The American stock market began last week with a recovery after a strong collapse the day before.
Investors were waiting for the key events of the week: the presidential election, the results of the Fed meeting, the publication of a report on the American labor market. Market participants also studied favorable economic data from the Institute for Supply Management (ISM), which showed that the manufacturing activity index rose to 59.3 in October. This was the highest reading since November 2018 and followed the 55.4 reading in September. The index was expected to rise to 55.8 in October.
On Tuesday major US stocks rose markedly amid hopes for a landslide victory for Joe Biden. Biden's victory, according to the markets, is the key to the approval of a large package of assistance to the economy in the context of the pandemic and the easing of tensions in US trade relations with partner countries. Investors also looked at data from the Commerce Department, which showed that factory orders rose 1.1% in September after rising 0.6% in August. Orders were boosted by growing demand for primary metals, computers and electronic products, as well as cars and finished metal products. But orders for cars, furniture and electrical equipment, household appliances and components fell. Manufacturing orders were expected to rise 1.0%.
A confident victory, however, did not work, moreover, Biden's advantage turned out to be very doubtful. Nevertheless, trading on Wednesday was in the green zone. The report from the ADP showed that U.S. private sector employment growth slowed in October as the U.S. economy struggled with the renewed coronavirus pandemic. According to the report, companies added 365,000 line items in a month, well below the 600,000 forecast. This was the lowest reported gain from ADP since July. In addition, a report released by ISM showed that activity in the US services sector expanded for the fifth straight month in October, but the growth rate slowed down compared to September. According to the report, in October the service sector activity index fell to 56.6 from 57.8 in September. Economists had expected the index to be 57.5.
On Thursday in addition to the voting, the focus of attention was also the meeting of the US Federal Reserve System. As expected, following the meeting on November 4-5, the base interest rate remained at the level of 0-0.25% per annum. The statement of the Central Bank practically did not undergo any changes in comparison with the text following the results of the previous meeting in September. The Fed again pledged to use "the full range of instruments" to support the economy and promised not to consider raising rates until maximum employment is restored and inflation is on track to surpass the 2% target. Market participants also received data from the Labor Department, which showed that the number of Americans filing new jobless claims fell slightly but remained extremely high amid signs that the economic recovery is weakening as the COVID-19 pandemic intensifies and budget incentives cease. According to the report, initial claims for unemployment benefits were at a seasonally adjusted 751,000 for the week ended October 31, up from 758,000 in the previous week. Economists forecasted 732,000 applications.
The week ended with mixed dynamics as investors evaluated the October US employment report and awaited the announcement of the results of the presidential and congressional elections. A Labor Department report showed US job growth slowed in October. According to the report, US nonfarm employment jumped 638,000 jobs in October after rising 672,000 jobs in September. It was the smallest gain since the job recovery began in May. Economists had expected employment to rise by 600,000 jobs, up from 661,000 jobs originally reported in the previous month. At the same time, the unemployment rate fell to 6.9% from 7.9% in September. Economists forecasted that the unemployment rate would fall to 7.7%.
