U.S. Stocks Edge Lower as Election-Week Rally Pauses

By Mischa Frankl-Duval and Gunjan Banerji

U.S. stocks slipped Friday, interrupting the sharpest weekly rally since April as investors focused on the still-undecided presidential election, surging Covid cases and fresh jobs numbers.

The S&P 500 fell 0.5% shortly after the opening bell. The Dow Jones Industrial Average lost 0.4%. The technology-heavy Nasdaq declined 1%.

Stock futures pared their losses after the latest jobs report showed hiring picked up last month at a stronger pace than expected. The unemployment rate fell to 6.9% in October, better than the 7.7% figure economists surveyed by The Wall Street Journal had forecast. The U.S. economy added 638,000 jobs in October, more than the 530,000 projected.

"I was afraid that the rise in Covid would hurt the report," said Chris Grisanti, chief equity strategist at MAI Capital Management. "I was pleasantly surprised."

The mild declines in early trading Friday come at the tail end of a blockbuster week for the stock market. Stocks have vaulted higher as the prospect of a split Congress reduced the chances of a corporate-tax hike should Democratic candidate Joe Biden win the presidency. Mr. Biden gained a lead over President Trump in Georgia early Friday morning and narrowed the gap in Pennsylvania. He was also leading in Arizona and Nevada, putting him within striking distance of the 270-electoral college votes needed to win the White House.

"I just think it's a pause for breath," said Altaf Kassam, head of investment strategy and research for Europe, the Middle East and Africa at State Street Global Advisors, of Friday's moves.

Mr. Kassam attributed this week's rally to a "goldilocks scenario," where a Republican Senate dilutes the power of a Democratic president, limiting his ability to enact tax increases or antitrust regulation against big tech companies.

All three major stocks indexes are up at least 6% for the week.

The relative weakness of stocks on Friday came a day after the Federal Reserve left policy unchanged, but highlighted rising risks to the economy from the coronavirus pandemic.

"There is a sense of urgency coming from the fact that the second wave, or the U.S. third wave, is becoming definitely much worse than I think we were expecting," said Luca Paolini, chief strategist at Pictet Asset Management.

The U.S. recorded another record-high day of newly reported coronavirus infections Thursday, with nearly 121,888 infections, according to data compiled by Johns Hopkins University. The tally is 18.5% higher than Wednesday's 102,831. More than 1,200 deaths were reported on Thursday, according to Johns Hopkins data, a figure not seen since mid-September.

In corporate news, shares of T-Mobile US jumped almost 8% after the company said it continued to add customers in the third quarter and told investors the cost-cutting plan it launched in the wake of its Sprint takeover is running ahead of schedule.

In commodities markets, U.S. crude oil prices dropped 3% to $37.64 a barrel in recent trading, erasing some of the gains made earlier in the week amid hopes for longer, deeper supply cuts. Behind Friday's fall was a combination of rising coronavirus cases -- which is hampering crude's demand recovery -- and the protracted tallying of U.S. votes.

"A Biden victory is more likely to weigh on the oil price in the longer term because it makes rapprochement more probable in the Iran conflict and would see a greater focus on renewable energies," said Eugen Weinberg, head of commodities research at Commerzbank.

Gold prices crept 0.2% higher in recent trading, on course to end the week up more than 3.5%.

China's Shanghai Composite closed 0.2% lower, while Japan's Nikkei 225 index rose 0.9%.

Write to Mischa Frankl-Duval at [e-mail] and Gunjan Banerji at [e-mail]

(END) Dow Jones Newswires

11-06-20 1007ET