The market’s tumbling again this morning as investors digest a tough week of losses. Big Tech earnings revealed last evening did little to quell Covid-19-related fears.
In particular, uncertainty over Q4 guidance had bulls feeling less confident. And with Election Day quickly approaching, it seems almost anything could happen between now and then.
It’s not overly surprising to see traders taking profits as a result.
What did come as somewhat of a shock, however, was the weak response to earnings “beats” from Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), and Facebook (NASDAQ: FB).
AMZN shares are down more than 4% today despite a massive quarter from the e-commerce giant. Earnings per share (EPS) measured a staggering $12.37 vs. $7.41 expected. Revenue impressed, too, clocking in at $96.15 billion vs. $92.7 billion expected.
The only company to see a boost was Google-parent Alphabet (NASDAQ: GOOG), which is trading 4.20% higher as of noon. Much like its Big Tech peers, GOOG also surpassed analyst estimates.
But unlike those other stocks, GOOG is actually enjoying a strong post-earnings trading session.
Overall, though, the rest of the market has struggled due to a resurgence in Covid-19 infections.
“Massive policy stimulus, positive medical developments and high hopes for a return to pre-pandemic economic activity levels have provided a solid boost to equity markets,” wrote MRB Partners strategists in a note.
“However, mounting new economic restrictions, particularly in Europe, despite being forecastable and in lagged response to the re-acceleration in COVID-19 infections, only caught investors’ attention this week, triggering sharp losses.”
Making matters worse is a complete lack of pre-election stimulus. Earlier this week, Senate Majority Leader Mitch McConnell adjourned the Senate until November 9th. That sinks the chances of a new relief package to near-zero before Election Day.
Treasury Secretary Steven Mnuchin didn’t ease tensions, either, when he accused House Speaker Nancy Pelosi of conducting a “political stunt” by stalling negotiations intentionally.
If Pelosi meant to make President Trump look bad, she may have succeeded. Or, it just as easily could have hurt her party’s image with strapped-for-cash voters – the same folks that might see the maneuver as a Democratic betrayal during the general election.
Most investors assume at this point that stimulus will eventually come. But how big it will be, and how quickly it arrives are topics that remain up for debate.
“[Q3’s GDP growth] mask[s] the reality that 23 million Americans remain on unemployment and tens of thousands of small businesses have already gone under,” said Senate Minority Leader Chuck Schumer, following yesterday’s better-than-expected GDP reveal.
“Our nation still has a long way to go before we overcome this public health crisis and our economy fully recovers. Much more needs to be done.”
Ironically, Schumer, Pelosi, & Co. could’ve had a deal weeks ago if they were willing to budge on “no-go” issues for Republicans.
Instead, the proposed relief package languishes in Washington.
So too will the market until a deal gets done. The upcoming election will certainly provide some short-term fireworks, but longer-term, stimulus should make a bigger impact.
And, depending on who wins come November 3rd, the size of the stimulus package – and the magnitude of the ensuing rally – could vary greatly.
