Published: October 22nd, 2020
Investor spirit was pumped up on Friday, October 16, after the latest government data indicated that retail sales have surged past the forecast. Consumer spending, which drives U.S. growth is climbing once again.
The key stock indexes in the U.S. opened for trading on Friday, October 16, in the green on the backdrop of stronger-than-forecasted retail sales data for September. Coupled with vaccine hopes after pharmaceutical giant Pfizer disclosed it may apply for approval for its COVID-19 vaccine, at least for emergency use by late November, the markets could not resist a surge.
The Dow Jones Industrial Average was up more than 165 points or a 0.58% increase just moments into the New York trading session to record 28,659.41 points. Overall, the index managed a whopping 300 points by the end of the day. The S&P 500, which mainly gauges the country’s college savings and retirement reports, gained 0.44%, while the tech-leaning Nasdaq Composite index was up 0.65%.
Meanwhile, investors keep weighing the possibility of a Democratic victory on November 3. If the blue party’s nominee, Joe Biden, carries the White House, and Democrats gain and retain control of the Senate, and the Congress, respectively, then chances of seeing Biden’s ambitious spending plans will increase several folds. Such a scenario would inject a massive, much-needed stimulus into the economy.
Despite the hopeful sentiment, negotiations between Democrats in Congress and the Trump administration on a new round of coronavirus stimulus for struggling U.S. households and businesses remain in doubt. House Speaker, Nancy Pelosi, had urged the Secretary of the Treasury, Steven Mnuchin, to aim at reaching a deal before the end of Tuesday, October 20, if the package is to be available before elections.
Trump signaled that he is considering a package steeper than the $1.8 trillion offer that his administration dangled in front of the Democrats. Meanwhile, Pelosi and Mnuchin have made headway in their latest round of talks on Tuesday, October 20.
A source close to the negotiations said the two have narrowed their differences. The house speaker even went further to direct House committee chairs to put more effort into resolving the contentious issues with the White House. This progress came even as Senate majority leader, Mitch McConnell, cast doubts on a massive pre-Election Day deal.
Investors matched into the Friday, October 16, uplifted by the positive news on the status of the economy. Newly released data show that the country’s retail sales increased by 1.9% in September, the first time the data has surpassed expectations since June.
The information signals that consumer spending, the key driver of the U.S. economy, is accelerating once again. The initial market forecast had suggested that retail sales would go up by 0.7%. The impressive figures gave the markets a great footing to conclude trading on a high.
However, the effects of the good news were not limited to the stock markets alone. Both the euro and the pound rose. The pound’s rise was also compounded by Great Britain’s preparation for No Deal.
The euro managed impressive gains despite coronavirus struggles. With most countries including major economies in the European bloc seeing a spike in coronavirus numbers, it is a strange time for the bloc’s currency to turn around. However, the hope of a vaccine and the massive migration from the dollar seems to have given the euro a shot in the arm.
Market insiders say that it is not surprising that investors are moving away from the greenback. The good news from the American economy courtesy of the retail sales data is sending spending straight to the riskier assets, one market analyst said.
The renewed hopes were boosted by Pfizer, a leading giant pharma, and the first entity in the drugs industry, saying with certainty when a coronavirus vaccine could be available. While the news is positive for the markets, the company reiterated that they will not seek the approval of the Food and Drug Administration of the U.S. (FDA’s) until after the elections.
Meanwhile, governments all over the world and especially in Europe, are scrambling desperately to avoid the spread of the virus from what seems like the eruption of a second wave. Besides, the fight also aims at avoiding complete lockdowns and the economic downfall that such actions may cause.
Some of the stocks that turned heads on Friday, October 16, include Pfizer, which rose by 1.85%, and Boeing Co.’s shares that spiked almost 4%. The former’s fate was boosted by the news that it may apply for an emergency use authorization for its vaccine candidate by mid-November. Boeing’s shares, on the other hand, surged after reports reached the market that Europe’s aviation authority has allowed 737 MAX to fly once again.
However, not all shares were on an upward trajectory. Shares of Gilead Sciences Inc. shed 0.33% as Schlumberger shares lost 5.63%.
It has been a while since the markets agreed unanimously on the positive trends of the pound. That changed on Friday, October 16, when the English currency benefitted from the improved, risk-on market mood that began with the positive retails data from the U.S.
The positivity pushed by the U.S. numbers pushed the pound above $1.29 despite the disturbing news for the greater British economy about the ongoing Brexit trade negotiations. The country’s prime minister, Boris Johnson, has threatened to abandon negotiations for a deal with the E.U.
Johnson’s threats come amid little substantive progress made on the talks. The prime minister warned U.K. businesses to brace themselves for the possibility of No Deal. Economists estimate that a disruptive exit such as Johnson is proposing might cost the U.K. economy in the regions of $25 billion in 2021, a figure the economy can hardly stomach.
Retail sales, the key driver of the U.S. economy is up again and doing better than anticipated. The news of such good tidings had a positive effect on the stocks and forex markets. All the major indexes rose by substantial margins on Friday, October 16. The euro and pound also surged partly because of the exhilarating news.