Growing uncertainty over the outcome of next week's presidential election fed volatility on Wall Street over the past five days.
The S&P 500 slid 1.94% over the past five days, the Dow Jones Industrial Average fell 1.50%, and the Nasdaq dropped 2.77%. The Volatility Index spiked 35%.
The S&P 500 sold off for its ninth day in a row on Friday, the longest losing streak since 1980, as Republican presidential candidate Donald Trump ticked up in the polls. A Trump presidency grew slightly more likely after the FBI disclosed that it was looking into more emails tied to its previously-settled investigation into Democratic presidential candidate Hillary Clinton. Wall Street has so far reacted positively to any news of a likely Clinton win and negatively to higher chances of a Trump win.
"Election-related uncertainty is high," Terry Sandven of U.S. Bank Wealth Management in Kanas City told TheStreet. "A divided Congress presents the highest level of certainty, a neutral-to-positive outcome for equities. Conversely, a democratic or republication sweep presents a heightened level of uncertainty and a likely market sell-off as concerns about drug pricing, energy policy, financial regulation, infrastructure spending, possible trade wars, and the like, weigh on investor sentiment."
Trump's bump in the polls slowly eroded as the week wore on. Current polls indicate Clinton has a slight advantage in battleground states and a wider path to winning the Electoral College over Trump. At least 33 million votes have already been cast in early voting in 37 states, around 25% of the expected total turnout. Early voting has so far favored Clinton. Voters will head to the polls next Tuesday, Nov. 8.
Election drama overshadowed the October jobs report and the Federal Reserve's November meeting this week.The number of jobs added to the U.S. economy came in slightly lower than expected, though August and September numbers were both revised upward. The unemployment rate slipped to 4.9% from 5%, as expected. Average hourly earnings rose 0.4%, the highest since July, and above consensus of 0.3% growth. Earnings rose 2.8% year over year, highest since 2009.
The Fed left the fed funds rate unchanged on Wednesday afternoon, noting that it was waiting for some further evidence of progress toward its goals of full employment and 2% inflation. The decision was 8 to 2 with Cleveland Fed President Loretta Mester and Kansas City Fed President Esther George the two dissenters.
The chance of a rate hike in December currently sits at 72%, according to CME Group fed funds futures. A solid October jobs report supported investors' confidence in a rate hike at year's end.
Manufacturing activity in the U.S. in October rose at a faster pace than expected, according to the latest ISM Manufacturing Index. The measure increased to 51.9 last month from 51.5 in October. Analysts expected a reading of 51.7. A comeback in manufacturing was welcome after a higher U.S. dollar and low oil prices stunted growth for months. A separate reading on the manufacturing sector from Markit hit a one-year high as increases in output and new orders drove activity.
Crude oil endured its largest weekly percentage decline since mid-January this week. Prices came under pressure as fears over global oversupply persisted. Skepticism grew over whether major oil producers, including the Organization of Petroleum Exporting Countries, would come to a freeze agreement at a meeting later this month.
Weekly data out from the Energy Information Administration on Wednesday showed a major build in domestic inventories. Stockpiles rose by their most in 34 years, according to the latest data. Oil-drilling activity in the U.S. also climbed over the past week.
West Texas Intermediate declined 9.5% over the past five days.
The earnings season barreled forward over the past five days. The S&P 500 ended the week with more than 80% of S&P 500 companies having reported earnings. Of those that have reported, 71% have surpassed analysts' profit estimates, while more than half have exceeded sales forecasts. The third-quarter blended earnings growth estimate is 3.9%, on track to snap the longest earnings recession in seven years.
In tech earnings, Facebook (FB) reported a better-than-expected third quarter on its top- and bottom-lines. However, growth concerns spooked investors. The social network warned that advertising growth would "come down meaningfully" once it stops increasing the number of ads in users' news feeds.
Fitbit's (FIT) third-quarter sales missed expectations and its fourth-quarter outlook came in short consensus. The fitness wearables company reported a 23% jump in revenue to $503.8 million, but missed estimates of $506.9 million. GoPro (GPRO) reported a weak third quarter and disappointing guidance for its fourth quarter and full year. Quarterly sales slumped nearly 40%. The action camera maker anticipates fourth-quarter earnings no higher than 35 cents a share, missing consensus of 43 cents.
Alibaba (BABA) bested revenue and earnings estimates in its third quarter, a result the company said reflects its "increasing ability to monetize" its user base. The Chinese e-commerce site reported a 14% jump in annual active buyers to 439 million.
Royal Dutch Shell (RDS.A) swung to a profit in its third quarter. Shell managed to turn a profit as it focused on cost cutting in the face of a prolonged period of low oil prices. BP (BP) also reported a better-than-expected quarter as it stripped down operations to weather a tough climate. Third-quarter profit rose 35% after three straight quarters of net losses.