The Stock Market This Week: October 12-16

By: Stacey Nickens

  • Earnings Reports: Earnings reports from banks have been mixed this week. JPMorgan Chase, Citigroup, Morgan Stanley, and Goldman Sachs reported better-than-expected earnings. However, JPMorgan Chase accompanied their positive earnings by reiterating the helpfulness of fiscal stimulus. JPMorgan pointed out that banks may face higher defaults moving forward if unemployment remains at such high levels and consumers do not receive economic relief. Citigroup also raised their unemployment expectations for 2021 to 6.4%, while JPMorgan lowered their unemployment expectations to 7%. Later in the week, Goldman Sachs posted impressive earnings with the help of their trading desk; however, both Bank of America and Wells Fargo underperformed expectations and reported profit losses. All in all, trading-focused banks seemed to have faired far better than retail banks during this pandemic.
  • Economic News: Both the Consumer Price Index and Producer Price Index increased in September. However, even with the increase, the economy remains far off the Fed’s 2% inflation goal. The PPI did reach a 0.4% year-over-year gain, the first time the index has posted yearly gains since March. On the other hand, weekly jobless claims climbed to 898,000 and reached a peak that hasn’t been seen since August. This reading points to continued weakness in the labor market. Retail sales jumped 1.9% in September thanks to increased consumer spending on cars, clothing, sporting goods, and eating out. This reading beat the expected 0.7% increase in sales. With high unemployment rates and no fiscal stimulus in sight, some analysts worry that spending will stagnate moving forward. Indeed, manufacturing production dropped 0.3% in September after increasing in August. This marks the first decline in manufacturing activity in the past five months.

On Monday, major indexes rose with the help of mega-cap stocks. The S&P 500 advanced 1.6%. The Nasdaq climbed 2.6%, and the Dow Jones was up 0.9%. Both Apple and Amazon stock outperformed ahead of their events. Apple will have their iPhone 12 event on Tuesday, and Amazon kicks off Prime Day on Tuesday as well. The market also seemed optimistic ahead of earnings reports from several banks this week. Pessimistic stimulus news did not deter market advances. The market advanced even though House Democrats and Senate Republicans rejected the White House’s latest $1.8 trillion stimulus package suggestion. By close, the information technology, communication services, and consumer discretionary sectors finished with strong gains. The materials sector closed with a 0.2% loss.

On Tuesday, the market struggled following the release of several earnings reports from banks. While JPMorgan Chase and Citigroup outperformed expectations and had to put less money aside for defaulted loans, the banks also presented cautionary tales of economic recovery. JPMorgan Chase underscored the need for further fiscal stimulus, and Citigroup raised their unemployment expectations for 2021. Moreover, the market fell following some concerning vaccine developments. Johnson & Johnson paused their vaccine trials after a participant became sick, and Eli Lilly stopped their antibody trials for safety reasons. By close, both the Dow Jones and S&P 500 fell 0.6%. The Nasdaq dropped 0.1%. With the sobering banking commentary, the financial sector was down 1.9%. Real estate, energy, and industrials also closed lower. Communication services and consumer discretionary posted modest gains. In economic news, both total CPI and core CPI rose 0.2% in September, locking in year-over-year readings of 1.4% and 1.7%, respectively. These readings point to rising prices; however, the readings also suggest the economy is far away from the Fed’s 2% inflation goal. The NFIB Small Business Optimism Index rose in September as well.

On Wednesday, pessimism around fiscal stimulus spiraled the market lower. The S&P 500 dropped 0.7%. The Nasdaq fell 0.8%, and the Dow Jones declined 0.6%. These losses seemed partially attributed to Treasury Secretary Steve Mnuchin’s comments that additional financial stimulus would be unlikely before the election. House Speaker Nancy Pelosi underscored this point by saying that significant disagreements remained. Additionally, some bank stocks dragged on the market. Both Wells Fargo and Bank of America reported profit losses, and their stocks accordingly fell in daily trading. However, Goldman Sachs blew out earnings expectations thanks in part to their strong trading business. All in all, the financial sector fell 1.1% in daily trading. Consumer discretionary, communication services, and real estate also closed in negative territory. Industrials, materials, and energy posted gains. Energy got a boost from higher oil prices and rumors of a merger or acquisition involving Concho Resources. In economic news, the Producer Price Index rose 0.4% m/m, beating expectations. The PPI is now up 0.4% year-over-year and is posting a yearly gain for the first time since March.

On Thursday, the market struggled under renewed COVID concerns in Europe. Many European countries are imposing additional restrictions and lockdowns to cope with rising infection rates. On that news, the S&P 500 fell 0.2%. The Nasdaq lost 0.5% due to weakness among technology stocks, and the Dow Jones slipped just 0.07%. Traders also contended with a spike in weekly jobless claims. Last week’s claims clocked in at 898,000 — the highest level since mid-August. The rise in claims points pointed continued weaknesses in the labor market, and with additional fiscal stimulus still uncertain, investors seemed nervous about this rising metric. The energy, financials, and real estate sectors posted strong gains in daily trading and helped the S&P 500 minimize its losses. However, the communication services, healthcare, and information technology sectors dragged on the benchmark index. Among corporate earnings reports, both Morgan Stanley and Walgreens Boots Alliance exceeded expectations and rose in daily trading. Comparatively, United Airlines Holdings struggled following a disappointing earnings report and continued pessimism around the recovery of the airline industry.

On Friday, stocks closed with some gains following better-than-expected retail sales results. The S&P 500 climbed 0.01%. The Dow Jones added 0.4%; however, the Nasdaq fell 0.4% with the information technology sector finishing in negative territory. The energy sector saw the worst losses of the day and fell 2.3%. The consumer discretionary and real estate sector also finished lower. Comparatively, the healthcare, industrials, materials, and utilities sectors were the day’s biggest winners, each outperforming the S&P 500. Retail sales increased 1.9% in September, beating the initial estimate of a 0.7% gain. However, on a more pessimistic note, manufacturing production declined 0.3% in September, marking the first manufacturing decline in five months. In individual company news, Pfizer shares climbed after the company announced that they would likely be able to apply for emergency-use authorization of their COVID vaccine by late November.