A rebound in stocks looked premature despite a 0.7% rise in Nasdaq futures on Monday, with election uncertainty limiting the appetite to buy, according to Bloomberg Television's market analysis.
The gain followed a broad selloff across assets on Friday and a poor October for stocks. The discussion aired on “This Bounce in Stocks Appears Premature: Market Analysis,” published Nov. 2.
The rebound was described as “a bit of a dead cat bounce,” meaning a temporary recovery after a steep fall. The analysis questioned whether the morning's gains represented a lasting change after Friday's losses.
Investors faced difficulty justifying fresh purchases before the US midterm elections after losses in October. Uncertainty about Donald Trump's actions and the US approach to Iran also hung over markets for the next week or two.
The election itself was not expected to be a major driver of the broader market. The immediate concern was the difficulty of buying aggressively before those uncertainties cleared, with further losses expected during the week.
The discussion nevertheless distinguished that short-term outlook from a more positive view over the medium term. Further weakness into early November was seen as potentially offering a buying opportunity for investors taking a longer view.
Growth remained supportive in that assessment, while the boom in capital expenditure, or spending on facilities and equipment, had not yet burst. The discussion treated the spending outlook as more complicated than a simple collapse.
A Democratic victory in both houses of Congress could intensify short-term market concerns. It was not expected to alter the broader course of the artificial intelligence investment boom over the following month or two.
Growth in spending on artificial intelligence was already slowing, although spending itself continued to rise. Much of the following year's expenditure had funding in place, supporting the view that the investment cycle would continue.
The election's effects were expected to vary between individual companies, with some facing greater damage than others. Continued corporate spending was supporting investment at other businesses and providing jobs, helping sustain economic growth.
Attention then turned to Apple's earnings, which the discussion said were due that day. Apple's size gives it a large presence in stock indexes and exchange-traded funds, which hold baskets of investments.
Apple had served as a haven within technology stocks and remained near its highs despite weakness among other large technology companies the previous week. Disappointing results were seen as a possible trigger for another bout of selling.
The discussion gave no earnings forecast for Apple and did not specify which companies would suffer most from an election result. It also left open what developments involving Iran would change the market outlook.
