The Stock Market This Week: September 28-October 2
The Stock Market This Week: September 28-October 2
By: Stacey Nickens
- Sector News: Earlier in the week, we saw spotty, but strong performances, from some of the worst-hit sectors. The financial and energy sector posted significant gains on Monday, and we saw strong performances from JPMorgan Chase, Goldman Sachs, Chevron, and Devon Energy. Investors buying less expensive stocks contributed to some of these gains, while positive merger news also played its part. The financial and energy sectors reversed their gains ahead of the Presidential debate on Tuesday; however, many cyclical sectors were up early on Wednesday with the help of stronger-than-expected financial news and hope for fiscal stimulus. When Senate Majority Leader Mitch McConnell dashed some of this hope, energy dropped into negative territory while financials maintained its gains. On Thursday, cyclical sectors spiraled lowered due to pessimism about additional fiscal stimulus. However, on Friday, President Trump’s COVID diagnosis gave renewed hope for fiscal stimulus, and cyclical and value stocks finished the week on a strong note.
- Economic News: An increase in consumer confidence in September coupled with strengthening retail inventories in August suggest that spending may increase in the fourth quarter. Moreover, an estimated 749,000 private-sector payroll jobs were added in September as the unemployment rate continued to drop, hopefully strengthening the labor market and bolstering further economic recovery. Despite these hopes, initial jobless claims remained elevated and pointed to the lengthy road to recovery ahead of us. This sentiment was underscored when Friday’s economic data showed that labor participation decreased in September. Without enhanced unemployment benefits, personal income fell in August; however, spending remained elevated. The numbers suggest that people may be spending from their savings as the personal savings rate dropped to 14.1%.
- GDP: Despite falling less-than-expected, the third estimate for the second quarter GDP still showed a 31.4% annualized drop quarter over quarter, with the second quarter still seeing the worst economic downturn on record.
On Monday, major indexes rose on the backs of financial and energy stocks. The Dow Jones climbed 1.5%. The S&P 500 rose 1.6%, and the Nasdaq added 1.9%. All 11 of the S&P 500 sectors finished in positive territory; however, the financial and energy sector made the largest gains, adding 2.3% each. JPMorgan Chase and Goldman Sachs both climbed in daily trading, and Chevron also gained as investors gravitated towards less expensive stocks outside of the technology sector. Devon Energy had a strong day of trading after the Wall Street Journal reported that the company would merge with WPX Energy. In other corporate news, Uber shares gained following the company winning an appeal over the retraction of their London operating license.
On Tuesday, major indexes declined in a lackluster trading day. The S&P 500 fell 0.5%. The Nasdaq declined 0.3%, and the Dow Jones lost 0.5%. Many traders seemed to be holding their breath in anticipation of the debate, with both the energy and financial sectors falling significantly. Communication services was the only sector to finish in positive territory thanks to Facebook gaining in daily trading. In economic news, the Consumer Confidence Index rose in September, suggesting that consumers may increase spending in the fourth quarter. The Case-Shiller Home Price Index increased in July while advanced wholesale inventories and advanced retail inventories increased in August. The House Democrats introduced a $2.2 trillion stimulus bill that may still be too high for Republicans; however House Speaker Nancy Pelosi is continuing discussions with Treasury Secretary Steve Mnuchin.
On Wednesday, the futures market posted gains in the morning and early afternoon. Cylicial sectors performed strongly during this time following the release of better-than-expected economic data and positive news about financial stimulus. Initially, House Speaker Nancy Pelosi, White House Chief of Staff Mark Meadows, and Treasury Secretary Steven Mnuchin expressed hopefulness around fiscal stimulus. However, following comments from Senate Majority Leader Mitch McConnell that they are far from an agreement, the market began to slide. Industrials and energy tumbled into the negative. Yet buyers were able to step in a fend off some of the losses. By the end of the day, the S&P 500 added 0.8%, finishing negative for the month but positive for the quarter. The Dow Jones rose 1.2%, and the Nasdaq climbed 0.7%. In sector news, health care, consumer staples, financials, and information technology all rose in daily trading. Some of the positive economic news included the addition of an estimated 749,000 private-sector payroll jobs in September. Additionally, Chicago PMI soared to 62.4% in September. Pending home sales were up 8.8% in August. Despite falling less-than-expected, the third estimate for the second quarter GDP still showed a 31.4% annualized drop quarter over quarter, with the second quarter still seeing the worst economic downturn on record.
On Thursday, major indexes rose with the help of technology stocks. The S&P 500 gained 0.5%. The Nasdaq added 1.4%, and the Dow Jones was up just 0.1%. The S&P 500 was up 1% earlier in the day after news suggested Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi might be getting closer to a deal. However, when later reports dampened these hopes, the index lost some of its steam. Cyclical sectors fell after these reports, with energy, materials, industrials, and health care finishing in the negative. Investors were more attracted to growth investments and drove consumer discretionary, communication services, and information technology into positive territory. Amazon also helped the market after Pivotal Research Group raised their price target on Amazon to $4,500. In economic news, initial claims for the week ending in September 26 fell by 36,000 and landed at 837,000. The ISM Manufacturing Index came in at 55.4% as the sector continues to recover. In August, personal income declined 2.7% m/m while personal spending increased. Finally, construction spending rose 1.4% m/m in August.
On Friday, major indexes declined; however the S&P 500 was able to recover some of its losses with the help of value and cyclical stocks. After news broke that President Trump was diagnosed with COVID-19, political and economic uncertainty weighed on the market. The S&P 500 was down as much as 1.7% in intraday trading. However, President Trump’s diagnosis seemed to have spurred fiscal stimulus discussions. With renewed hope for economic relief, the industrial, energy, materials, financial, and real estate sectors made gains and finished in positive territory. In the end, the S&P 500 closed with a 1% loss for the day. The information technology sector largely underperformed. Apple and Tesla both dropped significantly in daily trading, and as a result, the Nasdaq fell 2.2%. The Dow Jones finished with a 0.5% loss. In economic news, jobs data was mixed. The unemployment rate for September fell from 8.4% to 7.9%; however, labor force participation also fell to 61.4%. Consumer Sentiment for September increased to 80.4, and factory orders increased in August as business spending continued to increase.
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