Stocks up, crude down as investors brace for a volatile week

Good morning. Global stocks and U.S. futures are rebounding ahead of a busy week at the polls and on the corporate earrings calendar. A thick gloom still hangs over the oil markets with crude sinking again this morning.

Let’s check in on the action.

Markets update

Asia

• The major Asia indexes are mostly higher in afternoon trading with Japan’s Nikkei up 1.4%.
• China released a fresh batch of consumer and manufacturing data over the weekend showing the economic recovery in the world’s No. 2 economy is going strong.
• On Sunday, Australia reported zero new “local” cases of COVID for the first time since June—proof that it is possible to crush the curve.

Europe

• After a shaky start, the European bourses ticked higher in morning trade. Germany’s DAX was up 0.4% as the country goes into a kind of lockdown lite today.
• British PM Boris Johnson announced on Saturday France-like lockdown measures to go into effect (if it passes through parliament) later this week and last four weeks, reigniting double-dip recession fears. Britain’s pub, leisure and airline stocks were down in early trading on Monday.
• Shares in Ryanair were down 1% at the open after Europe’s largest budget airline gave a dismal outlook for the winter months as the continent-wide lockdowns and travel restrictions go into place.

U.S.

• U.S. futures point to a positive open. That’s after all three major exchanges fell last week, ending the month in negative territory. (More on that in the essay below.)
• This won’t surprise any of you tech bears: David Einhorn’s Greenlight Capital had a killer October as the hedge fund added to it’s short-tech holdings. Greenlight rose 7.7% in October, but is still down nearly 10% for the year.
• Nearly two-thirds (64%) of S&P 500 companies have now delivered quarterly results this corporate reporting season. The big names to go this week include PayPal, Oracle, Allstate and Bristol-Myers Squibb.

Elsewhere

• Gold is up slightly, trading around $1,880/ounce.
• The dollar is up.
• Crude is bombing again, falling to a five-month low. Brent futures are trading around $37/barrel.
• Bitcoin is flat at $13,750. Up roughly 90% this year, Bitcoin is approaching a three-year high.

***

The winners and losers

October is in the books, and it closed with a thud. The S&P 500 fell 4.1% last week, enough to wipe out gains for the entire month. In fact, last week’s sell-off was enough to tip the benchmark index into the red across August, September and October.

As we do here occasionally at Bull Sheet, it’s time to look back at the month that just passed to tally up the winners, the losers and the October surprises.

October had a Jekyll and Hyde feel. The first half boomed. The second half cratered as stimulus talks flamed out and COVID cases spiked.

The biggest losers in our roundup were European stocks. Germany’s DAX fell more than 9% in October. Much of the damage in Germany happened last week, starting with SAP’s monster miss that set the tone for the week.

October wasn’t a good month for any asset class outside of Bitcoin (not in our chart here.) The major U.S. exchanges were all in the red, as was gold.

And, as the sell-off in equities and gold picked up pace in the latter part of October, the dollar climbed. The greenback rallied to end the month totally flat.

You probably recall that the dollar also climbed in the spring, trading higher as equities fell. That trend line is one to watch in the weeks ahead. The basic thinking is that more bad COVID news, combined with a contested election in the U.S., will add to the volailtity in the markets. Such a scenario is good for the dollar, bad for stocks.

There’s something else to mention about the stocks’ swoon last month. It’s occurred amid a stellar corporate earnings season.

As Goldman Sachs told investors in a weekend note, “three weeks into earnings season, 70% of S&P 500 companies have beaten consensus earnings estimates by a standard deviation or more. This is the highest rate since at least 1998. However, investors are not rewarding earnings beats this quarter. While positive earnings surprises have historically led stocks to outperform the market by 105 bp the day after reporting results, this quarter has seen them lag the market by 10 bp.”

As of this morning, 180 companies in the S&P 500 have yet to report. Judging by what we’ve seen so far this earnings period, investors will be preoccupied with politics and the pandemic, and less focused on profits.

***

Postscript

A Bull Sheet reader, whom I’ve known for years, sent me a note last night. She got her certification to work tomorrow at a polling place in Pennsylvania as a “greeter,” which means she’ll be stationed outside the polling center, mostly in the parking lot.

Her job sounds straightforward enough. If somebody has a question, they can ask her. If they don’t have a question, she’s just there to say hello.

There’s also something called a “polling place observer.” Each political party gets one observer that can remain inside the polling place to watch for any irregularities, and to make sure the voting process goes smoothly. This is all fairly common in U.S. elections.

I got her permission to share this note, which I found illuminating. Perhaps those of you outside the United States (or outside PA) may find it interesting as well.

Here’s what she wrote me:

The 2 hr Zoom training was interesting…… Here is what I learned

First, PA is an open carry state which means folks are allowed to vote armed.  I think the 70 people on the t-con were horrified by this.  But….it is a felony to bring any kind of firearm into a school where most polling places are. 

Second….the voting officials think most Dems voted by mail because they believe the pandemic is real, and do not want to expose themselves with long lines on Election Day. They believe those in-person voters will be mostly Republicans.

Third….the training on what to look for inside. Voter intimidation. Taking a long time to sign people in so [as] to frustrate…Asking for IDs. Only the first time you vote at an address do you need to show your ID. Harassing folks that could be considered a minority.

That’s it. I wanted to share this note without comment. Well, except to say this: stay safe, everyone.

***

Have a nice day, everyone. I’ll see you here tomorrow. 

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's reads

Buckle up. Some Wall Street vets believe this could very likely be the most volatile week of the year for your portfolio. (Let's hope the volatility doesn't last longer than that). As such, investor jitters are high. Take this data point from UBS, courtesy of the Wall Street Journal: nearly two-thirds (63%) of investors polled have tweaked their holdings in the weeks running up to the election. The biggest move: increasing their cash position. 

Speaking of cash... Shares in Microstrategy have been on a tear over the past two months, ever since the company announced it was putting its excess cash into...Bitcoin. It's too early to say, of course, whether this was a sound use of its cash reserves, but it's certainly earned the company decent publicity. 

Presidential Predictor. I mentioned this indicator in last week's Bull Sheet. It's an oft-cited markets-performance indicator that's trotted out during presidential election cycles. It says if the S&P 500 finishes in positive territory in the three months prior to Election Day—that is, August through October—then the incumbent party usually wins. (Well, it's held true been in all but one election since 1944). So, what does the Presidential Predictor say about this year's race? Fortune's Jen Wieczner has the scoop. 

Some of these stories require a subscription to access. There is a discount offer for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.

Market candy

Quiz time

One of the big items on the calendar this week (other than the election) is Friday's non-farm payrolls report. The unemployment rate is expected to tick down again, to about 7.7%. So, here's our question: As of last month, which state in the union has the lowest unemployment rate? 

• A) California
• B) Nebraska
• C) Louisiana 
• D) Hawaii

The answer is B, Nebraska, which currently has an unemployment rate of 3.5%. Fortune's Lance Lambert and Nicolas Rapp map out a breakdown of which states are faring well—and not so well—as we head into Election Day.