- Main Wall Street indices push higher
- Biden takes lead in Michigan vote count
- ADP jobs report undershoots estimates
10.24am: Banking stocks hit as election uncertainty sends bond yields down
Shares in major US banks have been hit by the ongoing uncertainty surrounding the election result, mostly due to a rush to safe-haven assets such as bonds sending yields of US Treasury’s lower in mid-morning trading in New York.
Shortly after 10am ET, shares in JP Morgan Chase & Co (NYSE:JPM) were 2.2% lower at US$100.9, Bank of America Corp (NYSE:BAC) dropped 2.9% to US$24, Citigroup Inc (NYSE:C) fell 1.1% to US$43 and Wells Fargo & Co (NYSE:WFC) was down 0.7% at US$21.93.
Gold prices have also found themselves on the back foot today, down around 0.64% at US$1,901.93 an ounce, as the failure of a ‘Blue Wave’ Democratic victory snuffed out hopes of a bullish trend.
“The path higher is very much still there, but a strong dollar will continue to be a nuisance. Contested election risks are high and should provide some short-term support for gold. Gold bulls are disappointed, but should not give up, as a divided Congress will force the Fed to do more for much longer”, said OANDA’s Craig Erlam.
Looking to the indices, the Dow Jones had continued to push higher into mid-morning, rising 2.1% to 28,058, while the S&P 500 was up 2.7% at 3,459 and the Nasdaq rose 3.7% to 11,573 shortly before 10.20am ET.
10.15am: Proactive North America headlines:
Valens Company Inc (CVE:VLNS) (OTCQX:VLNCF) (FRA:7LV) wins wholesale licences to sell and supply cannabis-derived medical products in Australia
Tetra Bio-Pharma Inc (TSE:TBP) (OTCQB:TBPMF) (FRA:JAM1) says ARDS-003 has potential to earn $500M in revenue from royalties, upfront payments by 2026
Benchmark Metals Inc (CVE:BNCH) (OTCQX:BNCHF) (FRA:87CA) unveils new mineralized zones at its Lawyers precious metals project in the Golden Triangle
9.40am: Wall Street opens higher as Biden edges ahead in Michigan
As expected, and seemingly despite the electoral uncertainty, the main indices on Wall Street began Wednesday’s session in the green.
Shortly after the opening bell, the Dow Jones Industrial Average rose 1% to 27,756 while the S&P 500 climbed 1.7% to 3,427 and the Nasdaq rose 2.9% to 11,485.
The bullish open on Wall Street came as the true picture of the US election results continued to emerge, with recent data from the Associated Press indicating that Biden may have managed to eke out victory in Wisconsin and has also taken a very slight lead in Michigan, both key Rust Belt states that Trump flipped red in 2016.
Biden campaign thinking:
– They believe they’ve won Wisc, expect it to be called this morning
– Mich vote by mail lead is insurmountable and will be called midday
– Philly vote by mail will come in tonight or tomorrow
– GA result midday or early afternoon
– NV called tomorrow
— Matt Viser (@mviser) November 4, 2020
If the trend continues and both states go for Biden, the former vice-president will need to, at a minimum, secure the six electoral votes from the state of Nevada to win a total of 271, one more than needed to claim victory. Any victories in other states that have yet to be called, Georgia, Pennsylvania and North Carolina, will expand this margin.
8.37am: ADP private sector jobs report falls short of estimates
The latest US ADP jobs data for October has come in much weaker than expected, potentially indicating that the American economy is sputtering in the face of a renewed surge in coronavirus cases.
The data showed the US private sector added 365,000 jobs in October, below the 600,000 estimate and down sharply on the 753,000 added in September.
Midsize businesses were the biggest contributor to the number, adding 135,000 jobs that month, which the services sector dominated in terms of industry, being responsible for 348,000 of the total figure.
The figures are likely to make for grim reading as traders await the crucial non-farm payrolls report on Friday.
Meanwhile, shares in major cannabis firms fell in pre-market trading on Wednesday despite the success of ballot initiatives to legalize the drug in New Jersey, Arizona and South Dakota on Tuesday’s election.
The three states have approved measures to legalize recreational marijuana, while an initiative in Montana is also on track to achieve the same result. Meanwhile, voters in Mississippi have approved a measure to legalize medicinal cannabis.
However, despite these victories major US cannabis firms fell in the pre-market, with Canopy Growth Corp (NYSE:CGC) down 3.8% at US$19.70, while Canadian firm Aphria Inc (NASDAQ:APHA) fell 1.8% to US$4.90 and Aurora Cannabis Inc (NYSE:ACB) dropped 4.5% to US$4.68.
A possible reason behind the negative performance is that initial elections results are indicating that the Democrats, which are seen as more favorable towards federal decriminalization of marijuana, are unlikely to take control of the Senate from the Republicans, meaning any attempts to push legalization laws through Congress are likely to fall flat.
7.48am: Wall Street points to higher start despite election turmoil
While uncertainty reigns as the US continues to tally votes from yesterday’s volatile election, the markets on Wall Street seem set to start Wednesday’s session on the front foot.
The Dow Jones Industrial Average is expected to open 150 points higher at 27,630, the broader-based S&P 500 is tipped to start 22 points firmer at 3,391 while the NASDAQ Composite is expected to kick-off 385 points to the good at 11,556.
Polls heading into yesterday’s vote initially indicated a comfortable win for Joe Biden, however, the results have revealed it to be anything but, with Trump managing to successfully hang on to the key battleground states of Florida and Ohio, dashing hopes for a Biden landslide and leaving the result on a knife-edge.
Trump has also added to the sense of unease by alleging “major fraud” and demanding that ballots stop being counted in key swing states such as Pennsylvania, North Carolina and Georgia, where no result has yet been declared.
Currently, the electoral race could go either way. Depending on what news source you prefer, Biden is either leading Trump by 238 or 225 electoral college votes to 213.
Results lower down the ballot are also indicating a narrowing possibility of the Democrats taking control of the Senate, while Republicans are now expected to pick up a few seats in the House of Representatives.
With Republicans likely to maintain control of the Senate, a risk has now emerged that even if Biden secures victory he will be hamstrung in his policy efforts, making any reform measures or a large stimulus package unlikely to pass muster.
“All of those expecting to see a blue wave sweep for the Democrats, have quickly seen this notion disabused as early results come in, with the Republican vote holding up fairly well, and in areas where you wouldn’t normally expect. The failure of the Democrats to capture the states of Texas and Florida, which they had high hopes of seizing control of, is likely to see the eventual outcome of this 2020 vote go to the wire, as the votes continue to get counted across the US”, said Michael Hewson at CMC Markets.
“Financial markets, which had been hoping for a swift outcome after the uncertainty of the last few weeks are currently taking the failure of the Democrats to open up a clear lead in their stride, however that could change if we don’t start to see a clear outcome by the end of the week”, he added.
As well as voting on the usual political stuff, Californian voters also cast their votes on “Proposition 22”, which essentially allows cab drivers and delivery couriers to be considered as independent contractors rather than employees. The vote was 58% in favor, with the value of the decision demonstrated by the US$58.3mln Uber spent campaigning in favor of it.
The decision relieves Uber of the need to provide unemployment insurance for its Californian drivers.
Five things to watch for on Wednesday:
- Election results from key states will likely dominate market attention should they appear today, with Wisconsin, a must-win state for either candidate, likely to be called soonest as the last remaining votes are tallied, although the result is expected to be extremely close
- Other states still yet to report are Michigan, Pennsylvania, North Carolina, Georgia and Nevada, although conclusive numbers from any of these may take days to appear as ballots are counted
- Away from politics, computing giant Qualcomm Inc (NASDAQ:QCOM) is scheduled to deliver third quarter earnings, while fell tech firm Oracle Corp (NYSE:ORCL) will hold its annual general meeting
- There will also be some action on the macroeconomic calendar, with the lasts US ADP employment data for October. The forecasts are predicting that the US added 590,000 private sector jobs last month, down from 749,000 in September
- The US trade balance for September will also be in focus, with the American trade deficit expected to narrow slightly to US$63.1bn from US$67.1bn in August