Stocks finish mixed as post-election surge cools off

The Dow slipped 67 points, or 0.2%. The S&P 500 and the Nasdaq were flat. Stocks had rallied sharply for the past four days, a big rebound from last week's market rout.

Even after Friday's mixed session, the Dow and S&P 500 posted gains of about 7% this week — the best performance since June. The Nasdaq rallied 9% in the past five days.

The bet on Wall Street seems to be that there will be more stimulus from Washington at some point soon, whether Joe Biden wins the race for the White House or President Trump is reelected.

Another financial aid package is clearly needed given that the unemployment rate, despite dropping dramatically last month, still remains at an elevated level of 6.9%.

That's down from 7.9% in September -- but sharply elevated from the 3.5% level in February before Covid-19 ground the US economy to a virtual standstill.

The government reported the latest jobs figures Friday morning and said 638,000 jobs were added last month -- more than expected.

On Thursday, Federal Reserve chairman Jerome Powell also emphasized the need for even more fiscal help from Washington during a press conference after the central bank decided to leave interest rates at zero.

"There is still a fair amount of uncertainty about the economy," said Dan Eye, head of asset allocation and equity research with Fort Pitt Capital Group. "The Fed may even need to step up and do even more."

But investors also appear to be cheering the likelihood that the Senate will remain in Republican control. That could mean some of the more progressive policies pushed by more liberal Democrats may not make it through Congress, even if Biden is the next president.

In other words, the old "gridlock is good for Wall Street" narrative is alive and well.

"The market had made a half-hearted attempt of pricing in a blue wave," said Timothy Chubb, chief investment officer with Girard.

"But if we have a split Congress and a potential President-elect Biden is not able to move forward with more substantial health care and tax reform, the market will ultimately see that as a positive," Chubb added.

Still, there are concerns that a divided government could mean that Congress won't wind up passing a big infrastructure spending bill -- something that investors have been hoping for since Hillary Clinton and Trump squared off for the presidency four years ago.

"A blue wave would have been more beneficial because it would jave led to even more stimulus spending and higher economic and earnings growth," said Steve Rick, chief economist at CUNA Mutual Group.

That's all the more reason why current market leaders -- namely big techs like Apple, Amazon and Microsoft -- may remain investors' favorites, Fort Pitt Capital's Eye said.

Meanwhile on Friday, several high-profile momentum stocks including The Trade Desk, Roku and Square rallied on the back of strong results.

Cannabis stocks Aurora, Canopy Growth, Cronos and Tilray all surged Friday and posted big gains this week after several states legalized recreational marijuana use. Canopy and Tilray will report their latest quarterly results Monday.

Drug store giant CVS, which also reported solid earnings, surged 6% too. The company said Friday that it was promoting executive vice president Karen Lynch, who also runs CVS insurer subsidiary Aetna, to CEO as of next February.

Lynch will become the 40th woman leading a Fortune 500 company.