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Market Still Confident in Economic Recovery: What Wall Street's Saying

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Stocks rose Thursday as economic stimulants are outweighing negative data points. 

The S&P 500 rose 0.8%, with value-oriented stocks outpacing growth tech. The tech-heavy Nasdaq rose 0.5%. The 10-Year Treasury yield, up significantly in the past week on higher inflation expectations, took a breather and fell a tick to 0.77%. Yields fall when prices rise.

Jobless claims for the past week came in at 840,000, worse than the expected 820,000 and only a slight drop-off from the last reading of 849,000. Investors looked right past this as other positive labor market data points are overwhelming the view that jobs are returning at a slow pace. Investors still expect the continuation of a V-shaped economic recovery.

One important factor driving that continued V-shape — alongside a coronavirus vaccine — is fiscal stimulus. Without it, small businesses not fully reopened and households that are not fully employed will continue to sink. President Trump said Thursday fiscal stimulus talks are progressing just days after Trump said he would like his White House officials to stop speaking with Congress about stimulus until after the election.

Value stocks, both cyclical and defensive, popped as investors feel confident in the economy. Large cap oil stocks rose more than 3%. Banks rose more than 1.5% ahead of earnings soon, which analysts say may favor investment banks like Goldman Sachs  (GS) - Get Goldman Sachs Group, Inc. Report and Morgan Stanley  (MS) - Get Morgan Stanley Report, which derive a significant portion of their revenues from capital markets, giving them a relative tilt way from the yield curve-sensitive lending business. Goldman rose 2.17%. S&P 500 value stocks rose more than 1%.

Here’s what Wall Street’s saying:

Steven Ricchiuto, Chief U.S. Economist, Mizuho Securities:

"The principal consideration sustaining the equity and credit markets is the underlying health of the recovery. As identified clearly in the minutes of the September FOMC meeting, the economy has recovered more quickly than was generally expected.”

Jeff Buchbinder, Equity Strategist, LPL Financial:

"Stimulus talks in Washington, DC, are getting a lot of attention from investors—and for good reason. The midpoint of the two offers—roughly $1.6 trillion from the White House and $2.2 trillion from US House Democrats—is about 9% of last year’s US gross domestic product (source: Bureau of Labor Statistics). That’s a big deal in terms of potential impact on the economy and markets."

Strategist, Gorilla Trades, Ken Berman:

"The major indices are all trading in the green at midday, as yesterday’s broad-based rally continued in early trading on Wall Street. The mostly positive stimulus-related developments continued to support U.S. stocks this morning, despite the uptick in the number of domestic and global COVID cases.”

Colin Moore, Global Chief Investment Officer, Columbia Threadneedle Investments:

“In my view, elections cause a lot of volatility and anxiety beforehand, and then not much of substance for the broad economy and financial markets afterward. A lot of that temporary volatility comes from politicians making speeches about policies and programs that they are rarely able to fully enact. Long-term market and economic direction are about what actually happens, and in that respect, a single election is almost irrelevant to our long-term outlook. This is because changes in presidential administrations rarely lead to material fundamental changes in how the U.S. economy works.” 

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