The market reaction this week was notably positive, with the S&P 500 posting gains of over 1% four days in a row, Monday through Thursday, propelling the weekly gain to be the biggest since April.
Along with the weekly jobless claims this week, the unemployment rate was updated, and ADP employment data came out. On the positive side, October’s unemployment rate fell 1% to 6.9%, beating expectations of a 0.3% improvement. Nonfarm payrolls increased 638K to drive that number, and the components of the report were positive as well, with participation rate and working hours both improving. On the flip side, ADP employment data came in notably under expectations (365K vs. 643K) in October, while initial unemployment claims remained steady from the week prior at 751K in the last week in October.
Hard and soft economic data improved a bit as well with survey (“soft”) data in the ISM and Markit Manufacturing indices both staying in solidly expansionary territory (59.3 and 53.4, respectively, numbers above 50 indicate expansion). Factory orders improved 1.1% (vs. 0.6% the month prior), and inventories unexpectedly increased 0.4%, beating expectations of a slight decline while being the second month in a row of a positive inventory build and only the 3rd month in 2020 with a positive reading.
Eyes were focused on the dramatic election this week as votes continue to be counted, likely into the weekend. As of this writing, Biden may have secured enough electoral votes from his lead in PA, which prompted Decision Desk HQ to call Biden’s race. If that call holds, Biden looks to have a divided Congress with Democrats maintaining the House and Republicans in the Senate. However, plenty of ink and money will be spent in both Georgia Senate races, which appear to be heading to a runoff, which will decide if Republicans can get over 50 seats in the Senate.
As expected, the Fed kept rates unchanged in the FOMC meeting that concluded this week.