.6% in Monday’s stock market trading. The S&P 500 index rose 1.2%. The Nasdaq composite rallied late to close up 0.4% after going negative for much of the afternoon. The big-cap Nasdaq 100, home to the likes of Apple, Amazon, Facebook, Microsoft and Zoom Video, edged up 0.2%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) climbed 0.8%. The iShares Expanded Tech-Software Sector ETF (IGV) sank 0.65%, with Microsoft stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) rose 0.8%, helped by Taiwan Semiconductor stock.
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Key Earnings Reports
PayPal (PYPL) earnings and revenue beat views, but it guided low on Q4 profit and gave no 2021 forecasts. PYPL stock sank 65% overnight after breaking below its 50-day line last week.
SEDG stock tumbled 17% in extended trade as SolarEdge reported better-than-expected earnings but missed on revenue. SolarEdge stock, part of the No. 1-rated Energy-Solar group, is set to tumble below its 50-day line and perhaps test a prior 229.59 buy point.
Jazz Pharma earnings and sales beat. JAZZ stock jumped 8% after closing in buy range, just above its 10-week line. Shares could clear a short consolidation to hit a two-year high.
Freshpet earnings were in line while revenue topped. FRPT stock, which closed slightly in buy range, fell 7% overnight. That signals a move below the buy point to near its 10-week line.
Cirrus Logic stock leapt 8% on strong earnings and guidance, as well as a new CEO. Fellow Apple chipmaker Skyworks also easily beat views and gave a bullish outlook. Shares fell a fraction. Last week, Apple reported a bigger-than-expected decline in iPhone revenue, as buyers waited for the new 5G handsets.
Election Night 2020 Scenarios
The latest IBD/TIPP Trump vs. Biden poll shows Biden up by 3.2 points, 48.8%-45.6%. But that suggests anything is possible from an easy Biden win to a narrow Electoral College victory for Trump.
Joe Biden Wins On Election Night
Joe Biden wins Florida, North Carolina or other must-win states for Trump on Election Night, making it essentially impossible for Donald Trump to win reelection. Biden is declared winner before the stock market open Wednesday, or is all but certain to be the victor.
2020 Election Outcome Unclear
Mail-in voting and other unique aspects to Election 2020 could delay counting all the votes for several days or weeks. So the winner may not be known in several states for several days.
This could range from a scenario in which Biden is likely to win to a situation in which several states are truly up for grabs Wednesday morning, making a Trump Electoral College win possible.
This could be resolved quickly as final votes are counted in a day or two or three, but it could mean several weeks of fighting over whether or not to count certain ballots.
All of that could affect stock market action, especially in the short run.
Trump Wins On Election Night
This seems the most unlikely given the current polls and likely late vote counting in several key states. If Trump significantly outperforms the polls, especially in key swing states, he could pull off another narrow Electoral College upset on Election night, or at least appear to be the prohibitive favorite.
Senate Control In Election 2020
Republicans are expected to lose some seats, with Democrats seen as slight favorites to regain control of the Senate. But there are several close contests.
Dems Win Senate On Election Night
A blue wave pushes several Democrats into the Senate, likely giving Democrats full control of Washington.
GOP Holds Senate On Election Night
It’s less likely that the GOP holds the Senate on Election Night, in part due to Georgia, but a strong showing could preserve a narrow GOP majority.
Senate Races Undecided, Georgia Recounts
There may be several races too close to call on Election Night. It’s possible that when the votes are counted there will be calls for recounts in one or more races.
Even when the Election 2020 outcome is clear in all the Senate contests, Senate control may still not be.
In Georgia, the winner must get at least 50% +1 vote. Thanks to a special election, Georgia has two Senate seats in play. At least one and quite possibly both will go to a runoff in early January. Depending on the outcome of other races, those runoffs could determine whether there is a Democratic or Republican majority, or if there is a tie.
There’s also a big difference between Democrats holding 52-53 Senate seats or 50-51, especially if Biden is president. Sweeping policy changes would be much harder in the latter scenario.
Election 2020 Results And The Stock Market
There’s a good chance there will be considerable Election 2020 uncertainty when the stock market opens on Wednesday. We don’t know how Wall Street will react to the election results, clear or otherwise.
You might think a Trump or Biden victory in 2020 would be bad, or that divided government is good. But while your vote counts, your opinion doesn’t on Wall Street.
Conventional wisdom before the 2016 election said stocks would sell off on a Donald Trump victory. Dow Jones futures did plunge on Election Night as a Trump win became likely, but stocks rallied in the next day’s regular session and for the next several weeks. Even if you could predict the election 2020 outcome, that doesn’t mean you’d know how the stock market would respond in the short or long term.
Also, there could be a “buy the rumor, sell the news” reaction. Solar stocks such as SolarEdge have rallied in part on expectations of a Biden presidency pushing new green energy policies. But even if Biden wins, that could still spur profit-taking.
Wait For A Winning Stock Market Rally
So while Election 2020 is finally here, don’t cast your stock market ballot early. For now, refine your watchlists of leading stock candidates. Look for stocks with high relative strength, focusing on those near buy points such as JD.com and Taiwan Semiconductor.
Wait until a stock market rally is a confirmed winner.
The final IBD/TIPP Trump vs. Biden poll will be released at 9 a.m. ET.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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