The Stock Market This Week: September 14-18
By: Stacey Nickens
On Monday, all major indexes rose after the announcement of promising acquisition and vaccine news. The S&P 500 rose 1.3%. The Nasdaq gained 1.9%, and the Dow Jones added 1.2%. In acquisition news, NVIDIA, Gilead Sciences, and Verizon’s stocks all soared after the companies announced their intentions to acquire Arm Holdings, Immunomedics, and Tracfone, respectively. Similarly, Oracle’s stock rose after reports suggested the company won the bid to acquire U.S. operations of TikTok. In positive vaccine news, AstraZeneca resumed their COVID-19 vaccine trials in the U.K. The company had halted trials last week after a patient became inexplicably ill. Pfizer also said that they expected to have results from their COVID-19 vaccine trials in October. All 11 of the S&P 500 sectors finished with gains. Real estate and information technology performed the strongest while communication services made the most modest gains.
On Tuesday, mega-caps and growth stocks helped the S&P 500 rise 0.5% and the Nasdaq gain 1.2%. The Dow Jones finished virtually unchanged in daily trading. Overall, the information technology, communication services, real estate, and consumer discretionary sectors all posted gains. Apple was one of the few standouts. Despite revealing a host of new products and plans at their event on Tuesday, Apple’s stock only gained 0.2%. In other sector news, financials, energy, and consumer staples all dropped. Shares in JPMorgan fell after they lowered their FY20 net interest income guidance. Citigroup’s stock also fell after news came out yesterday that Citigroup may face a penalty due to their risk management practices. The utilities company NextEra Energy gained 4.9% on Tuesday after increasing their 2021 earnings-per-share guidance and announcing a stock split. In economic news, industrial production increased at a slower pace in August than in July, suggesting that manufacturing growth has slowed. Import and export prices also increased in August.
On Wednesday, the S&P 500 fell 0.5%, following the downward trajectory of mega-cap stocks. The Nasdaq also fell 1.3%; however, the Dow Jones climbed 0.1%. In part, the market seemed influenced by the Fed’s announcements. The Fed revealed that they would not change the funds rate. They stated that they would consider raising the policy rate when the economy had reached maximum employment and a consistent 2% inflation rate for some time. The central bank also increased their GDP estimates for 2020 while simultaneously lowering their estimates for 2021 and 2022. Overall, though, mega-caps seemed to be the main drag on the market. Information technology, communication services, and consumer discretionary all finished in the negative. Along these lines, Facebook stock was down after reports that the company may face an antitrust suit. Cyclical energy, financials, and industrials made gains in daily trading. In individual company news, FedEx gained 5.8% after a better-than-expected earnings report. Snowflake stock soared 111.6% following their initial public offering (the largest software IPO in history). On the economic front, total sales increased in August, though at a slower rate than in July. The numbers suggested that spending slowed without enhanced unemployment benefits; however, notably, spending did not contract.
On Thursday, major indexes continued to decline due to weakness among the mega-cap stocks. The S&P 500 fell 0.8%. The Nasdaq declined 1.3%, and the Dow Jones dropped 0.5%. Overall, mega-caps dragged on communication services, consumer discretionary, and information technology. As Snowflake stock tumbled following their historic IPO, it’s possible that valuation concerns and profit-taking measures led to further decline among mega-cap and growth stocks. Comparatively, cyclical sectors had a much stronger day, with cyclical materials, industrials, and energy all finishing with gains. The market seemed to favor the cheaper cyclical securities over the higher-valued, higher-risk mega caps and growth stocks. Additionally, an increase in oil prices as well as strong performances from Nucor and General Electric helped cyclical and value stocks make gains. In economic news, initial claims for the week ending in September 12 held fairly steady at 860,000. In recent week, initial claims have hovered around 900,000 as layoffs remain elevated, suggesting there is still a long road to full economic recovery. Additionally, while housing starts for August declined m/m, single-family housing starts and permits increased both m/m and yr/yr. The data suggests a continued strength in demand for single-family homes.
On Friday, major indexes fell on the backs of tumbling technology stocks. These high-valuation stocks have an outsized influence on market performance. Indeed, this influence is so outsized that a version of the S&P 500 that equally weights all companies performed evenly throughout the month. However, the actual index with high tech valuations has fallen over 5% this month. In daily trading, the Dow Jones fell 0.9%. Both the Nasdaq and S&P 500 declined 1.1%. In individual company news, Oracle stock was down following the Trump administration’s announcements that they would prevent downloads of TikTok and WeChat. The administration is currently reviewing a proposal by TikTok and Walmart to own a majority stake in TikTok. Economic news showed that consumer sentiment actually increased in early September at levels that were greater than expected.
This Week’s Important Highlights:
- The Fed announced that they would interest rates near zero through 2023. They said they would consider raising interest rates when the economy had achieved maximum employment and around 2% inflation for some time. Keeping interest rates near zero helps weaken our dollar in comparison to other currencies. This move would accordingly increase U.S. exports because U.S. goods become cheaper than foreign goods. Indeed, it seems the Fed is actively engaged in reinflation efforts to bolster the U.S. economy.
- Both manufacturing growth and total sales increased in August, though at a slower pace than in July. The data suggests that economic activity is not contracting; however, without increased stimulus and enhanced unemployment benefits, the rate of recovery seems to have slowed. This trend is further underscored by initial jobless claims steadying around 900,000. With the claim rate remaining relatively stable during the past few weeks, numbers point to continued layoffs and a slow down in rehiring activity.
- Mega-cap and growth stocks dragged on major indexes during the latter half of the week. Facebook could be facing an antitrust lawsuit, and Snowflake’s stock volatility following their IPO seems to have spurred valuation concerns among the increasingly-expensive tech industry.
- Housing starts declined in August m/m. However, single-family housing starts and permits increased m/m. This economic indicator suggests that there remains a strong demand for single-family homes.
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