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James Hyerczyk
US Stock Indexes

The major U.S. stock indexes closed higher on Thursday after posting a sharp pullback a day earlier as investors returned to technology heavyweights ahead of their earnings reports after the close. Meanwhile, additional economic data overshadowed worries about surging COVID-19 cases in most of the states.

In the cash market on Thursday, the benchmark S&P 500 Index settled at 3310.11, up 39.08 or +1.15%. The blue chip Dow Jones Industrial Average finished at 26659.11, up 139.16 or +0.50% and the technology-driven NASDAQ Composite ended the session at 11185.59, up 180.72 or 1.61%.

The Washington Influence:  Election and Stimulus

Democratic challenger Joe Biden holds a comfortable lead over President Donald Trump in national polls, but the race in battleground states that will likely decide the election are tighter than the national surveys.

Discussions between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin took on a decidedly less cordial tone Thursday as the Trump administration’s top negotiator accused his counterpart of miscasting the state of stalled coronavirus stimulus talks before Election Day, according to CNBC.

Stalled efforts in Washington over fresh stimulus and an alarming rise in COVID-19 cases globally have put the S&P 500 and Dow on course for their worst week since March.

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Sectors and Stocks

Communication services, materials and technology rose the most among major S&P sectors.

Apple Inc, Amazon.com Inc and Alphabet Inc, which have seen a surge in demand for their products and services from people staying at home during the pandemic, rose between 0.6% and 2.3% ahead of their results after the closing bell.

Social media companies Facebook Inc and Twitter Inc, which also reported later in the day, jumped about 5% each, riding on Pinterest Inc’s forecast for sales growth on healthy rebound in ad spending.

Coach owner Tapestry Inc climbed 4% after it beat estimates for quarterly earnings and forecast growth for the year as demand for luxury handbags and apparel rebounds in China from pandemic lows.

US Economic Data

Sentiment got a further lift after data showed the U.S. economy grew at a record pace in the third quarter as the government poured out more than $3 trillion worth of pandemic relief.

The GDP data was impressive, but it’s stale data. While it’s encouraging that the economy posted a noticeable recovery, keep in mind that it occurred at a time when the economy was being saturated with fiscal stimulus. Given the resurgence of COVID-19 cases and the lack of fresh fiscal stimulus, there is no telling what pace the economy is on during the current fourth quarter.

A separate report showed weekly unemployment claims fell more than expected in the latest week.

The Internals

The CBOE Volatility Index (VIX) hovered near 15-week highs as the White House coronavirus task force urged for aggressive measures to curb the spread of the disease and on anxiety over the outcome of the November 3 presidential election. This essentially means investors are aggressively buying puts for protection against a stock market crash either due to further government restrictions, new shutdowns or a contested U.S. presidential election.

Advancing issues outnumbered declining one on the NYSE by a 2-to-1 ratio and by a 1.3-to-1 ratio on NASDAQ.

The S&P 500 posted three new 52-week highs and 10 new lows; the NASDAQ Composite recorded 31 new highs and 65 new lows.

For a look at all of today’s economic events, check out our economic calendar.

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