Day Traders Diary

10/5/20

The major averages surged today after President Donald Trump said he will be discharged from the hospital Monday evening, easing concerns about more political uncertainty ahead of Election Day. Investors also grew more hopeful that lawmakers would reach a compromise on a new stimulus deal.

The Dow Jones Industrial Average climbed 465 points, or 1.7%, to 28,148. The S&P 500 rose 1.8%, or 60 points to 3,408 while the Nasdaq Composite gained 2.3%, or 257 points, to 11,332.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin held an hourlong phone call Monday and discussed "the justifications for various numbers" and "plan to exchange paper" in preparation for further discussions on Tuesday, Pelosi's chief of staff said.

Optimism for reaching a compromise rose recently after Pelosi said Trump's diagnosis could change the dynamic of talks toward an agreement. Pelosi on Friday called on the airline industry to delay furloughs, saying additional relief for the industry is "imminent."

After Trump's diagnosis, former Vice President Joe Biden opened his widest lead in a month in the presidential race with 51% of those polled backing him and 41% saying they would vote for Trump, according to a Reuters/Ipsos poll released on Sunday from October 2-3.

A win for the former vice president in November could spell headaches for Wall Street in the form of higher taxes and tighter regulations, but some also say it could lead to a bigger fiscal stimulus deal that would be good for stocks.

At the same time, a convincing win could ease concerns about a drawn-out or contested election result.

The news cycle fueled a growth mindset that lifted all 11 S&P 500 sectors into positive territory, boosted small-cap stocks, buoyed crude prices ($39.29/bbl, +2.24, +6.1%) by 6%, and steepened the U.S. Treasury yield curve amid selling in longer-dated maturities.

The energy rose 2.9%, information technology rose 2.3% and health care rose 2.1% today. The real estate sector underperformed with a 0.6% gain, but the rate-sensitive space had traded lower for most of the session amid the higher Treasury yields.

The 2-yr yield increased one basis point to 0.14%, while the 10-yr yield rose six basis points to 0.76% -- its highest closing level since June. The U.S. Dollar Index fell 0.4% to 93.46.