Week 40 in Brief
How did the major indices perform?
U.S. stocks closed an otherwise strong week lower in volatile trading after President Donald Trump’s coronavirus diagnosis fueled concerns about the election and a worsening pandemic. Investors also reacted to a weaker-than-expected September jobs report and hopes of additional stimulus from Washington.
- On Friday, the Dow Jones Industrial Average shed 134.09 points, 0.5%, to close near 27,682.81; the S&P 500 lost 32.36 points, or 1%, closing at 3,348.44; and the Nasdaq Composite slumped 251.49 points, or 2.2%, to reach 11,075.02.
- Meanwhile, the small-cap Russell 2000 gained 8.10points, 0.5%, to close at 1,539.30.
- For the week, the Dow added 1.9%, the S&P 500 gained 1.5%, and the Nasdaq rose 1.5. The Russell 2000 outperformed, adding 4.4% for the week.
- Declines in technology shares dragged the S&P 500 and Nasdaq Composite lower, while the Dow industrials, materials, and energy outperformed.
Economic data & policy
- The U.S. economy created 661,000 new jobs in September and the unemployment rate fell again to 7.9% to the lowest level of the pandemic, but the gain in hiring was the smallest since businesses reopened after lockdowns earlier this year and pointed to a deceleration in the economic recovery. The decline in the unemployment rate mostly reflected 700,000 people exiting the labour force because of a scarcity of new jobs. About 12 million jobs have been recovered since the mid-March economic shutdown that saw about 22 million layoffs.
- Trump’s positive Covid-19 diagnosis forces investors to reassess the likelihood of a Biden victory and its implications for markets since Trump was widely viewed as a business-friendly president and the former vice president was considered more likely to raise taxes and increase regulations.
Stocks in focus
- Tesla’s stock was in focus after the company released vehicle sales results, showing that it sold some 124,100 Model 3s and Ys. Tesla shares closed 7.4% lower at $415.09.
- Uber Technologies said it received $500 million for Uber Freight from Greenbriar. Shares closed up 1.6% at $37.72.
- PepsiCo on Thursday reported its third-quarter report, which saw a more than 5% growth in sales during the period. Shares closed the week at $138.06.
- Data analytics firm Palantir Technologies went public on Wednesday through a direct listing on the NYSE. Shares began trading at $10.00 but finished the week at $9.20. Asana also went public this week.
European stocks closed Friday slightly higher after recouping from Trump-driven selling and hopes of more U.S. stimulus from Washington following a weaker jobs report.
- The pan-European STOXX 600 rose 0.3%, capping another volatile week which started with a bout of bargain hunting in beaten-down sectors that helped the benchmark record a 2% weekly gain.
- In the UK, the FTSE 100 gained 0.39%, in France, the CAC 40 rose 0.02%, and in Germany, the DAX lost 0.33%.
- German Chancellor Angela Merkel said she had no breakthrough to announce in European Union talks with Britain but remained optimistic that sealing a new trade deal was still possible before the end of the year.
- Spanish engineering and infrastructure group ACS surged 25.8% after French rival Vinci made an offer to buy ACS’s industrial unit Cobra for 5.2 billion euros ($6.10 billion). Vinci rose 4.4%, driving Europe’s construction & materials index up 1.7%.
- French telecom companies Orange, Bouygues Telecom, and Iliad rose between 1.1% and 2.6% after the results of an auction of the country’s 5G spectrum sale.
Asian markets finished mixed as of the most recent closing prices.
- China’s Hang Seng gained 0.79%, while Japan’s Nikkei 225 led the Shanghai Composite lower. They fell 0.67% and 0.20% respectively.
- Investors should look at Asia instead of the U.S. when it comes to stocks and bonds, an investment strategist told CNBC this week. The strategist noted that Asian (investment grade) bonds are offering a yield of around 3%, compared to a 2% yield in the U.S.
Commodities and other assets
- In oil, sell-offs intensified as Trump’s coronavirus news added to the industry’s demand concerns. U.S. benchmark (WTI) crude futures for November delivery fell 4.3% or $1.67 to settle at $37.05 a barrel on the New York Mercantile Exchange, the lowest close since Sept. 8 as Brent crude hovers around the pivotal $40 a barrel threshold.
- Gold futures for December delivery fell $18.70, or nearly 0.5%, to settle at $1,907.60 an ounce on Comex after rising 1.1% on Thursday.
- Meanwhile, the yield on the 10-year Treasury note was 1.4 basis points higher at 0.692%, after initially selling off on the diagnosis news. Bond prices move inversely to yields.
- USD and the safe-haven JPY clung to their earlier gains on Friday. JPY made its sharpest gain in more than a month to reach a one-week high of 104.95 and was last up 0.4% on the day. Implied volatility gauges for the yen over the next month rose, signalling more choppy trading ahead.
- The ICE U.S. Dollar index, a gauge of the greenback’s strength against a basket of currency trading partners, was up about 01.%, paring some slight gains from earlier. The index remains down 0.8% for the week - its biggest weekly drop since late August.
- The market is finally in October, and analysts predict volatility is likely to continue as investors will follow developments surrounding Trump’s diagnosis, the November election, and stimulus talks.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.