The stock market was mixed following a solid September retail sales report, with the fifth consecutive sales gain coming in much better than expected — and more in Friday’s stock market update.
News that Pfizer Inc. (NYSE: PFE) could apply for emergency-use authorization of its vaccine by late November also lifted bullish sentiment.
The final hour slide off the highs sent Tech and the small-caps into the red, although the major indexes managed to close the week mostly higher.
The Dow was up 0.4% after testing an intraday high of 28,842.
The S&P 500 was higher a half-point, or 0.01% with the morning peak hitting 3,515.
The Nasdaq fell 0.4% with the late-day low reaching 11,648.
The Russell 2000 was down 0.3% after settling on the session low of 1,633.
For the week, the Russell 2000 was lower by 0.3% while the Nasdaq added 0.8%. The S&P 500 rose 0.2% and the Dow nudged up 0.1%.
Healthcare led sector strength after advancing 1% while Industrials and Materials were higher by 0.7%. Energy was the leading sector laggard after sinking 2.3%.
Navistar Intl Corp (NYSE: NAV) shares jumped nearly 23% following news Volkswagen’s (OTC: VWAGY) Traton is very close to a deal to acquire what it does not own of Navistar for $44.50 a share. Carl Icahn and Mark Rachesky are supporting the deal, which still needs formal approval, but has been agreed to verbally.
The third-quarter earnings season heats up next week and is expected to show continued improvement in the overall outlook, a trend that has been in place since early July, and that has been showing up in steadily rising earnings estimates.
For 2020 Q3, total S&P 500 earnings are expected to decline -22.3% on -2.9% lower revenues. This is an improvement from the -26.5% earnings slide that was expected at the start of July and follows the -32.3% earnings drop in the second quarter.
Sectors with the weakest Q3 growth outlook remain the social-distancing exposed spaces like Transportation (-122.9% earnings decline), Energy (-105.3%) and Consumer Discretionary (-85.1%).
Out of the 16 major sectors, 14 are expected to experience earnings declines for Q3, with Construction and Medical as the only sectors expected to show earnings growth.
Utilities (-3.5%), Technology (-4.1%) and Retail (-4.5%) are the sectors with the lowest expected earnings declines.
Finance, Industrial Products and Basic Materials sectors are expected to be down -23.1%, -25.6% and -25.3% from the year-earlier period, respectively.
For 2020, total earnings for the S&P 500 index are currently expected to be down -20.4% on -4.7% lower revenues.
European markets closed higher across the board after British Prime Minister Boris Johnson said the U.K. must prepare for a no-deal break with the European Union unless there is a fundamental change of position from the bloc.
France’s CAC 40 rallied 2% and Germany’s DAX 30 soared 1.6%. UK’s FTSE 100 gained 1.5% and the Stoxx 600 rose 1.3%. The Belgium20 added 0.7%.
Asian markets settled mixed to end the week.
Hong Kong’s Hang Seng rose 0.9% and China’s Shanghai edged up 0.1%. South Korea’s Kospi was down 0.8% and Australia’s S&P/ASX 200 dropped 0.5%. Japan’s Nikkei fell 0.4%.
Industrial Production fell -0.6% in September, and capacity utilization fell to 71.5%. Factory production declined -0.3% after a 1.2% rise in August. Weakness was in motor vehicles and parts which declined -4% after a prior -4.3% slide. Excluding vehicles, production dropped -0.4%. Utilities tumbled another -5.6% from -1%. Mining edged up 1.7% versus the prior -2.4% decline.
Retail Inventories increased 1.9% with ex-auto sales rising 1.5% in September, more than double expectations. Sales excluding autos, gas and building materials climbed 1.5% following August’s 0.3% rise. Gains were broad-based. Clothing sales surged 11% from the prior 1.4% increase. General merchandise sales increased 1.8%, with department stores jumping 9.7% from -2.2%. Vehicle sales were 3.6% higher after rising 0.7% previously. Gas station sales increased 1.5% from 0.9%. Building materials were up 0.6% from 2.4%. Food and beverage sales were flat after tumbling -1.4% while sporting goods were up 5.7% from -7.5% preciously.
Consumer Sentiment ticked up 0.8 points to 81.2 in the preliminary October report after rising 6.3 points to 80.4 in September. Expectations were for a reading of 80.5. All of the strength was in the expectations component, which improved to 78.8 from September’s 75.6. The current conditions index slipped to 84.9, down from the 87.8 print last month. The 12-month inflation gauge edged up to 2.7% versus 2.6% in September. The 5/10 year inflation index slipped to 2.4% from 2.7%.
Business Inventories rose 0.3% in August, with sales up 0.6%, versus expectations for a rise of 0.4% for both. Sales climbed 3.4% for a fourth straight monthly gain. The inventory-sales ratio dipped to 1.32 from 1.33.
Baker-Hughes reported the U.S. rig count was up 13 from last week to 282 with oil rigs up 12 to 205, gas rigs up 1 to 74, and miscellaneous rigs unchanged at 3. The U.S. Rig Count is down 569 rigs from last year’s count of 851, with oil rigs down 508, gas rigs down 63 and miscellaneous rigs up 2. The U.S. Offshore Rig Count was unchanged at 14 and down 8 year-over-year.
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) fell for the second straight session after tapping a first-half low of $161.10. Near-term and upper support at $161.50-$161 was breached and failed to hold. A move below the latter would signal a further back test towards $160-$159.50 and the 200-day moving average.
Lowered resistance is at $162-$162.50 followed by $163-$163.50 and the 50-day moving average.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the fifth straight session after trading to a high of 27.46. Current and lower resistance at 27-27.50 failed to hold. A move above the latter would indicate a retest towards 30-30.50 and the 200-day moving average.
Support remains at 26.50-26 followed by 25.75-25.25 and the 50-day moving average.
The Invesco QQQ Trust (Nasdaq: QQQ) fell for the fourth straight session despite tagging a morning peak of $293.27. Near-term and lower resistance at $293-$293.50 was cleared but held. A close above the latter would indicate a retest towards the $295-297.50 area with Monday’s monthly peak at $297.46.
Support is at $288-$287.50 followed by $285.50-$285.
RSI (relative strength indicator) remains in a downtrend with upper support at 55-50 holding. Resistance is at 60.
The Materials Select Sector Spider Fund (NYSE: XLB) rebounded after testing an intraday high of $66.57. Lower resistance at $66.50-$67 was cleared but held. A close above the latter and the mid-September all-time peak at $67.14 would be a bullish signal for a breakout towards $69.50-$70.
Current support is at $66-$66.50 followed by $65.50-$65.
Check back after the closing bell for the most important news and numbers each day in the WealthPress stock market update.