Stock Market Update: Friday, Oct. 30, 2020
Wall Street ended the week in the red as better-than-expected earnings after Thursday’s close failed to excite investors — and more in Friday’s stock market update.
Despite a number of earnings and revenue beats, a few big tech companies were cautious for the rest of 2020 and into next year.
The nervousness over the upcoming presidential election Tuesday was evident throughout the week and cemented overall losses for the major indexes in the month of October. The small caps managed to escape the damage after closing October with a gain of 2%.
Stock Market Update
The Nasdaq fell 2.5% after testing an intraday low of 10,822.
The Russell 2000 lost 1.5% following the morning fade to 1,526.
The S&P 500 stumbled 1.2% with the first-half low tapping 3,233.
The Dow dropped 0.6% after bottoming at 26,143 shortly after the opening bell.
For the week, the Dow was off 6.5% and the S&P 500 gave back 5.6%. The Russell and Nasdaq were down 5.5%.
For the month:
- The Dow fell -4.6%.
- The S&P 500 fell -2.7%.
- The Nasdaq fell -2.3%.
Energy and Financials were the only sectors that closed higher after adding 0.6% and 0.3%, respectively. Consumer Discretionary and Technology were the weakest sectors with losses of 2.2% and 2.1%.
Stock Market Movers
Shares of Twitter Inc. (NYSE: TWTR) sank 21% despite topping Wall Street’s earnings estimates. The company reported a profit of 19 cents a share on revenue north of $936 million versus forecasts of 6 cents a share on revenue of $777 million. The monthly daily active user growth was a cause for concern after coming in 5.5 points below consensus.
Stock Market Outlook
More than half — over 265 — S&P 500 companies have reported third-quarter earnings thus far. Of those companies, 85% have topped earnings forecasts. Despite the high beat rate, several companies have seen their stocks fall after releasing quarterly results.
Overall, total earnings are down -11.3% from the same period last year on -3.5% lower revenues, with 78% of the companies also topping revenue estimates.
For the Technology sector, third-quarter numbers from 35% of the sector’s market capitalization have been announced. Total earnings are up 4% from the same period last year on 1.4% higher revenues, with 92% beating earnings per share (EPS) estimates and 85% topping revenue forecasts.
As far as the Finance sector, third-quarter results from 56% of the sector’s market capitalization in the S&P 500 index have been reported. Total earnings are down -7.8% on 1.4% higher revenues, with 69% beating EPS estimates and 77.6% besting revenue estimates.
Looking at the quarter as a whole, total S&P 500 earnings are expected to decline -15.2% on -2% lower revenues.
Global Economy
European markets closed mostly lower as a new round of coronavirus lockdowns dampened prospects for a sustained economic recovery.
Germany’s DAX 30 dropped 0.7% while the Belgium20, UK’s FTSE 100 and the Stoxx 600 were down 0.3%. France’s CAC 40 was up a point, or 0.02%.
Asian markets were weak across the board but were overall higher for the month.
South Korea’s Kospi tanked 2.6% and Hong Kong’s Hang Seng sank 2%. Australia’s S&P/ASX 200 was lower by 0.6% while Japan’s Nikkei and China’s Shanghai fell 0.5%.
U.S. Economy
The Employment Cost Index posted a 0.5% increase in Q3, as expected, the same as in Q2 and versus 8% in Q1. Wage and salary costs rose 0.4%, also identical to Q2, and versus 0.9% in Q1. Benefit costs posted a 0.6% gain versus 0.8% in Q2 and 0.4% in Q1. On a 12-month basis, headline ECI slowed to a 2.4% clip compared to 2.7% in Q2 and 2.8% in Q1.
Personal Income edged up 0.9% in September with spending up 1.4%, both beating expectations. Compensation was up 0.8% from 1.3% while wage and salary income also rose 0.8% versus the prior 1.4% gain in August. Disposable income bounced 0.9% after falling -2.9% previously. The savings rate slipped to 14.3% from 14.8%.
Chicago PMI manufacturing index slipped -1.3 points to 61.1, versus expectations of 58, after bouncing 11.2 points to 62.4 in September. The three-month moving average rose to 58.2 from 55.2 in September.
Consumer Sentiment inched up 0.6 ticks to 81.8 in the final October print, versus forecasts of 81.2 and the preliminary reading. The strength in October was in the expectations component which rose to 79.2 (78.8 preliminary) from September’s 75.6. The current conditions gauge fell to 85.9 (84.9 preliminary) from September’s 87.8. The one-year inflation index was steady at 2.6% while the five-year index slid to 2.4% from 2.7% in September.
Stock Market Sentiment
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) was down for the second straight session with the intraday low tagging $157.57. Current and upper support at $158-$157.50 was breached and failed to hold. A drop below the latter would signal additional weakness towards $157-$156.50 with the monthly low at $156.75.
Resistance is at $159.50-$160 and the 200-day moving average.
Volatility Index
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the fourth time in five sessions after testing a morning peak of 41.09. Near-term and upper resistance at 40.50-41 was cleared but held for the third straight session. A move above 41.50 would likely indicate upside towards 42-44 and levels from June.
Support is at 37-36.50 followed by 35.50-35. A close below the 34 level would be a more bullish signal for the stock market.
Stock Market Analysis
The SPDR Dow Jones Industrial Average ETF (NYSE: DIA) fell for the fifth time in six sessions after trading to a low of $261.261.41. Prior and upper support from late July at $261.50-$261 was breached but held. A move below the latter would indicate additional weakness towards $260.50-$260 and the 200-day moving average.
Lowered resistance is at $266-$266.50 followed by $268-$268.50.
RSI has flatlined with key support at 30 holding. A close below this level would signal weakness towards 25-20 and prior levels from March. Resistance is at 55-60.
Sector
The Dow Jones Transportation Average ($TRAN) was down for the fourth time in five sessions with the intraday low reaching 10,971. Current and upper support from mid-September at 11,000-10,900 was cracked but held. A close below the latter would be an ongoing bearish development with additional downside risk towards 10,800-10,700 and levels from early August.
Resistance is at 11,200-11,300 with more important recovery levels at 11,400 and the 50-day moving average.
RSI (relative strength index) is in a downtrend with upper support at 40-35 holding. A close below the latter would signal additional weakness towards 35-30 and levels from mid-March. Resistance is at 45-50.
Check back after the closing bell for the most important news and numbers in the WealthPress stock market update.