Week 34 in Brief
How did the major indices perform?
U.S. stocks touched fresh records on Friday supported by positive economic data, but trading volume remained low and focused on a few large-capitalization technology names.
- The Dow Jones Industrial Average rose 190.60 points, or 0.7%, to close at 27,930.33; the S&P 500 added 11.65 points, or 0.3%, to close at 3,397.16, notching its second record of the week while the teach-heavy Nasdaq Composite closed at a fresh high of 11,311.80, up 46.85 points or 0.4%, a new 36th record for 2020.
- Separately, the small-capitalization Russell 2000 index, viewed as a bet on the health of the economy, lost 0.8% to close at 1,552.47, while the large-capitalization focused Nasdaq-100 index was up 0.7% to 11,555.16.
- For the week, the Nasdaq gained 2.7%, the S&P 500 added 0.7%, and the Dow was flat. The S&P 500 posted its longest winning streak since the week ending December 27, 2019, when the market rose for five straight weeks, according to Dow Jones Market Data.
- The U.S. IHS purchasing managers indexes for August were better than expected, with a flash reading for manufacturing at 53.6, a 19 month high, and up from 50.9 in July. The service sector index rose to 54.8 for August, a 17 month high, and up from 50 in July. A reading of 50 or above indicates improving conditions.
- Sales of existing homes in the U.S. rose 24.7% between June and July to a seasonally-adjusted annual rate of 5.86 million. It was the second month consecutively in which the monthly increase was the largest on record, compared with a year ago, sales were up 8.7% in July.
- With so much economic data over the past few months have surprised to the upside, there will be a higher bar for positive market reaction to fresh data, according to analysts
Stocks in focus
- Bullish investors were strong on Pfizer Inc. and BioNTech which said they are on track to submit a COVID-19 vaccine candidate as early as October, while Johnson & Johnson said it was beginning the latter phases of its large vaccine trials.
- Uber and Lyft won more time on Thursday in their appeal of a California ruling that required them to classify their drivers as employees. Shares of Uber were down 1.9% at $30.83, while those for Lyft closed 2.8% lower, at $28.93.
- Tesla shares surged past the $2,000 mark for the first time on Thursday, extending its recent rally ahead of next week’s 5-to-1 share split. The stock closed at $2,049.98.
- Apple’s stock also extended gains after touching a market value of $2 trillion. Shares rallied more than 5%, extending a four-week gain over 32% and closed trading at $497.48.
European stocks closed lower Friday as investors focused on disappointing economic data out of the Eurozone and geopolitical tensions, with shares in Germany leading the region.
- The pan-European Stoxx 600 finished marginally lower by 0.15%, as most sectors and major bourses sank despite starting the session in positive territory.
- In Germany, the DAX is down 0.51% while France’s CAC 40 is off 0.30% and London’s FTSE 100 is lower by 0.19%.
- Eurozone flash PMI (purchasing managers’ index) data published on Friday dented hopes of a V-shaped recovery from the bloc’s deepest economic downturn on record. The August composite reading, widely seen as a strong gauge of economic health, fell to 51.6 from July’s 54.9, considerably below analyst expectations.
- Novartis rose 0.5% after it won U.S. health regulator’s approval to repurpose an 11-year-old blood cancer drug against multiple sclerosis while the Dutch-based payment-processing company Adyen fell 3.7% as several top executives each sold 15% of their stakes in the company, cashing in 693 million euros ($822 million) in all.
Asian markets finished broadly higher on Friday with shares in Hong Kong leading the region.
- In Hong Kong, the Hang Seng is up 1.30% while China’s Shanghai Composite is up 0.50% and Japan’s Nikkei 225 is up 0.17%.
- Shares of Singapore-based Sea Limited recently hit an all-time high after it posted its second-quarter earnings. Sea Ltd returned over 500% since its IPO in 2017, and the stock has risen 880% in the last 18 months alone. The stock closed trading at $147.42 a 3.42% drop from its $150.56 high.
- Oil prices fell back to a familiar trading range in the low-$40s on more negative news. The U.S. crude benchmark declined 1.2%, with the most actively traded October contract falling 48 cents to settle at $42.34 a barrel on the New York Mercantile Exchange.
- Gold marked its second-straight weekly decline, with December gold futures settling at $1,947 an ounce on Comex on concerns about demand.
- The 10-year Treasury note yield fell 1.2 basis points to 0.64% due to negative and surprising European economic data. Bond prices move inversely to yields.
- USD was up 0.5% against its major rivals at 93.28, based on trading in the ICE U.S. Dollar Index.
- On Friday, USD gained against EUR for the first week since mid-June after data showed a strong uptick in the U.S, business activity.
- GBP fell more than 1% on Friday on a mix of bad news on the latest Brexit negotiations and gains for USD that combined pushed sterling below $1.31.
- Apple and Tesla stock splits take effect next week.
- Several FTSE companies including Rolls-Royce, Provident Financials, and WPP report their financials next week.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.