As voters march to the polls today, stocks appear set to march in place ahead of election outcomes and Thursday’s October inflation numbers.
The market’s been on an upswing the last couple of sessions, possibly because many investors expect Washington to be gridlocked for the next two years. Blame common market wisdom as many believe that divided government means fewer new laws, regulations and general uncertainty for companies and their leaders to consider.
In the meantime, investors might be craning their necks for anything worth trading on this morning. Asian stocks closed mixed and European shares are about flat. The data calendar is nearly blank today, and earnings news isn’t too exciting, either, though Walt Disney Company (NYSE:DIS) is expected to report this afternoon. For the moment, Wall Street seems less interesting than watching paint dry.
Tomorrow could be different. Keep an eye on stock index futures tonight for possible signs of reaction as people try to sort out how the election results might impact investment strategy. Be ready for a market that’s trying to find its way after the votes get counted.
What We Learned this Morning
- In Q3 earnings, Norwegian Cruise Line Holdings (NYSE:NCLH)provided one highlight, beating Wall Steet’s earnings per share (EPS) and revenue consensus and offering guidance line with analysts’ expectations. Shares popped more than 3% in premarket trading.
- On the other end of the spectrum was LYFT (NASDAQ:LYFT), driving steeply downhill on its outlook for lower revenue and lower ridership. Shares were off 16% as LYFT provided a stark contrast to competitor Uber's (NYSE:UBER) recent results.
- The U.S. dollar index and Treasury yields are steady so far but have moved in opposite directions the last couple of days. That’s something worth watching. Yields continued to move higher Monday while the $DXY retreated.
- Eurozone retail sales, meanwhile, posted a 0.4% month-over-month September increase, in line with analyst expectations and up sharply from August’s -0.3% decline. Like the Federal Reserve here, the European Central Bank (ECB) is under pressure to reduce inflation, and ECB President Christine Lagarde has been sounding hawkish. Bloomberg reported that Lagarde told reporters that 2% inflation remains the ECB’s goal, but wouldn’t speculate on a peak, or terminal, interest rate.
Potential Market Movers
October’s Consumer Price Index (CPI) report arrives Thursday and looms largest after the election. Analysts expect it to show a slight drop to a gain of around 8% year over year. That would be down from 8.2% in September but still near 40-year highs. It wouldn’t be surprising to see volatility pick up as investors parse election results until the release.
There’s been a lot of focus lately on the CBOE Volatility Index retreating recently to nearly two-month lows below 25, but a check of the VIX futures complex doesn’t offer much hope for smooth trading ahead. That’s because it’s in backwardation, meaning outlying contracts trade above current levels. There’s nothing extremely spooky on the futures charts, but the market is pricing in a VIX that will be above 25 for the next six months, a signal that turbulence isn’t necessarily over.
As far as the 2022 midterms, nothing is over until the final votes are counted, and if 2020 is a guide, that might take a while. Today could be the calm before the storm, but how long the storm lasts is anyone’s guess. In 2020, it took nearly a week for an official declaration of President Biden’s victory over former President Trump, and many congressional districts took even longer to settle the outcome. There’s a small chance we could wake up tomorrow and have a solid idea of how things turned out, but there’s also a chance for a lot of uncertainty.