Week 25 in Brief
How did the major indexes perform?
All three US indices finished the week with modest gains. On Friday, the indexes gave up strong gains to close mostly lower on the session, after headlines raised concern about a resurgence of the coronavirus, a slowdown in the economy’s recovery, and as Apple said it will re-close nearly a dozen stores due to rising case counts.
- The Dow Jones Industrial Average finished 207 points, or 0.8%, lower at 25,871;
- The S&P 500 index closed 0.6% lower at 3,098 for the day; and the Nasdaq Composite finished virtually unchanged at 9,946.
- For the week, the Dow booked a 1% weekly gain, the S&P 500 returned 1.9% and the Nasdaq notched a 3.7% weekly advance.
- Friday marked the so-called quadruple witching, which occurs on the third Friday of the month in March, June, September, and December and can cause higher volumes and volatility as single-stock options, single-stock futures, and stock-index options and stock futures all expire. Index rebalancing has often been associated with an uptick in market volatility when index and exchange-traded funds tracking the S&P 500 adjust. S&P Dow Jones estimates that more than $11.2 trillion in assets are indexed or benchmarked to the S&P 500.
- Shares of Slack Technologies Inc were off 3.2% Friday after Goldman Sachs analyst Heather Bellini downgraded the stock to sell from neutral. She maintained a $30 price target on the stock, which is up 63% over the past three months as the S&P 500 has risen 29%. Slacked closed trading at $33.13.
European stocks rose gained on Friday and were headed for a weekly gain after days of worries over rising coronavirus cases in parts of the world. Potential good news on the U.S.-China trade front also drove the momentum.
- Shares in London lead the region, the FTSE 100 up 1.10%. The pan-European Stoxx 600 closed 0.6% higher, at 365.46, France’s CAC 40 is up 0.42% and Germany’s DAX is up 0.40%.
- Among stocks on the move, shares of Wirecard tumbled another 43%, extending Thursday’s declines when the German payments processor said its auditor couldn’t locate €1.9 billion ($2.1 billion) in cash on its balance sheet. Wirecard could see banks terminate €2 billion in loans if it can’t file its 2019 accounts on Friday. The company announced it was holding “constructive discussions” with lenders and that it had mandated investment bank, Houlihan Lokey, to “develop a plan for the sustainable financing strategy of the company”. If the company fails to file audited accounts for 2019 on Friday, lenders have the right to terminate the loans. Wirecard closed trading at €24.70.
Asian markets finished higher on Friday with shares in China leading the region, but trading was mixed as optimism about a possible global economic recovery was tempered by concern over rising coronavirus infections.
- The Shanghai Composite Index rose 0.4% to 2,951.39 and the Nikkei 225 in Tokyo added 0.1% to 22,385.10. The Hang Seng in Hong Kong lost 0.1% to 24,427.41 and Seoul’s Kospi shed 0.4% to 2,121.51.
- The dollar gained 0.51% this week against a basket of currencies, its best performance since mid-May.
- The euro was slightly weaker, down 0.12% at $1.119, as an EU summit, in which the bloc will seek to bridge regional divisions over a 750 billion coronavirus recovery fund, got underway.
- The 10-year Treasury note yield was flat at 0.70%.
Commodities and other assets
- Oil prices rose on Friday but pulled back sharply from early highs on concerns that continued spread of the novel coronavirus could stall the United States’ economic rebound, and comments from the Boston Federal Reserve that the US economy requires more fiscal and monetary support.
- The international benchmark, Brent crude closed at $42.20 for a 9.5% weekly gain, after it opened on Monday at $38.80 a barrel. West Texas Intermediate (WTI) also finished the week on a good note, as it closed at $39.98 a barrel with an 11% weekly increase, after starting the week at $36.03 per barrel.
- The commodity is up more than 10% for the week and looking at its highest close since June 8. Meanwhile, oil traders have flagged the start of hurricane season as a potential headwind for crude oil prices.
- In bullion trading, August gold on Comex advanced $21.90, or 1.3%, to settle at $1,753 an ounce, the highest finish for a most-active contract since May 15 and a modest 0.9% weekly gain.
In the News
- Stocks dropped after Apple announced it would re-close 11 stores in Florida, the Carolinas, and Arizona starting on Saturday.
- The World Health Organization also announced Friday that the coronavirus pandemic has entered a “new and dangerous phase.” As of Saturday 20th June, some 8.6 million people have been infected with COVID-19 worldwide and more than 460,000 fatalities reported, according to data compiled by Johns Hopkins University.
- In economic reports, the U.S. current-account deficit, a measure of the nation’s debt to other countries, slipped 0.1% in the first quarter. The current-account deficit fell to $104.2 billion from a revised $104.3 billion in the 2019 fourth quarter. The small decline reflected a lower trade deficit in goods. The current account reveals if a country is a net lender or debtor.
- On Friday, Boston Federal Reserve President Eric Rosengren, in webcast remarks to the Providence Chamber of Commerce, cautioned that the U.S. economy isn’t likely to have a fast recovery and more support will likely be needed from the Federal Reserve and Congress, reiterating comments made by Chairman Jerome Powell earlier this week.
- The Cruise Lines International Association announced a voluntary suspension of operations from U.S. ports until Sept. 15 due to the COVID-19 outbreak. The current no-sail order had been set to expire on July 24, a move likely to impact on shares of cruise lines.
The week Ahead?
- Markets will remain tuned to virus news in the coming week, as the battle between stimulus-fueled optimism and second wave fears rages on. The US virus count might be what tips the scales, not just for stocks but for currencies also, as risk appetite has become the dominant force in the current volatile market.