Stock Market Update: Thursday, Nov. 12, 2020
Wall Street fell on news the Trump administration is stepping back from negotiations on a new stimulus package and leaving it to Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi — and more in Thursday’s stock market update.
While the White House probably would consult with Republican lawmakers on details of a COVID-19 relief bill, it’s now unlikely to take the lead on talks with president-elect Joe Biden taking over in January.
The move greatly diminishes the chances of a trillion-dollar or more stimulus package for the U.S. economy before January. Meanwhile, growing concerns of the spike in coronavirus cases, and new lockdowns forthcoming in Chicago, also weighed on sentiment.
Stock Market Update
The Russell 2000 fell 1.6% while testing an afternoon low of 1,696.
The Dow dropped 1.1% with the intraday low tapping 28,902.
The S&P 500 sank 1% following the pullback to 3,518.
The Nasdaq gave back 0.7% after trading to a late-day low of 11,666.
Energy was the weakest sector after tumbling 3.2% while Materials and Financials were down 2.1% and 1.7%, respectively. There was no sector strength.
Stock Market Movers
Snap Inc. (NYSE: SNAP) rose nearly 5% after an analyst upgraded the price target to $48 from $40 while keeping a Buy rating on the shares. The analyst believes Snap’s strategy around its user product, ad product, augmented reality and e-commerce is starting to come together in a way that could provide further upside. The analyst also added sponsored lens and filter ads are better positioned to scale at Snap than most investors realize.
Stock Market Outlook
Cisco Systems Inc. (Nasdaq: CSCO) is scheduled to report quarterly results after the close today. In the company’s last report, Cisco guided for Q1 adjusted earnings of 69-71 cents a share on revenue decline of 9%-11%. At the time, analysts were expecting the company to report a profit of 76 cents on revenue of $12.25 billion, but those estimates have since fallen to 70 cents and $11.85 billion, respectively.
As far as specific coverage, Citi recently downgraded the stock to Neutral from Buy while cutting the price target to $43 from $48, saying at the time that the company’s switching and routing sales, which represent 40% of its revenue, remain on the decline.
Update: Cisco rose more than 8% in after-hours trading. The company reported earnings of 76 cents per share and revenue of $11.93 billion, topping analyst estimates.
Global Economy
European markets retreated from eight-month highs as surging coronavirus infections raised doubts about a quicker economic rebound.
France’s CAC 40 tumbled 1.5% and Germany’s DAX 30 lost 1.2%. The Stoxx 600 declined 0.9% and UK’s FTSE 100 was off 0.7%. The Belgium20 was lower by 0.3%.
Asian markets closed mostly lower following a report new bank loans last month in China fell more than expected to their lowest in a year on tightened loan quotas.
Australia’s S&P/ASX 200 fell 0.5% and South Korea’s Kospi was down 0.4%. Hong Kong’s Hang Seng slipped 0.2% and China’s Shanghai dipped 0.1%. Japan’s Nikkei rose 0.7%
U.S. Economy
Initial Jobless Claims fell -48,000 to 709,000 following the -1,000 dip to 757,000 previously. The four-week moving average declined further to 755,250 from 788,500. Claims not seasonally adjusted declined -20,800 to 723,100 after rising 5,200 to 74,900 previously. Continuing claims contracted -436,000 to 6,786,000 after dropping -601,000 to 7,222,000 previously. The insured unemployment rate came in 4.6% versus 4.9%.
Consumer Price Index for October was unchanged for both the headline and core indexes and follow gains of 0.2% for both in September. The 12-month pace slowed to 1.2% year-over-year for the headline from 1.4% in September, and to 1.6% for the core versus 1.7% previously.
Stock Market Sentiment
Federal Reserve Chairman Jerome Powell said more will need to be done on fiscal and monetary policy fronts, and that this is not a time for complacency. He worries the next few months will be challenging as the virus spikes.
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) was up for the second straight session after closing on the session peak of $158.39. New and lower resistance at $158-$158.50 was cleared and held. A close above the the latter would signal additional upside towards $159.50-$160.
Rising support is at $157.50-$157.
Volatility Index
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for just the second time in nine sessions following the late-day bounce to 27.27. Lower resistance at 27-27.50 was breached but held. A close above the latter reopens upside risk towards 28.50-29 and the 50-day moving average.
Support is at 25-24.50 followed by 23-22.50.
Stock Market Analysis
The iShares Russell Growth 1000 ETF (NYSEArca: IWF) fell for the third time in four sessions with the intraday low tapping $223.84. Near-term and upper support at $224-$223.50 was breached but held. A close below the latter would indicate further weakness towards $222.50-$222.
Resistance is at $226.50-$227 followed by $228-$228.50.
RS is in a slight downtrend with upper support at 55-50 failing to hold. A move above the latter would suggest additional weakness towards 45-40 and prior levels from late October. Key resistance is at 60.
Sector
The Materials Select Sector SPDR Fund (NYSE: XLB) was down for the second straight session after tagging a late-day low of $67.40. New and upper support at $67.50-$67 was breached but held. A close below the latter would be a bearish signal for a retest towards $66.50-$66.
Lowered resistance is at $68-$68.50 followed by $69.50-$70.
RSI remains in a downtrend with upper support at 55-50 holding. A move below the latter would suggest additional weakness towards 45-40 and late October lows. Resistance is at 60.
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