S&P 500 Weekly Forecast: US election countdown, 50-day SMA supports

Stocks on Wall Street ended the week mixed while investors continued looking for signs of progress in the stimulus talks between congressional Democrats and the White House.

The Dow Jones Industrial Average closed down 28.09 points, or 0.1%, at 28,335.57, the S&P 500 settled up 11.90 points, or 0.3%, at 3,465.39.

The Nasdaq Composite finished higher 42.28 points, or 0.4%, at 11,548.28.

For the week, the Dow was down 0.9%, with the S&P 500 0.5% lower and the Nasdaq down 1.1%.

It's been a turbulent time in markets. The VIX has been in a trading range of roughly 25-30 over the past six weeks, and there is plenty to out there to keep volatility up.

With just over a week to go to the US presidential election, national polling puts former Vice President Joe Biden comfortably ahead of incumbent US President Donald Trump.

However, other analysis of state polling, which is a better guide to the winner of the electoral college and thus the presidency, suggests that the race is tighter.

On the other hand, there are far fewer undecided voters now compared to 2016 and Biden is consistently polling around 50%. Hillary Clinton, the Democratic candidate for the previous US presidential election, never reached that and the gap between Biden and Trump has been remarkably stable.

Meanwhile, without a new agreement emerging in Washington, DC, the bulls may be reluctant to invest heavily so close to the US elections on 3rd November at the start of the week.

Treasury Secretary Steven Mnuchin warned a deal would only be possible if Democratic House Speaker Nancy Pelosi was willing to compromise, saying that she has "dug in" and that there are still significant differences.

White House Economic Adviser Larry Kudlow noted "it is going to be very hard to get it done".

The news of the spread of the coronavirus in European markets from the weekend will be an additional risk.

The second wave of the coronavirus is gathering pace although the recent news of an FDA approval for antiviral drug remdesivir gave a hint of positive news, as do the prospects of the Johnson & Johnson trials getting back on track. 

However, European countries have reported sky-high numbers of new coronavirus cases as the continent prepares for the pandemic to intensify through winter.

The swell has forced countries to impose even-more social-distancing rules in a bid to avoid a return to full-blown lockdowns.

Spain has announced a national state of emergency and has imposed a night-time curfew in an effort to help control a new surge in infections.

In Italy, new restrictions were also announced over the weekend.

As for the performers from last week, communication services led advancing sectors, rising about 1.1%. Facebook (FB) gained 2.4%, and Alphabet (GOOGL) added 1.6%.

Next week is poised to be a busy one again for major tech players which will release their earnings including Facebook, Apple and Alphabet.

With roughly 27% of the S&P 500 companies having reported earnings so far, 73% have already beaten estimates on the top line while 84% have beat on the bottom line.

This compares to the respective 65% and 85% seen in the prior quarter.

Investors will rely on rosy surprises to potentially help the balance to the upside vs the various negative themes to help cushion downside potential in equities.

All eyes will also be on third-quarter US Gross Domestic Product where a record bounce back is expected immediately following the worst quarterly contraction on record.

European and Canadian growth data will also cross the wires while the European Central Bank will be on the cards as an additional catalyst for global stock markets.

S&P 500 levels

The index has also pulled back from October’s highs around 3,550, trading now within a range of roughly 3,400, or the 50-day SMA, and that October high of 3,550.