Market Recap - Large-cap Indices Decline for the Third Straight Week

It Was Another Bad Week For The Mega-Cap Stocks, But Some Rotation Into Cyclical And Value Stocks Did Limit The Index Declines. The S&P 500 (-0.6%) And Nasdaq Composite (-0.6%) Both Lost 0.6%, And The Dow Jones Industrial Average (-0.03%) Finished Just Below Its Flat Line. The Russell 2000 Rose 2.6% In A Catch-Up Trade.

The week started on a bullish note, with the market rebounding from back-to-back weekly declines, but general weakness originated on Wednesday after the FOMC policy decision. The Fed did as expected, so one can't really blame the central bank this week. Briefly, the Fed kept rates unchanged and signaled they will remain near zero through 2023.

The mega-caps showed weakness way before the decision and extended losses throughout the rest of the week amid valuation concerns following a spectacular IPO from Snowflake (SNOW), options-expiration activity on Friday, and news that TikTok and WeChat will be banned from U.S. downloads on Sunday.

Apple (AAPL) fell 4.6% this week, dragging the S&P 500 information technology sector (-1.0%) down with it. The communication services (-2.3%), consumer discretionary (-2.3%), and consumer staples (-1.7%) sectors fell even more, while the energy (+2.9%), industrials (+1.5%), materials (+0.9%), and health care (+0.8%) sectors benefited from a rotational trade.

Factors that contributed to the rotation included AstraZeneca (AZN) resuming its COVID-19 vaccine trials in the UK, rebounding oil prices ($41.09/bbl, +3.75, +10.0%) that favored energy stocks, upbeat guidance out of the steel industry, and General Electric (GE) providing positive cash-flow expectations. GE shares rose 15% this week.

The financials sector (-0.2%) outperformed on a relative basis, but the Fed's acknowledgement of lower rates for longer, and profitability concerns, weighed on sentiment. Citigroup (C) fell 12% on news it could get reprimanded for failing to improve its risk-management systems.

In other developments, NVIDIA (NVDA) agreed to acquire Arm Holdings from Softbank for $40 billion in cash and stock, and House Speaker Pelosi (D-CA) repeated that a stimulus deal must be at least $2.2 trillion. Ms. Pelosi's comments came after centrist lawmakers proposed a $1.5 trillion relief bill that President Trump said he liked.

U.S. Treasuries traded near their flat lines all week. The 2-yr yield remained unchanged at 0.13%, and the 10-yr yield increased two basis points to 0.69%. The U.S. Dollar Index declined 0.4% to 92.95.

Market Recap - Fed Provides New Inflation Policy in Record-setting Week

This Was The Fifth Straight Weekly Gain For The S&P 500 And Nasdaq Composite, Which Ended The Week Higher By 3.3% And 3.4%, Respectively. Both Set New Record Highs While The Dow Jones Industrial Average Turned Positive For The Year With A 2.6% Gain. The Russell 2000 Increased 1.7%.  

Financial stocks were among the week's biggest winners, benefiting from some curve-steepening activity after Fed Chair Powell outlined a shift towards an average inflation target. Under the new framework, the central bank would allow PCE inflation to run moderately beyond 2.0% over time to make up for years when it ran below 2.0%.

The S&P 500 500 financials sector rose 4.4%, following closely behind the communication services (+4.8%) and information technology (+4.5%) sectors atop the standings. Only the utilities sector (-0.7%) closed lower. 

Sprinkled throughout the week were positive coronavirus updates: the FDA approved emergency use authorization for convalescent plasma in hospitalized COVID-19 patients, Abbott Labs (ABT) received emergency use authorization from the FDA for its $5.00, 15-minute COVID-19 antigen test, and Moderna (MRNA) said its COVID-19 vaccine generated a promising immune response in ten elderly patients.

Notably, the latest gauge on consumer confidence offered a pessimistic perspective. The Conference Board's Consumer Confidence Index dropped to 84.8 in August (Briefing.com consensus 93.0) from 91.7 in July for its lowest reading since May 2014. Clearly, investors were more optimistic.

Microsoft (WMT) and Walmart (WMT) rose more than 6.5% this week, helped by reports that the companies are teaming up to possibly acquire TikTok US. Facebook (FB) rose 10.0% in a momentum trade.

Separately, the Dow will look slightly different on Monday. Salesforce (CRM), Amgen (AMGN), and Honeywell (HON) will replace Exxon Mobil (XOM), Pfizer (PFE), and Raytheon Technologies (RTX) prior to Monday's open. Salesforce gained 30% this week, a bulk of those gains coming after its earnings report. 

The 2-yr yield was unchanged at 0.15%, while the 10-yr yield rose nine basis points to 0.73%. The U.S. Dollar Index fell 1.0% to 92.32. WTI crude futures gained 1.6%, or $0.66, to $42.97/bbl.

Market Recap - Rally Continues

The S&P 500 added 0.7% this week while the Nasdaq continued its show of strength, rallying 2.7%. The Dow underperformed, ending the week unchanged.

There was some focus on trade‐related headlines over the course of the week after the August 15 meeting between officials from China and the U.S. did not materialize. An official from China’s commerce ministry said on Thursday that representatives from the two sides will talk “in the coming days.” On a related note, the U.S. took more steps to restrict Huawei’s access to components and there was more pressure on ByteDance to sell TikTok.

Meanwhile, lawmakers in Washington made no progress on the next fiscal stimulus while House Speaker Nancy Pelosi said that she opposes a smaller package.

Concerns about delayed trade and stimulus talks barely registered with the stock market, allowing the S&P 500 and the Nasdaq to finish the week at new record highs.

Five out of eleven sectors ended the week with losses between 1.3% (materials) and 6.1% (energy) while communication services (+1.7%), consumer discretionary (+2.4%), and technology (+3.5%) ended the week in positive territory.

Apple (AAPL) jumped 8.2% during the week, recording its fourth consecutive weekly advance.

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Market Recap - Short of Record Highs

It was another positive week for the market, and it was almost a record-setting week for the S&P 500. The benchmark index gained 0.6% and nearly closed at a record high twice this week amid relative strength in the cyclical and value-oriented stocks.

The Dow Jones Industrial Average outperformed with a 1.8% gain. The Russell 2000 increased 0.6%, and the Nasdaq Composite increased 0.1%.

With the majority of Q2 earnings behind the market, investors looked to economic data for the latest indications on the economy. It remained mostly positive.

Weekly initial claims decreased by 228,000 to 963,000 (Briefing.com consensus 1.150 mln), which was the first time since March that claims checked in below one million; retail sales increased 1.2% in July (Briefing.com consensus 1.8%), and Q2 preliminary labor productivity climbed 7.3% (Briefing.com consensus 5.5%).

Cyclical sectors took the data in stride. The industrials (+3.1%), energy (+2.3%), consumer discretionary (+1.6%), materials (+1.5%), and financials (+1.3%) sectors advanced the most. The utilities (-2.1%), real estate (-1.8%), and communication services (-0.3%) sectors were the only sectors that closed lower.

There were no coronavirus relief talks this week, but that didn’t deter trading sentiment. The Senate adjourned for August recess until after Labor Day, and House Speaker Pelosi (D-CA) said she will only resume talks with White House officials if they are willing to agree to at least a $2 trillion deal.

Separately, Tesla (TSLA) surged 20% in three days after announcing a 5:1 stock split on Tuesday.

The U.S. Treasury curve steepened noticeably this week amid a sell-off in longer-dated maturities. The 10-yr yield rose 15 basis points to 0.71%, while the 2-yr yield was unchanged at 0.13%. The U.S. Dollar Index declined 0.3% to 93.10. WTI crude futures rose 2.1%, or $0.88, to $42.05/bbl.

Market Recap - Taking the Good News in Stride, But No Agreement on Coronavirus Relief Bill

It was a strong week for stocks as the S&P 500 closed higher in every session for a 2.5% weekly gain. The Russell 2000 rose 6.0%, the Dow Jones Industrial Average rose 3.8%, and the Nasdaq Composite rose 2.5%.

The gains were broad, with all 11 S&P 500 sectors finishing in positive territory. The industrials (+4.8%), financials (+3.3%), energy (+3.1%), and communication services (+3.0%) sectors outpaced the benchmark index, while the health care (+0.9%) and real estate (+0.7%) sectors increased the least.

Within the communication services sector, Walt Disney (DIS) surged 11% after reporting a surprise quarterly profit and positing strong subscriber numbers for its streaming platform. Facebook (FB) gained 6%, as investors chased the stock higher in a momentum trade.

In other well‐received corporate news, Microsoft (MSFT) resumed talks to acquire TikTok, and Novavax (NVAX) provided an encouraging vaccine update on a Phase 1/2 trial for healthy adults ages 18‐59.

This week’s economic data continued to depict a rebounding labor market. Nonfarm payrolls increased by 1.763 million in July (Briefing.com consensus 2.000 million), the unemployment rate improved to 10.2% (Briefing.com consensus 10.5%) from 11.1% in June, and weekly initial claims decreased by 249,000 to 1.186 million (Briefing.com consensus 1.400 million) for its lowest level since March.

In addition, data from the ISM showed manufacturing activity and non‐manufacturing activity continue to expand in July.

Separately, Democrats and the White House remained far apart on key relief provisions and were unable to strike a deal. Treasury Secretary Mnuchin said he will recommend to President Trump signing executive orders that extend the eviction moratorium and enhanced unemployment benefits.

U.S. Treasuries declined modestly this week. The 2‐year yield increased three basis points to 0.13%, and the 10‐ yr yield increased two basis points to 0.56%.

The U.S. Dollar Index increased 0.1% to 93.41. WTI crude futures rose 2.6%, or $1.04, to $41.17/bbl.

Market Recap - S&P 500 & Nasdaq Boosted by Mega‐cap Earnings and Dovish Reminder from the Fed

The S&P 500 rose 1.7%, and Nasdaq Composite rose 3.7% in a busy week that concluded with stellar mega‐cap earnings results (and reactions). The Dow Jones Industrial Average declined 0.2%, and the Russell 2000 declined 0.9%.

Apple (AAPL), Amazon (AMZN), Alphabet (GOOG), and Facebook (FB) exceeded quarterly expectations, sending shares, except GOOG, noticeably higher on Friday. Naturally, investors entered the weekend wondering if these stocks can sustain these gains and, consequently, mitigate a possible market pullback. Earlier in the week, shareholders were unfazed by the House Judiciary Committee’s antitrust hearing.

The S&P 500 information technology (+5.0%), real estate (+4.1%), and consumer discretionary (+2.1%) sectors advanced the most this week, while the energy (‐4.3%), materials (‐1.8%), financials (‐0.9%), and industrials (‐0.2%) sectors under performed.

These cyclical sectors were pressured by economic data that showed Q2 GDP decline at an annualized rate of 32.9% (Briefing.com consensus ‐35.0%), initial and continuing jobless claims increase on a weekly basis, and consumer confidence and consumer sentiment decline in July versus June. In addition, lawmakers extended their coronavirus relief bill talks into the weekend.

The Fed was in the spotlight, too. The FOMC left rates unchanged, Fed Chair Powell made it abundantly clear that the central bank is not going to raise rates anytime soon, and the Fed extended its lending facilities through the end of the year.

Other notable developments included the U.S. Dollar Index (93.46) falling to a 2‐year low and gold futures ($1986.20/ozt) breaking out to new highs. The 2‐yr yield declined four basis points to 0.10%, and the 10‐yr yield declined four basis points to 0.54%. WTI crude fell 2.3%, or $0.95, to $40.13/bbl.

Market Recap - Pressured By the Mega‐caps

The week started with a mega‐cap rally that powered the Nasdaq Composite to new heights, but the rest of the week saw money flow out of these mega-cap stocks following earnings.

The Nasdaq ended the week down 1.3% for its second straight weekly decline, followed by modest losses in the Dow Jones Industrial Average (‐0.8%), S&P 500 (‐0.3%), and Russell 2000 (‐0.4%).

The sector standings offered a more mixed picture. The information technology (‐1.5%), communication services (‐1.1%), and health care (‐0.7%) sectors underperformed the benchmark index, while the energy (+2.1%), financials (+1.3%), and consumer discretionary (+1.3%) sectors rose more than 1.0%.

Within the mega‐caps, Microsoft (MSFT) and Tesla (TSLA) reported better‐than‐expected earnings results, but disappointing earnings reactions appeared to cause concern about similar responses in Apple (AAPL), Amazon (AMZN), Alphabet (GOOG), and Facebook (FB) when they report given their huge runs off their March lows.

Amazon, which surged 8% on Monday after its price target was raised to a Street‐high of $3800 at Goldman Sachs and Jefferies, still ended the week higher by 1.6%.

Intel (INTC) disappointed investors with a six‐month delay of its next-generation 7nm chip technology, sending shares down 16% on Friday. Advanced Micro Devices (AMD) gained 16.5% on the news.

Investors were also provided with positive COVID‐19 vaccine data from the Pfizer (PFE) and BioNTech (BNTX) collaboration and the AstraZeneca (AZN) and the University of Oxford collaboration. In addition, Pfizer and BioNTech secured a $1.95 billion vaccine supply agreement with the U.S. government upon FDA approval, but none of the news was market‐moving.

In other developments, the EU agreed to a €750 billion fiscal stimulus package, weekly initial jobless claims increased by 109,000 to 1.416 million (Briefing.com consensus 1.285 million), China ordered the closure of the U.S. consulate in Chengdu in response to the U.S. ordering the closure of the Chinese consulate in Houston, and a GOP coronavirus relief bill was delayed until next week.

U.S. Treasuries were mixed this week. The 2‐yr yield remained unchanged at 0.14%, while the 10‐yr yield declined four basis points to 0.58%. Gold futures settled at their highest price ever at $1897.50/ozt amid a 1.6% decline in the U.S. Dollar Index (94.40, ‐0.30).

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Market Recap - Mixed Week as Earnings Season Begins with Rotational Trade

This week saw the Nasdaq Composite (-1.1%) finally take a breather, as money flowed out of mega-cap technology stocks and into value-oriented cyclical stocks. The S&P 500 advanced 1.3%, trailing both the Dow Jones Industrial Average (+2.3%) and Russell 2000 (+3.6%) in gains this week.

The big banks kicked off the Q2 earnings season with large provisions for credit losses, but that didn’t deter investors from investing in this unloved space this week. The S&P 500 financials sector rose 2.0% as part of the rotational trade, and it’s worth mentioning that most reporting companies did exceed quarterly expectations.

The industrials (+5.8%) and materials (+5.4%) sectors benefited the most from this rotation, though, rising more than 5.0%. The health care sector (+5.1%) also outperformed, deriving its strength from another round of encouraging vaccine news.

Specifically, two COVID-19 vaccine candidates from the Pfizer (PFE) and BioNTech (BNTX) collaboration received fast-track designation from the FDA, and Moderna’s (MRNA) vaccine candidate elicited neutralizing antibodies in all 45 participants in a Phase 1 study.

The market, however, was slowed down by the negative week in mega-cap technology stocks, pestering U.S.-China tensions, and a rollback in the reopening process in California due to the rising coronavirus caseload. In addition, the inability of the S&P 500 to stay above its June 8 closing level (3232.39) kept the bulls in check.

Netflix (NFLX) shares fell 10%, with a bulk of those losses coming after the company issued cautious subscriber guidance at the end of the week. Amazon (AMZN) and Microsoft (MSFT) pulled back 7% and 5%, respectively, following strong performances in the prior week.

U.S. Treasuries traded near their flat lines all week. The 2-yr yield declined two basis points to 0.14%, and the 10-yr yield was unchanged at 0.63%. The U.S. Dollar Index declined 0.7% to 95.95. WTI crude futures finished little changed at $40.56/bbl.

Market Recap - Mega-cap Technology Stocks Power Wall Street higher Ahead of Q2 Earnings

The Nasdaq Composite was where most of the action was this week, as it rose 4.0% and closed at a record high in four of the five trading sessions.

The S&P 500 rose a respectable 1.8%, followed by a 1.0% gain in the Dow Jones Industrial Average. The small-cap Russell 2000, however, declined 0.6%.

The S&P 500 consumer discretionary (+4.8%), communication services (+4.7%), and information technology (+2.7%) sectors were largely responsible for the market’s advance. Conversely, the energy (-4.6%), real estate (-1.8%), industrials (-1.4%), health care (-0.9%), and utilities (-0.2%) sectors finished lower.

This week’s action started with a front‐page editorial in one of China’s state‐run news outlets that suggested a “healthy bull market” was imminent for Chinese stocks. China’s Shanghai Composite rose 7.3% this week. On Wall Street, the bull market in mega‐cap technology stocks was hard to miss.

Tesla (TSLA) rose 27% in a pure momentum trade. Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), and Facebook (FB) rose between 3‐6%. Amazon (AMZN) rose 10% -- brushing past reports that Walmart (WMT) is planning to launch a competing delivery service this month. WMT shares also gained 10%.

On Friday, many of the mega-cap technology stocks did take a breather, as investors rotated back into cyclical/ value stocks following some positive remdesivir news. Gilead Sciences (GILD) said new data showed an improvement in severely ill COVID-19 patients and a 62% reduction in the risk of mortality compared to the standard of care.

In M&A news, Warren Buffett made his first major deal during the pandemic, agreeing to acquire Dominion Energy’s (D) natural gas assets for $4 billion in cash and assuming $5.7 billion in debt. Uber (UBER) agreed to acquire Postmates for $2.65 billion.

U.S. Treasuries finished the week mixed. The 2-yr yield increased one basis point to 0.16%, while the 10‐yr yield decreased four basis points to 0.63%. The U.S. Dollar Index declined 0.7% to 96.63. WTI crude increased 0.4% to $40.57/bbl.

Market Recap - Market Reaps Big, Pre-Holiday Gains

The S&P 500 rose 4.0% this week to recoup last week’s decline and some, as the market entered the third quarter with the same rebounding mindset as last quarter. The Nasdaq Composite (+4.6%) edged out the benchmark index to close at a record high. The Dow Jones Industrial Average rose 3.3%, and Russell 2000 rose 3.9%.

The gains were broad and noteworthy. All 11 S&P 500 sectors closed in positive territory with gains ranging from 1.6% (financials) to 5.6% (communication services). The financial sector was the only sector to advance less than 2.0% this week.

Interestingly, this week was not all that different from last week from a macro news perspective. Companies and states continued to take preemptive measures to help slow down the record count of new coronavirus cases, while economic data continued to depict a faster than expected recovery. This time, though, the market bestowed its faith in a recovery.

In the labor market, nonfarm payrolls increased by 4.800 million in June (Briefing.com consensus 3.50 million), the unemployment rate ticked lower to 11.1% in June (Briefing.com consensus 12.6%) from 13.3% in May, and weekly initial claims declined for the 13th straight week to 1.427 million (Briefing.com consensus 1.355 million).

Outside the labor market, the ISM Manufacturing Index for June returned into expansionary mode with a 52.6% reading (Briefing.com consensus 49.2%), pending home sales rebounded 44.3% m/m in May (Briefing. com consensus +18.0%), and factory orders rebounded 8.0% in May (Briefing.com consensus +7.0%).

In other positive developments, Boeing (BA) resumed 737 MAX flights for certification, and Pfizer (PFE) and BioNTech (BNTX) reportedly made progress on their COVID-19 vaccine candidate.

Tesla (TSLA) shares surged 26% this week, bringing its market cap to $224 billion, as money continued to flow into momentum stocks. The company also pleased investors at the end of the week with news that it delivered approximately 90,650 vehicles in the second quarter.

U.S. Treasuries finished mixed this week. The 2-yr yield declined one basis point to 0.15%, while the 10-yr yield increased three basis points to 0.68%. The U.S. Dollar Index declined 0.2% to 97.22. WTI crude futures rose 5.0%, or $1.93, to $40.42/bbl.