Wall Street’s rally continued for a fourth day on Thursday, with the S&P 500 gaining about 2 percent and on track for its best weekly showing in nearly seven months, a recovery that has defied predictions that investors would be unsettled by uncertainty in the outcome of the U.S. presidential election.
Thursday’s gains mean the S&P 500 is up 7.4 percent this week, as it rebounds from a loss of 5.6 percent last week. A gain of more than 4.9 percent through Friday would be the benchmark’s best weekly showing since mid-April, when stocks rallied more than 12 percent.
The rally has surprised some market analysts and investors, given the scale of political and economic uncertainties the country continues to face, and some have cautioned that investors’ tolerance of the uncertainty around the election may not last for more than a few days, and concern about a contested election or civil unrest could derail the rally.
“It’s going to be very news-driven and think that we have to expect that there’s going to be a lot of volatility,” said Doug Rivelli, president of the institutional brokerage firm Abel Noser in New York.
For now, however, Wall Street seems to seeing only good news in the possible outcomes. Should Joseph R. Biden Jr. win the presidency, and Republicans retain control of the Senate, the resulting gridlock in Washington will mean few policy surprises to come in the next few years.
If Mr. Biden wins and Democrats carry the Senate, then a surge of government spending aimed at shoring up the economy is also seen as good news for the markets, while expected tax increases and more restrictive regulation are a problem for another day.
That scenario was back on the table on Thursday, as results from Georgia suggested that candidates for both of the state’s Senate races could face a runoff in January, and sectors of the stock market seen as potential winners from a large-scale fiscal push from Washington Democrats fared well.
Shares of two solar companies, Sunnova Energy and Solar Edge, were both up more than 11 percent. Companies that benefit from construction and infrastructure spending such as Terex and United Rentals were up more than 5 percent.
“A Republican Senate takes tax increases off the table, limits more progressive nominees from running the agencies, and takes major restructuring of industries, like health care and energy, off the table. The drawback is that there is less stimulus in 2021. That equation could reverse if the market believes Democrats will retake the Senate,” wrote analysts with Strategas Research.
Another round of stimulus may not wait until a new government is in place. Senator Mitch McConnell of Kentucky, the majority leader, said on Wednesday that reaching a deal on a stimulus bill would be “Job 1” when lawmakers return for the lame-duck congressional session following the elections.
The Federal Reserve left interest rates unchanged and promised to use “its full range of tools to support the U.S. economy,” it said in a policy statement released Thursday, largely repeating its observation that economy and job market are still far behind where they were at the start of the year.
The Fed’s emergency support programs will expire at the end of the year, but analysts are increasingly expecting that the central bank will do more to support the economy if the election outcome leads to a relatively small fiscal stimulus package.
The kind of support the central bank can offer is better for financial markets than it is for unemployed workers and struggling small businesses who don’t directly benefit from it, said William Delwiche, an investment strategist at Baird, a financial firm in Milwaukee.
Mr. Delwiche said a divided government would also probably mean that Jerome H. Powell, the Fed chair, is likely to remain in place: “He’s been the calmest, most reassuring voice through this whole thing, so maybe part of this is the market expressing comfort in that outcome.”
The slow resolution of the presidential election, and the growing chance that Democrats and Republicans will divide power in Washington next year, has revived the possibility that lawmakers could reach agreement on a new economic rescue package before Christmas.
Senator Mitch McConnell of Kentucky, the majority leader, said on Wednesday that reaching a deal on a stimulus bill would be “Job 1” when lawmakers return for the lame-duck congressional session following the elections. It is possible that such a deal could be attached to a bill that would fund the federal government past Dec. 11 — legislation that will be necessary to avoid a government shutdown.
The chances of a stimulus deal may be improving, but it is unlikely the package would be as large as Democrats and President Trump discussed before the election.
Democratic leaders, including Speaker Nancy Pelosi of California, had been discussing a potential package with the White House that would have been just shy of $2 trillion and included direct payments to low- and middle-income individuals and families, loans for small businesses and money for schools, state and local governments and expanded coronavirus testing. Senate Republicans were pushing a bill that would have cost well under $1 trillion, possibly as little as $500 billion.
Business groups are mounting a renewed push for a large package — possibly around $1.7 trillion. “There’s no reason to wait,” Neil Bradley, the executive vice president and chief policy officer at the U.S. Chamber of Commerce, said Wednesday.
Larry Kudlow, director of the National Economic Council, said this week that he expected the White House and Congress to agree on another short-term extension of government funding in mid-December but that it was unclear if additional stimulus money would be attached to that legislation. He reiterated that the White House would like to see additional money allocated to the Paycheck Protection Program for small businesses and a reinstatement of supplemental benefits for the unemployed.
The mind-set of the White House is difficult to predict and cooperation on stimulus from Mr. Trump could hinge on his fading re-election prospects. Trump administration officials believe that Ms. Pelosi overplayed her hand in stimulus negotiations during the summer and fall and that Republicans will be even less likely to go along with a $2 trillion package now that the election is over and the Senate appears less likely to shift to Democratic control.
Federal Reserve officials made only minor adjustments to their policy statement Thursday, leaving rates unchanged and pledging to act as needed to protect the economy and sustain its recovery from the depths of the pandemic-spurred recession.
“Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year,” policymakers said in their post-meeting statement. They reiterated that the central bank was “committed to using its full range of tools to support the U.S. economy in this challenging time.”
The Fed slashed interest rates to nearly zero in March and has been buying huge quantities of government-backed bonds in an attempt to keep markets functioning smoothly and to stimulate demand.
Low rates do seem to be helping to fuel a recovery. Housing has been a bright spot in the pandemic-damaged economy, for instance, as families refinance to take advantage of mortgage savings and as buyers scramble to purchase new and existing houses. But government spending programs have also been an important driver of the rebound so far, keeping money flowing to businesses and households even as companies temporarily shut their doors and millions of people lost their jobs.
Jerome H. Powell, the Fed chair, will hold a news conference at a 2:30 p.m. where he will make remarks and answer questions.
There is still more that the Fed could do to stimulate the economy, and Mr. Powell is likely to face queries about its next steps. The central bank could reinforce its pledge to keep interest rates low for an extended period of time. It could change up the communication around its bond purchases, or shake up their composition so that they tilt more toward longer-dated debt, all with the goal of making credit cheaper and keeping money flowing into the economy.
The Labor Department reported on Thursday that 738,000 workers filed new claims for state unemployment benefits last week, virtually unchanged from the previous week as the U.S. economic recovery struggles to keep its footing.
Another 363,000 new claims were filed under the federal Pandemic Unemployment Assistance program, which provides benefits to part-time workers, freelancers and others ordinarily ineligible for jobless aid.
On a seasonally adjusted basis, new state claims totaled 751,000, significantly lower than after the coronavirus pandemic first struck but still extraordinarily high by historical standards.
“More than a half year after the pandemic-caused downturn began, we remain in a very stressful time for the U.S. economy,” said Mark Hamrick, senior economic analyst for Bankrate.com.
That economic stress is compounded by the political impasse over a new federal aid package, which the election this week did little to resolve.
“The prospects of a fiscal stimulus over the next few weeks are still quite uncertain, and the possibility of even a stronger economy under a Democratic sweep is now highly unlikely,” said Gregory Daco, chief U.S. economist for Oxford Economics. “As a result, we are that much more concerned about the pace of growth heading into 2021 and the effect on the labor market.”
The reading on initial claims comes a day before the Labor Department releases a comprehensive report on the nation’s employment situation in October. Most forecasts point to a continued slowing in job creation.
Many workers have exhausted their state unemployment insurance. The number of individuals receiving any type of benefit in the week that ended Oct. 17 declined 1.2 million to 21.5 million. More than 60 percent of that total, or 13.3 million, were receiving benefits from Pandemic Emergency Unemployment Compensation or Pandemic Unemployment Assistance, two federal programs set to expire at the end of the year.
At the same time, a surge in coronavirus cases in the Midwest has prompted a fresh round of lockdowns, which could lead to more layoffs as businesses close and people feel less comfortable dining in restaurants and shopping in stores.
“Whoever becomes the president faces a very formidable challenge in the coming months, as winter weighs down on certain industries that were able to get by with outdoor service, as extended unemployment benefits expire at the end of the year, and as assistance for student-loan borrowers and renters expires,” said Julia Pollak, a labor economist at the career site ZipRecruiter. “A wave of challenges is coming in the direction of workers who have lost their jobs in the pandemic.”
Visa’s planned $5.3 billion acquisition of the financial technology firm Plaid would give the company an unfairly tight hold on the online debit transactions market, the Justice Department said in a lawsuit on Thursday.
Visa announced plans in January to buy Plaid, which helps consumers connect their bank accounts to thousands of financial apps, including the popular payment system Venmo and banking and investment services like Betterment and Chime.
In a complaint filed in federal court in San Francisco, the Justice Department said the deal would “eliminate a nascent competitive threat” to Visa, which it says controls more than 70 percent of the online debit market.
Visa called the department’s claims “legally flawed” and said Plaid was a network that transmitted data, not a direct rival. “Visa’s business faces intense competition from a variety of players — but Plaid is not one of them,” the company said in a statement.
The Justice Department, however, argues that Plaid’s extensive partnerships with other financial technology companies, known as fintechs, would make it “uniquely positioned” to take on a giant like Visa — if it wanted to.
The department’s complaint details internal Visa discussions about the threat that Plaid posed and quotes Visa’s chief executive as describing the deal to another executive as an “insurance policy” for the company’s lucrative online debit business. A third executive, the suit said, described Plaid to colleagues as a “volcano” whose services were merely “the tip showing above the water” — a point the executive backed up with a doodle, included in the complaint.
The Justice Department has lately taken a more aggressive posture on antitrust issues. Last month, it filed a sweeping antitrust case against Google that seeks to curb and reshape one of the world’s most powerful companies. The agency is still reviewing two other proposed fintech takeovers: Intuit’s $7.1 billion acquisition of the personal-finance portal Credit Karma, and Mastercard’s $1 billion deal with Finicity, a data aggregator with some similarities to Plaid.
Uber’s core ride-hailing business continues to be battered by the coronavirus while its food delivery business surges, the company said in its quarterly earnings report on Thursday.
Uber’s revenue in the third quarter was $3.1 billion, an 18 percent annual decline. Revenue from rides and Uber’s other transportation offerings, such as scooter rentals, was down 53 percent compared with last year, while its delivery revenue increased 125 percent.
The company lost $1.1 billion, an 8 percent improvement from the $1.2 billion Uber lost in the third quarter last year. Company officials said they were optimistic that Uber’s financial situation was improving.
“As consolidated growth returns, it will return to a more profitable foundation,” Nelson Chai, Uber’s chief financial officer, said in a statement.
Uber scored a major win in California this week, when voters passed a ballot initiative that would allow the company to continue to treat its drivers as independent contractors and grant them reprieve from a state law that required it to employ its drivers. The company’s stock price has increased more than 17 percent since that result.
Still, the company faces regulatory challenges. Its growing delivery business, Uber Eats, has faced roadblocks in some cities that have imposed a cap on the fees the company can charge for deliveries. The caps are intended to protect restaurants and consumers during the pandemic.
“If the economic picture is sluggish even after we’re past the worst of the pandemic, I do wonder whether some of these caps might be extended or made permanent,” said Tom White, an equity research analyst at D.A. Davidson. “That’s something to keep an eye on.”
ESPN will lay off 300 employees, approximately 6 percent of its worldwide staff, and let 200 open positions go unfilled as the broadcast giant weathers a sports world disru
pted by the pandemic, the sports channel’s chairman, Jimmy Pitaro, told employees in a memo Thursday.
“Prior to the pandemic, we had been deeply engaged in strategizing how best to position ESPN for future success amidst tremendous disruption in how fans consume sports,” Mr. Pitaro wrote in the memo, which was obtained by The New York Times. “The pandemic’s significant impact on our business clearly accelerated those forward-looking discussions.”
The cuts will affect divisions across the company but are expected to be especially concentrated in broadcast production. ESPN, which is owned by the Walt Disney Company, has already furloughed some employees and asked executives and highly paid employees to take pay cuts.
The pandemic has ravaged ESPN’s business. The lifeblood of the network’s nine cable channels is live games, but from March to July, there were almost no games to show. Even with the resumption of most professional and college sports, ESPN has faced low viewership and a sluggish advertising market.
This is the latest in a string of layoffs for ESPN in recent years. About 300 employees were laid off in 2015, and about 250 were laid off in two waves in 2017, including a number of high-profile on-air workers.
The layoffs come as the company continues to confront the long-term decline of pay television. The number of households paying for television peaked at 100.5 million in 2014; today that number is close to 80 million. The timing and severity of the layoffs were driven by the pandemic, but they are also a further reorientation toward a fully digital and streaming future. In August, Disney said it had more than 100 million subscribers worldwide across its Disney+, Hulu and ESPN+ streaming services.
“Placing resources in support of our direct-to-consumer business strategy, digital, and, of course, continued innovative television experiences, is more critical than ever,” Mr. Pitaro wrote.
The price of the virtual currency Bitcoin has moved back toward its record high, pushed up by new signs of corporate acceptance and the turmoil around the pandemic and the presidential election.
The value of a single Bitcoin soared to above $15,000 on cryptocurrency exchanges on Thursday, the highest level since the price briefly hit $20,000 in late 2017. A Bitcoin is a digital token — with no physical backing — that can be sent electronically from one user to another, anywhere in the world.
Bitcoin’s value is up more than 100 percent since the beginning of the year. It has risen particularly quickly in recent weeks since the digital payments company PayPal announced last month that it would begin allowing its customers to buy and pay for products with Bitcoin and a few other cryptocurrencies.
Cryptocurrency market watchers have said that Bitcoin’s decentralized governance and finite supply — which is capped at 21 million in the token’s computer code — has made it attractive at a time when governments are struggling to deal with a rise in coronavirus cases. The uncertainty surrounding the presidential election has also been a factor for those looking for alternatives to traditional government, they said.
As England entered its second national lockdown to slow the spread of the resurgent coronavirus pandemic, Britain’s central bank said it would increase monetary stimulus in the face of a renewed downturn in the economy as the government announced an extension of its furlough program through March.
The Bank of England also downgraded its projections for the path of the recovery, forecasting a 2 percent drop in G.D.P. in the fourth quarter compared with a previous projection of 4 percent growth. Three months ago, policymakers said they expected the British economy to recover to its pre-pandemic level by the end of 2021. On Thursday, they said this would not happen until early 2022.
Policymakers voted unanimously to buy 150 billion pounds ($195 billion) more in government bonds next year, increasing the bank’s total stock to £875 billion. This was more purchases than economists had predicted.
This is the third time the Bank of England has increased bond-buying in 2020, the year its program of purchases had been expected to end. Quantitative easing, as such purchases are known, is intended to bolster the economy by keeping interest rates low and encouraging financial institutions to invest in riskier assets than government bonds.
The chancellor of the Exchequer, Rishi Sunak, said Thursday the government’s furlough program, which pays 80 percent of wages for the hours employees cannot work, will be extended through the end of March. It was supposed to end in October and be replaced by a less generous plan.
The central bank said on Thursday that it expected 5.5 million people to be put on furlough in November, about three million more than are currently using it. The Treasury also increased grants to self-employed workers and businesses.
Beginning Thursday, restaurants, bars, hotels, nonessential shops, gyms and all other leisure facilities must close until Dec. 2. Unlike in the spring lockdown, however, schools will remain open and construction and manufacturing work will continue. The measures were announced over the weekend after Italy, France, Germany and Belgium also introduced tighter restrictions on movement, all in an effort to curb a second wave of virus infections that has filled some hospitals and caused more deaths.
In the spring, Britain shuttered businesses and much of its economy later than some of its European neighbors and in the end had a longer lockdown and one of the worst recessions in the second quarter. Some politicians and economists fear that Britain is repeating this error. Opposition lawmakers had pushed for a lockdown weeks ago but the government persisted with local restrictions instead. On Sunday, before the latest restrictions were imposed, a senior government official suggested that the proposed one-month timeline for this lockdown might have to be extended.
The worsening outlook for the British economy, which will also be affected by the country’s separation from the European Union at the end of the year, may renew speculation about whether the central bank will introduce negative interest rates. Last month, the Bank of England asked banks if they were operationally ready for the introduction of zero or negative rates. The bank rate was held at 0.1 percent at this month’s policy meeting.
A federal court in Ohio has issued a temporary restraining order against 25 counterfeit websites that allegedly preyed on the fear of coronavirus to trick consumers into buying Clorox and Lysol products that were never delivered, the Federal Trade Commission said Thursday. None of the websites are owned by or affiliated with the Clorox Company or Reckitt Benckiser, the company that makes Lysol products, the agency said. “The defendants illegally charged consumers thousands of dollars for Clorox and Lysol products that they never delivered,” the F.T.C. said, adding that in some cases, the websites shipped “worthless products that consumers did not order — like a pair of socks.”
Voters in Illinois rejected a proposal to increase tax rates on high earners, the centerpiece of Gov. J.B. Pritzker’s plans to address the state’s severe money problems. The ballot measure didn’t come close to passing: As of Wednesday morning, 55 percent o
f voters opposed the measure. The ballot measure would have instituted a graduated income tax to raise billions of new revenue.
Gap on Wednesday tweeted an image of a half-red, half-blue hoodie bearing the brand’s logo, along with the caption, “The one thing we know, is that together, we can move forward.” Clicking the image showed the sweatshirt being zipped up. The post, which was subsequently deleted, quickly went viral and was met with widespread mockery and criticism. “Read the room,” several users wrote. “Really? A red & blue hoodie is the healing ointment America needs?” one user posted.
It’s common practice for market analysts, economists and other strategists to incorporate opinion polls into their models and forecasts. Although the pre-election polls pointed to a win for Joseph R. Biden Jr. on Tuesday, which still may prove correct, the underlying details were way off and the margin of victory much narrower than expected. On top of the errors in 2016, financial forecasters are rethinking how much faith to place in polls when making assumptions about elections, the DealBook newsletter explains.
“Sympathy is wearing awfully thin with regard to U.S. pollsters who have now been unacceptably far from the market two straight elections,” said Eric Lascelles, the chief economist at RBC Global Asset Management. “I’m not quite sure what we’re going to do if we literally cannot trust pollsters to be within eight points of the correct answer.”
Scott Minerd, the global chief investment officer at Guggenheim Investments, said he didn’t rely on polling at all in the run-up to the election. “In my mind, there were just too many tossup states,” he said. To guide his analysis, Mr. Minerd looked instead to indicators his firm had developed, such as the performance of stocks most exposed to key policy pledges by each candidate.
“That doesn’t mean polling is dead,” he said. A major problem is that “voters just don’t want to say what they really think,” but at some point artificial intelligence could, perhaps, identify patterns in poll data that would have “a higher correlation with election outcomes,” he added.
In the meantime, strategists like Ben Laidler, the head of Tower Hudson, an investment research firm, said he would take polls “with a bigger pinch of salt” in the future. He noted that political betting markets were less sure about Mr. Biden’s chances than opinion polls. Others say that indicators like Google searches and counting signs in yards could take more prominence in election models.
Still, polls will remain a useful guide to the market consensus — however misguided — and “we take our own views against it” when devising trading strategies, Mr. Laidler said.
General Motors reported robust third-quarter results as auto sales and production rebounded through the summer after the coronavirus forced the industry to shut down factories and dealerships in the spring.
The automaker reported net income of $4 billion, a 74 percent increase from the same period in 2019. Revenue in the quarter was unchanged at $35.5 billion.
Almost all of G.M.’s profit was generated in North America, where it enjoyed strong demand for high-margin trucks and sport utility vehicles. G.M. earned $4.4 billion in North America before interest and taxes, up from $3 billion a year ago.
The company was also helped by cost-cutting, though it said on Thursday that it would now seek to expand capacity, including by reaching a new agreement with its Canadian union that will allow G.M. to make pickup trucks in 2022 at a plant in Oshawa, Ontario.
“We have been operating our full-size pickup plants around the clock,” Mary Barra, the company’s chairman and chief executive, said in a conference call with analysts. “The fact is, we simply can’t build enough. And because we expect demand to remain strong, we must increase our capacity.”
The company is also rushing to introduce electric vehicles. Ms. Barra said construction on a battery plant in Lordstown, Ohio, is ahead of schedule, and would eventually add 1,100 jobs to the area. G.M. earlier closed a small-car factory in Ohio.
The company’s international operations broke even in the third quarter, a slight improvement from a year earlier. Its finance arm generated $1.2 billion in pretax profit, up from $700 million in the year-ago period.
Mr. Barra said G.M. expected to reinstate its dividend around the middle of next year. The company suspended its dividend early in the pandemic.
A feeble recovery staged over the summer months when the pandemic was in a brief lull in Europe has been disrupted by the second onslaught gripping the region, European Commission forecasts said Thursday, adding that the bloc will not return to pre-pandemic economic output before 2022 at the earliest.
The autumn forecast, the latest installment of the commission’s quarterly health check of the economies of the 27 E.U. countries, showed that the second wave of Covid-19 infections, which have forced a growing number of countries to go back into full or partial lockdowns in recent weeks, will weaken the economic recovery of the region in 2021. The forecast said that the bloc’s economies will shrink
on average by 7.4 percent this year; the core of the region, the euro area of 18 nations that share the common currency, will see a 7.8 percent contraction, the commission said.
“This forecast comes as a second wave of the pandemic is unleashing yet more uncertainty and dashing our hopes for a quick rebound,” said Valdis Dombrovskis, the European Commission executive vice president.
The Spanish economy will be worst hit, the forecasts said, set to shrink by 12.4 percent, followed by Italy, which is predicted to lose 9.9 percent of its economic output this year. France, the bloc’s second-largest economy, will contract by 9.4 percent, whereas the leader, Germany, will see a more moderate 5.4-percent contraction.
Prognosticating in this environment is treacherous, the report authors warned: “Uncertainties and risks surrounding the Autumn 2020 Economic Forecast remain exceptionally large.”
A worsening pandemic and longer-term, deeper scars to the economy after this crisis, such as an avalanche of bankruptcies and high unemployment, could also set the recovery back more than is currently foreseen, the report warned. The specter of double-digit unemployment is returning to the European south, especially set to hurt Greece (with a jobless rate of 18 percent) and Spain (16.7 percent), the forecast showed.
But perhaps one of the more lasting impacts of the financial crisis unleashed by the pandemic will be spiraling debt burdens across the board in E.U. countries.
In the euro area, aggregate government debt will jump to more than 100 percent of economic output in 2022, from 85.9 percent. The European Union has issued joint bonds in recent weeks, at a scale never before attempted, to begin funding some of its joint social and economic support measures for its members. And the European Central Bank has been providing ample liquidity to members that need funding to support prolonged furlough plans and other economic recovery measures.
A landmark stimulus package, a 750 billion euro, or $883 billion, set of grants and loans to help lift economies, known as NextGenerationEU, is stuck in negotiations and will not come online until next year.