FXStreet reports that since returning in mid-August to highs last seen before the pandemic, the S&P 500 benchmark index of the broader US market has bounced between 3100 and a high of 3588 set on September 2. According to Lisa Shalett from Morgan Stanley, there are three key concerns that may keep stocks trading in a range for a while yet, giving investors time to reposition for the next phase.

“The timing and size of CARES 2.0 fiscal stimulus is a major source of uncertainty, as the Senate focuses instead on a Supreme Court nomination.”

"The outcome of key Senate races could determine the size of the next stimulus bill if control of the chamber switches parties. Many Senate races remain close. Even if Democrats manage to gain the majority in the Senate, their margin will likely be slim. However, a ‘blue wave’ result – where the Democratic Party gains control of the White House and both chambers of Congress – could lead to an economic relief package approaching $3 trillion come next year.”

“Signs of another cresting wave of COVID-19 infections could also exacerbate worries. On October 15, US daily positive cases numbered more than 62,000, the worst report since July. In Europe, new cases have surged to twice their peak in April. We continue to believe that better treatment regimes, lower mortality rates and more clarity on when vaccines will become widely available will help to limit the economic impact.”

U.S. stock-index futures rose on Tuesday, following Monday's market decline, supported by reports that House Speaker Pelosi and Treasury Secretary Mnuchin had narrowed some of their differences on a new stimulus package.

Global Stocks:

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Travelers (TRV) reported Q3 FY 2020 earnings of $3.12 per share (versus $1.43 per share in Q3 FY 2019), beating analysts’ consensus estimate of $3.07 per share.

The company’s quarterly revenues amounted to $7.771 bln (+2.7% y/y), beating analysts’ consensus estimate of $7.317 bln.

TRV rose to $115.50 (+3.27%) in pre-market trading.

Procter & Gamble (PG) reported Q1 FY 2021 earnings of $1.63 per share (versus $1.37 per share in Q1 FY 2020), beating analysts’ consensus estimate of $1.42 per share.

The company’s quarterly revenues amounted to $19.318 bln (+8.5% y/y), beating analysts’ consensus estimate of $18.379 bln.

The company also issued in-line guidance for FY 2021, raising core EPS growth from 3-7% y/y to 5-8% y/y, which translates to $5.38-5.53, versus analysts’ consensus estimate of $5.39.

PG rose to $144.25 (+1.65%) in pre-market trading.

FXStreet notes that financial markets have been trading in a wide range since August. For example, US equity markets have not been able to make new highs in six weeks, the longest period since this new bull market began in March. Uncertainty about fiscal stimulus, the US election and the pandemic could mean the correction isn’t over, according to Mike Wilson, Chief Investment Officer and Chief US Equity Strategist at Morgan Stanley.

“From a technical perspective, I've been closely watching a key resistance area for the S&P 500 since early September. And that comes in around 3550. Last week, the index failed to break through that level for the second time in two months. This technical failure is not the end of the bull market, but it does suggest to me that the correction that began in September probably is incomplete. In short, that means equity markets could experience another 10% correction back toward more formidable support levels. More specifically, the 200-day moving average, which comes in around 3125.”

“At today's prices, the S&P 500 is trading at an equity risk premium of 380 basis points... However, with so much uncertainty surrounding the US elections, Brexit and the arriving second wave of COVID-19, we think the equity risk premium should be about 10% higher. In short, we like our 3100-3550 range on the S&P 500 as a good guide for risk taking, both from a technical and valuation perspective.”

IBM (IBM) reported Q3 FY 2020 earnings of $2.58 per share (versus $2.68 per share in Q3 FY 2019), in line with analysts’ consensus estimate of $2.58 per share.

The company’s quarterly revenues amounted to $17.560 bln (-2.6% y/y), roughly in line with analysts’ consensus estimate of $17.557 bln.

IBM fell to $121.94 (-2.85%) in pre-market trading.