Stock Market Update: Friday, Dec. 18, 2020
Wall Street settled lower as Congress struggles to pass a stimulus bill, staying over the weekend to potentially get the deal done — and more in Friday’s stock market update.
Small caps and Tech bucked the opening trend after tagging fresh all-time highs, but closed in the red following the late-day selling pressure. Meanwhile, volatility continues to show nervousness despite the week’s run to record peaks.
Stock Market Update
The Dow declined 0.4% with the second-half low tapping 30,029.
The Russell 2000 fell 0.4% despite testing an intraday and lifetime high of 1,992.
The S&P 500 was off 0.3% after trading down to 3,685 while holding the 3,700 level into the closing bell.
The Nasdaq slipped 0.1% after testing a record peak of 12,809.
For the week, the Nasdaq surged 3.1% while the Russell jumped 3%. The Dow gained 1.3% and the S&P rose 0.5%.
Materials and Consumer Staples paced sector strength after rising 0.5% and 0.2%, respectively. Energy and Real Estate were laggards after sinking 1.7%.
Stock Market Movers
Shares of Tesla Inc. (Nasdaq: TSLA) settled modestly higher with shares set to trade in the S&P 500 on Monday. This prompted a flurry of activity as index funds adjusted positions to track it.
Stock Market Outlook
Volatility has not closed below the 20 level since February despite the stock market’s continued run to all-time highs throughout this month and last. Typically, with the major indexes at all-time highs, volatility will trade into the low teens and possibly single-digits.
Volatility has not closed above 25 since mid-November and is a level to watch into year-end and the first week of January. While this level has been stretched this month with the intraday peak hitting 25.14, volatility has held at 25. This will be a key signal to possibly lighten up on bullish positions if this were to change.
On the flip side, if volatility closes below 20 over the near-term, there is a good chance the major indexes will continue to trade towards elevated record highs. Otherwise, trading ranges could develop into year-end as Wall Street awaits a stimulus deal and the outcome of the Georgia elections.
Global Economy
European markets fell after British Prime Minister Boris Johnson said Brexit talks were in a serious situation and a deal is unlikely unless the EU is willing to alter its position on fisheries.
The Belgium20 stumbled 0.5% while the Stoxx 600 and France’s CAC 40 were lower by 0.4%. Germany’s DAX 30 and the UK’s FTSE 100 were down 0.3%.
Asian markets settled mostly lower, weighed down by fresh signs of tension between the world’s two largest economies. News the United States is set to add dozens of Chinese companies, including the country’s top chipmaker, to a trade blacklist weighed on sentiment.
Australia’s S&P/ASX 200 sank 1.2% and Hong Kong’s Hang Seng fell 0.7%. China’s Shanghai declined 0.3% and Japan’s Nikkei dipped 0.2%. South Korea’s Kospi nudged up 0.1%.
U.S. Economy
Current account deficit widened $17.2 billion to -$178.5 billion in Q3, after expanding to -$161.4 billion. As a percentage of GDP, the gap widened to -3.5% versus -3.3% previously. The balance on goods and services was -$188.4 billion versus -$158.6 billion. The goods deficit rose to -$245.6 billion versus the prior -$219.5 billion while the services surplus narrowed to $57.2 billion from $60.9 billion.
Stock Market Sentiment
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) was down for the fifth straight session with the intraday low tapping $156.18. Current and upper support at $156.50-$156 failed to hold. A move below the latter would signal additional weakness towards $155-$154.50.
Lowered resistance is at $157.50-$158 with important hurdles at $158.50 and the 50-day moving average.
Volatility Index
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) fell for the fourth straight session despite the late-day high reaching 23.77. Current and lower resistance at 23.50-24 was cleared but held. A close above the 24.50 level would suggest additional upside towards 25.50-26 and the 50-day moving average.
Support is at 21.50-21 followed by 20.50-20.
Stock Market Analysis
The SPDR Small-Cap 600 ETF (NYSE: SLY) fell for the second time in three sessions despite testing an all-time high of $80.10. Key resistance at $80 was breached but held.
The fade to $78.89 afterwards failed to hold current and upper support at $79-$78.50. There is retest potential towards $77.50-$77 on a move below the latter.
RSI (relative strength indicator) is showing signs of rolling over after failing to hold key support at 70. Continued closes below this level would indicate additional weakness towards 65-60. Resistance is at 75 and the November high.
Sector
The Consumer Staples Select SPDR Fund (NYSE: XLP) remains in a 14-session trading range between $67-$68 following the late day pullback to $67.40. Near-term and upper support at $67.50-$67 was breached but held. A close below the latter would indicate additional weakness towards $66.50-$66 and the 50-day moving average.
Key resistance is at $68 with the mid-November all-time high at $68.18.
RSI remains in an uptrend with key resistance at 60 getting cleared and holding. Continued closes above this level would signal a retest towards 65-70 with the latter representing the mid-November peak. Support is at 55-50 and the latter holding since early November.
Check back after the closing bell for the most important news and numbers in the WealthPress stock market update.