What Investors Are Weighing Monday as Stocks Are Pressured

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A meeting between the President and Congress over fiscal stimulus and a Democratic Presidential nominee, Joe Biden, racing ahead in the polls were factoring into markets Monday. 

The S&P 500 was muted, teetering between a loss and a flat move, as the tech-heavy Nasdaq, the components of which have a heavy market cap weighting in the S&P 500, rose as much as 0.44%. Both of these indices dipped into the red minutes after the market open. Risk sentiment was weak, with the 10-Year Treasury yield down to 0.61%.  

President Trump is expected to meet with Senate majority leader Mitch McConnell about another round of fiscal stimulus. With virus cases rising, states pausing reopenings and the federal funds rate already at 0%, a new round of stimulus for small businesses and households may be what the economy and the market needs to remain steady. Recently, some Republican resistance to more spending has worried investors, one reason why many economically sensitive stocks since mid June have sold off. 

Oil, banks and consumer discretionary were all pressured, posting slight losses, the heaviest of which was seen in oil. 

A smaller consideration in the market: Biden is at 55% favorability in voting polls, while Trump at 40%, as Biden has extended his lead by about 5 percentage points. Although the market’s biggest fear on Biden is raised corporate taxes to 28% from 21%, this would negatively impact all profit-making companies. But tech stocks were rising. 

Microsoft  (MSFT) - Get Report and Amazon  (AMZN) - Get Report report earnings this Thursday and Next Thursday. After both stocks fell a bit in the past week or two, after a month’s long rally, investors are ganing more interest in these growth stocks, as they both have the propensity to beat earnings expectations, especially Microsoft. They both trade at expensive valuations, but investors are willing to pay a premium for growth in an uncertain economic environment. 

Facebook  (FB) - Get Report shares did fall as much as 2%, as Disney  (DIS) - Get Report is pulling a bulk of its ad spend on the platform, joining other large corporations in their boycott against what they see as a platform with some questionable content. This is potentially beginning to raise questions about how much near-term earnings power is lost at Facebook. 

For tech more broadly, “those looking for a tech rebound, could be keeping a close eye on behemoths like Microsoft reporting earnings this week,” Chris Larkin managing director of trading and investment product at E*trade in emailed remarks to reporters.

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