S&P 500 Index

Waiting for a Package…

A bit of a yawner this week as the markets traded sideways while waiting for another stimulus package from Congress. Perhaps we get it before the election but the politics seem to be too messy right now to expect anything in October. We are in the twilight zone of pre-election uncertainty as the tax and regulatory policies are up for grabs while markets wrestle with the timing of a vaccine and getting back to 100%. None of these difficulties will last forever so 2021 must be better, right?

For now, the trend of the stock market is still higher but there is some serious trend line resistance in the chart below. The blue trend-line from the 2009 low has been respected many times by the S&P and now we are knocking on its door one more time. A breakout above the trend-line in the 3600 area would be a significant development and signal that a strong uptrend may be underway. Of course, this implies a much better 2021 and a return to normalcy. And a big rollover to the downside means that Congress will be passing that stimulus package.

Chart of the S&P 500 Index (SPX)

Earnings season did get started this week with the banks which posted decent numbers. The market will be looking for a recovery in business in Q3 and feedback from CEOs on their outlook for the remainder of the year. This information could be key for how we trade before the election.

Chart of the Week!

Chart of how households used their stimulus payments.

Economic & Central Banking Snippets 

  • Core retail sales in September rose 1.4% (m-o-m) which was better than expectations of +0.3%.
  • Continuing claims fell 1.17mm to about 10mm with the hopes that many found jobs. Pandemic Unemployment Assistance also fell to 373k from 464k. (Boock Report)
  • European Union car registrations rose 3.1% (y-o-y) as September was a strong month of recovery and an indication of a turnaround.
  • Initial jobless claims rose to 898k which was well above the forecast of 825k.
  • European Union car registrations rose 3.1% (y-o-y) in a sign that the global auto industry is slowly beginning to pull out of its worst slump in decades. (WSJ)
The fragile recovery in the auto sector.

Macro Snippets

  • Rent is plunging in high-priced U.S. cities and tech hubs (e.g., San Francisco, New York, San Mateo), and increasing in fast-growing cities (e.g., Rochester, NY; Colorado Springs, CO) and spillover markets (e.g., Tacoma, WA), according to a September report from Realtor.com. One-bedroom rents declined year-over-year in 36 of the 100 largest counties, up from just six in March.
  • Countries across Europe are reimposing more restrictions on public life as a surge in coronavirus infections heightens fears the pandemic is tightening its grip, bringing another public health emergency closer just as winter approaches. (FT)
The Coronavirus pandemic worsens in Europe.
  • Paris-based luxury group LVMH says Hennessy cognac and fashion and leather goods sales have returned to growth in the third quarter. Overall revenue was down 7% in the third quarter, which marked a significant improvement in trends from the first half of the year and “encouraging signs of recovery” were observed. (Investopedia)
  • United Airlines posted a wider-than-expected third quarter loss as the pandemic continues to cripple air travel demand, but the airline trimmed its cash burn. (WSJ)
  • The average rate for a U.S. 30-year fixed loan dropped to 2.81%, down from 2.87% last week, which is the lowest in almost 50 years of data keeping, Freddie Mac said in a statement Thursday.
  • Amazon has struck a deal with the National Football League to stream one of the two new “wildcard” playoff games this season. The company streams 11 Thursday Night Football games a year for at least $75 million annually and the playoff game terms are much higher on a per-game basis. (WSJ)
  • U.S. colleges are seeing sharp declines in students. The number of first-year undergraduates is down 16% this semester, while total enrollment has dropped 4%, according to the National Student Clearinghouse Research Center. (Investopedia)
  • Delta Air Lines posted a $5.4 billion loss, warning that the recovery could take more than two years. Revenue dropped 76% from $12.56 billion a year earlier to $3.06 billion in Q3.

That is all for now and thank you for being a subscriber!

Paul J. McCarthy


Paul J. McCarthy, III

President – Kisco Capital

Paul McCarthy

Mr. McCarthy is the President and founder of Kisco Capital.