Week 37 in Brief
How did the major indices perform?
U.S stocks closed slightly higher on Friday, though Wall Street finished the volatile week lower. The Nasdaq Composite booked its sharpest weekly loss since March 20, during the height of the coronavirus pandemic selling. U.S politicians also failed to agree on a new coronavirus rescue package after Democrats blocked a Republican bill on the Senate floor.
- On Friday, Dow Jones Industrial Average rose 131.06 points, or 0.5%, ending at 27,665.64; while the S&P 500 tacked on 1.78 points, or 0.1%, to close at 3,340.97, and the Nasdaq Composite shed 66.05 points, or 0.6%, finishing at 10,853.55.
- For the week, the Dow shed 1.7%, while the S&P 500 fell 2.5% and the Nasdaq dropped 4.1%.
- The S&P 500 index on Friday booked its largest two-week drop since March 27, according to Dow Jones Market Data.
- The Nasdaq underwent a rapid 10% fall into correction territory from a record close in September. Even that barely dented the index performance, markets don’t like uncertainty, but that is probably what’s in store over the next few months, particularly if recent Wall Street jitters over technology-led gains deepen.
- U.S. consumer-price index for August rose 0.4% last month, above economists’ estimates of a rise of 0.3% but still fell below the past two months at 0.6%. On a year-over-year basis, the CPI increased by 1.3% after gaining 1.0% in July, according to the Labor Department.
- The federal budget deficit surpassed $3 trillion in August and is on pace to hit $3.3 trillion when the fiscal year ends this month, although bond investors aren’t necessarily spooked by the financial strain on government finances.
Stocks in focus
- Shares of major tech companies closed mostly lower. The sharp rally that took stocks from their March pandemic lows to new all-time highs was led by a handful of large-cap, tech-related stocks. Among these, shares of Apple and Netflix declined more than 6.5% on the week, while Facebook saw a 5.7% weekly decline. Apple closed the week at $112.00, Netflix closed at $482.03 while Facebook closed at $266.61.
- Nikola shares lost 14.5%, a day after short-seller Hindenburg Research published a report accusing Nikola of perpetrating an “intricate fraud” built on lies told by Trevor Milton, its founder over many years. Nicola closed the week at $32.13, from a high of $53.98 on Tuesday.
- Peloton Interactive shares shed 4.2% after reporting late Thursday its first quarterly profit as a public company alongside record revenue, closing at $84.04
European shares closed higher on Friday supported by M&A activity, in a week that saw growing prospects of a no-deal Brexit, and the ECB held interest rates steady and fears of a recession.
- The pan-European STOXX 600 index rose 0.1% and ended the week about 1.8% higher
- In the UK, the FTSE 100 gained 0.48%, in France the CAC 40 rose 0.20% while in Germany the DAX lost 0.05%.
- M&A activity took centre stage, with Altice Europe’s shares soaring 24.4% to a three-month high and on top of the STOXX 600 after it agreed to be bought by its founder Patrick Drahi. Altice closed trading at Euro 4,13.
- Meanwhile, the EU is ramping up preparations for a tumultuous end to the four-year Brexit saga as top officials prepared to brief its 27 members on British Prime Minister Boris Johnson’s plan to break the divorce treaty.
- On Thursday, the European Central Bank (ECB) held interest rates steady and said it was closely watching the euro.
- Oil and gas stocks were among the biggest decliners as crude prices fell, while defensive plays including healthcare, telecoms, and real estate climbed higher.
- Swiss frozen baked goods maker Aryzta jumped 12.5% after it said it was in advanced talks with private equity firm Elliott Advisors over a takeover deal.
- The pan-European Euronext exchange edged 1.7% higher as it confirmed with Italian state lender Cassa Depositi e Prestiti (CDP) that they were in talks to buy the Milan stock exchange Borsa Italiana.
Asian markets finished higher on Friday with shares in China leading the region. Shares struggled to stem a bearish mood on Friday after US big tech firm shares fell again overnight on growing doubts about US stimulus and worries about their stretched valuations.
- China’s Shanghai Composite is up 0.79% while Hong Kong’s Hang Seng is up 0.78% and Japan’s Nikkei 225 is up 0.74%.
- MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.2%, hovering just above a one-month trough touched earlier this week. Japan’s Nikkei rose 0.3%.
Commodities and other assets
- Oil prices were little changed on Friday but posted their second straight weekly loss as stockpiles rise around the world and fuel demand struggles to rebound to pre-coronavirus levels.
- International benchmark Brent Crude ended the session down 0.6% at $39.83 a barrel while U.S. crude (WTI) settled up at $37.33 a barrel.
- Gold futures closed 0.8% lower at $1,947.90 an ounce, snapping a three-day winning streak but booking a weekly rise.
- The yield on the 10-year Treasury note fell 1.6 basis point to 0.668%, a weekly decline of 5.2 basis points. Bond prices move inversely to yields.
- EURUSD rose for a third straight session on Friday, with investors encouraged to push it higher after the European Central Bank showed no sign of stemming the single currency’s appreciation.
- Since around mid-June, EURUSD has risen more than 6%.
- In afternoon trading, the euro rose 0.2% to $1.1831 but posted a second straight week of losses. It did reach a one-week high of $1.1917 on Thursday.
- The ICE U.S. Dollar Index, which tracks the greenback against other major currencies, was flat to slightly lower at 93.320 or 0.1% but showed the second week of gains.
- USDJPY was little changed at 106.10 yen.
- The Fed holds its last meeting before the presidential election in the week ahead, and while it’s likely to sound dovish, it may not give markets the details on a policy that investors want to hear.
- The market could remain caught in a volatile trading pattern, as investors focus on the Fed, the economy, and the election.
- Retail sales will provide an important look at how the consumer is holding up, after a sharp rebound in spending earlier in the summer.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.