Stocks struggle as concerns grow over virus spread

The US presidential election is just a week away and only 5 more trading days are left until then. Time has run out for US lawmakers to finish an aid package before then, after senators departed for the pre-election break on Monday. Hopes over a deal had kept the markets supported until now, but with no breakthrough, the stimulus package will now have to wait until after the election. This means that investor sentiment will be dominated by the resurgent coronavirus until at least the election day, as well company earnings.
 
European stocks fell further, following Monday’s sell-off, while US indices were trying to cling onto the positive territory at the time of writing. Once again it was technology shares that outperformed the wider market, boosted by M&A news. Advanced Micro Devices announced a $35 billion takeover of Xilinx Inc., sending its shares sharply higher.
 
However, with the lack of any significant bullish sparks from a more macro point of view, I wouldn’t be surprised if Wall Street also ended sharply lower today.
 
In Europe, many countries are closer to announcing even stricter rules like those imposed during the initial wave of the pandemic. The current half-hearted measures have failed to curtail the second wave of the disease. Fears have grown that as the region’s virus situation is moving towards that of early March, the second wave could be even worse. A vaccine is badly needed. Yet, there are no signs that one is going become imminently available. Even if one becomes available soon, there are no guarantees it will reach everyone in time and there will be lots of question marks over their efficacy against the virus.  
 
Investors will therefore be hoping to have solid company results to save the rally. Here are this week’s earnings highlights:
 
UK:

 
US:

 
The above earnings results will provide lots of volatility and trading opportunities for individual companies and possibly the affected sectors.

It will be important to pay close attention to what the CEOs of these companies say about the current situation and, more to the point, the outlook. Their views will offer fresh clues about the health of the global economy. So, if we hear more pessimism from these companies, then we could see renewed falls in stocks as investors price out their bullish and optimistic forecasts.

This week we will also have GDP reports from the US and Eurozone, as well as three major central bank meetings as I outlined in the week ahead report on Friday.
 
Meanwhile from a technical point of view the S&P 500 and the Nasdaq 100 are both testing key technical levels, and so far holding above them
 
Wil S&P hold or break trend support?
 
The S&P managed to hold the first retest of the bullish trend line support yesterday. But if this breaks, then watch out below:


Source: ThinkMarkets and TradingView.com

Alternatively, a potential break above the channel would be deemed a positive development.
 
While the index is continues inside the bearish channel, the bulls will need to proceed with extra caution as the index could easily break down and trigger a stop run on weaker longs.
 
Tech-heavy Nasdaq also holding support for now
 
The Nasdaq 100 was also holding its own trend line for now, ahead of those big tech earning - let’s see what the next few days bring: