Stock Market Update: Monday, September 21, 2020
Wall Street was weak throughout Monday’s session following the passing of Supreme Court Justice Ruth Bader Ginsburg over the weekend — and more in Monday’s WealthPress stock market update.
News of Ginsburg’s death broke Friday evening, and it will surely add more uncertainty to an already fraught U.S. election in November. She was 87 and served on the court for 27 years.
Meanwhile, President Donald Trump said he backs an Oracle Corp. (NYSE: ORCL) bid for the U.S. operations of TikTok in concept, but there is chatter China won’t approve the current agreement because it will endanger its national security, interests and dignity.
Bank stocks were in focus after pulling back following government documents that claimed five banks defied money laundering crackdowns by moving large sums of illicit cash for shadowy characters and criminal networks. Specifically, JPMorgan Chase & Co. (NYSE: JPM) was named for moving money for people and companies tied to the massive looting of public funds in Malaysia, Venezuela and Ukraine, the leaked documents revealed.
Stock Market Update
The Russell 2000 plummeted 3.4% following the second half pullback to 1,470.
The Dow dropped 1.8% after closing below its 50-day moving average, hitting an afternoon low of 26,715.
The S&P 500 stumbled 1.2% after testing a intraday low of 3,229.
The Nasdaq slipped 0.1% with the morning low reaching 10,519.
Materials led sector weakness after falling 3.4%, while Energy and Industrials gave back 3.3%, respectively. Technology was the only sector that showed strength after rising 0.9%.
Stock Market Movers
Shares of Nikola Corp.(Nasdaq: NKLA) lost 19% following the surprise resignation of founder and executive chairman Trevor Milton. The board accepted his proposal, and Stephen Girsky, former Vice Chairman of General Motors Co. (NYSE: GM) and a member of Nikola’s board, has been appointed Chairman of the Board, effective immediately.
Milton said in a statement Nikola is truly in his blood and always will be, and the focus should be on the company and its world-changing mission, not him. Concerns that Nikola misled investors by exaggerating claims about its technology led to his resignation. The Justice Department and securities regulators are looking at allegations Nikola misrepresented progress it made in developing key technology core to releasing new models.
Nikola announced its entry into the electric pickup market with the Nikola Badger, a futuristic, zero-emission and cost-effective truck. The company intends to first service the commercial market with electric and hydrogen delivery trucks, and then the consumer market.
Stock Market Outlook
Monday’s lower stock market close was the first in three weeks and the month, with a holiday the prior Monday. However, the Tuesday afterward was lower. Lower Monday-Friday closes tend to indicate cash is moving out of the broader market.
In July and August, the higher Monday-Friday closes confirmed cash was moving into the market, and coincided on the run to record highs for the Nasdaq and S&P 500.
Global Economy
European markets closed sharply lower after countries from Spain to Denmark imposed new restrictions to contain surging coronavirus infections in some of their largest cities. Britain is reportedly considering reinstating a lockdown.
Germany’s DAX 30 plunged 4.4% and the Belgium20 dropped 4.2%. France’s CAC 40 tumbled 3.7% and UK’s FTSE 100 fell 3.4%. The Stoxx 600 was down 3.2%.
Asian markets were mostly lower despite China keeping its prime rate steady for a fifth straight month, as expected.
Hong Kong’s Hang Seng sank 2.1% and South Korea’s Kospi fell 1%. Australia’s S&P/ASX 200 gave back 0.7% and China’s Shanghai was lower by 0.6%. Japan’s Nikkei bucked the trend after rising 0.2%.
U.S. Economy
The Chicago Fed National Activity Index dropped 1.8 points to 0.79 in August, versus forecasts for a reading of 1.88. It tumbled 3.3 points to 2.5 in July. The three-month moving average had previously declined from 4.23 to 3.05 According to the report, 45 of the 85 indicators made positive contributions, with 40 making negative contributions.
Stock Market Sentiment
Dallas Fed Chief Robert Kaplan expects about a 30% pop in annualized growth in the third quarter, and also anticipates above-trend growth in 2021. He indicated his dissent at the last meeting was because he didn’t think it was appropriate to decide “right now” about where rates should be so far in the future. He said he would rather leave those judgments to future committees because he believes the world is going to look different post-pandemic than it does now.
Kaplan preferred to use more forward guidance, though he does believe the FOMC should keep rates in the 0% to 0.25% range until the pandemic has passed and the economy is on track for full employment and price stability. That might take 2 1/2 to 3 years.
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) rebounded after trading to a first half high of $165.40. Near-term and lower resistance at $165-$165.50 was cleared but held. A close above $166 and the 50-day moving average would be a more bullish signal for a retest toward $167-$167.50.
Current and rising support is at $164-$163.50 followed by $163-$162.50.
Volatility Index
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the third time in four sessions after zooming to an intraday high of 31.18 while holding its 200-day moving average. Prior and lower resistance from earlier in the month at 31-31.50 was breached but held. A close above the latter would indicate additional strength toward 32.50-33.
Rising support is at 27.50-27 followed by 25.50-25 and the 50-day moving average.
Stock Market Analysis
The SPDR Small-Cap 600 ETF (NYSE: SLY) showed weakness for the third straight session after testing an afternoon low of $59.08. Prior and upper support from mid-July at $59.50-$59 was breached but held. A close below the latter would be an ongoing bearish development, with additional pullback potential toward $58-$57.50.
Lowered resistance is at $60-$60.50 followed by $61 and the 200-day moving average.
RSI (relative strength indicator) is in a downtrend with upper support at 35-30 failing to hold. A move below the latter would signal additional weakness toward 25-20 and levels from late February-early March. Resistance is at 40.
Sector
The Communication Services Select Sector SPDR (NYSE: XLC) extended its losing streak to four straight sessions after tapping a morning low of $57.06. Prior and upper support from late July at $57.50-$57 was tripped but held. A close below the latter keeps downside risk toward $56-$55.50 in focus.
Lowered resistance is at $58-$58.50 with more important recovery hurdles at $59.50-$60 and the 50-day moving average.
