Stock Market Update: Thursday, October 1, 2020

The stock market was slightly choppy before settling higher with the major indexes rising for the fifth time over the past six sessions — and more in Thursday’s stock market update. Renewed hopes on stimulus talks outweighed slightly disappointing economic news that fell shy of expectations. 

The major indexes had posted solid gains until the midday turmoil hit on news that Sen. Chuck Schumer, D-N.Y., said that the White House and House Speaker Nancy Pelosi, D-Calif., haven’t been able to close the gap on a relief package.

Stock Market Update 

The Russell 2000 soared 1.6% after closing on the session peak of 1,531.

The Nasdaq rallied 1.4% with the afternoon high reaching 11,344.

The S&P 500 gained 0.5% following the run to 3,397 shortly after the open.

The Dow nudged up 0.1% with the morning high tagging 28,041.

Real Estate and Communications Services were the strongest sectors after rising 1.6% and 1.4%, respectively. Energy and Materials were the weakest sector after giving back 3.1% and 1.4%.

Stock Market Movers

Shares of Bed Bath and Beyond Inc. (Nasdaq: BBBY) zoomed 25% after announcing earnings that smashed Wall Street’s forecasts. The company reported a profit of 50 cents a share on revenue of $2.69 billion. Forecasts were for a loss of 23 cents a share on sales of $2.6 billion. 

Bed Bath and Beyond said digital sales represented about 32% of overall sales while adding it is committed to reviewing sales of non-core assets, which could unlock significant value.

Stock Market Outlook 

The September numbers for the major indexes resulted in losses of 2%-5% with the Nasdaq on the latter end. The month lived up to expectations as it is historically the worst for the major indexes in a calendar year. While the bulls ended September on a high note, the biggest stock market crashes have historically occurred in the second-worst month, October.

One of the biggest events that happen every October is the third-quarter earnings season, when companies report their numbers to Wall Street. The stay-at-home stocks like Zoom Video Communications Inc. (Nasdaq:  ZM) and Netflix Inc. (Nasdaq: NFLX) have skyrocketed from March lows of $100 and $290, respectively, with both currently trading around $500.

Zoom doesn’t report until early December and never sold-off like the broader stock market back in March, but Netflix will announce on October 20. While the current metrics may point to overstretched valuation, these stocks and other high flyers have been rewarded with recent earnings beats and stellar growth. 

How the major companies will be judged on earnings beats and misses this quarter could cause added volatility with wild price swings. Next week will be light  ahead of the official start of earnings season the following week. The price action in a number of tech stocks will determine if this month will be an extension of the September sell-off, or a continued rebound off the lows.

Global Economy

European markets closed mostly higher following rising Manufacturing PMI numbers.

France’s CAC 40 climbed 0.4% while the Stoxx 600 and UK’s FTSE 100 edged up 0.2%. The Belgium20 was up over a point, or 0.04%. Germany’s DAX 30 slipped 0.2%.

Eurozone Manufacturing PMI checked in at 53.7 in September versus 51.7 in August. Specifically, Germany was the best performer with September Manufacturing PMI at 56.4, up from 52.2 in August.

Asian markets closed higher in limited action after Japan’s Nikkei suspended trading for the entire day due to a glitch in its electronic trading system.

Australia’s S&P/ASX 200 jumped 1% and South Korea’s Kospi advanced 0.9%. Meanwhile, Hong Kong’s Hang Seng and China’s Shanghai were closed for a holiday.

U.S. Economy

Initial Jobless Claims fell 36,000 to 837,000 after rising 7,000 to 873,000 previously. The four-week moving average declined to 867,250 after sliding to 879,000 previously. Continuing claims dropped 980,000 to 11,767,000 following the 12,747,000 print previously. 

ISM Manufacturing Index slipped -0.6 points to 55.4 in September after rising 1.8 points to 56 in August. Much of the weakness was in orders and production, with new orders falling 7.4 points to 60.2 from 67.6 and production declining 2.3 ticks to 61 from 63.3.

Stock Market Sentiment

The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) rose despite testing a morning low of $162.10. Prior and upper support from early September at $162.50-$162 was breached but held. A close below the latter would indicate a retest towards $161-$160.50.

The bounce to $163.74 afterwards cleared lower resistance at $163.50-$164 but a level that held.

Volatility Index

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the third straight session after tapping an intraday high of 27.11. Resistance at 27-27.50 was breached but held for the fourth straight session. A close above the latter gets 29-29.50 and the 200-day moving average back in play.

Support remains at 25.50-25 and the 50-day moving average.

Stock Market Analysis

The SPDR Dow Jones Industrial Average ETF (NYSE: DIA) extended its winning streak to two sessions after trading to an intraday peak of $280.35. Prior and lower resistance from mid-September at $280-$280.50 was breached but held. A move above the latter would indicate ongoing strength towards $282-$282.50.

Current and rising support is at $277.50-$277 with backup help at $275.50-$275 and the 50-day moving average. 

RSI has leveled out with lower resistance at 55-60 getting challenged but holding. Support is at 50 with a close below this level signaling near-term weakness.

Sector

The SPDR Gold Shares (NYSE: GLD) was up for the third time in four sessions after testing an intraday high of $179.50. Fresh and lower resistance at $179.50-$180 was tapped but held. A close above the latter would be a bullish signal for a quick push towards $182.50-$183 and the 50-day moving average.

The $183 area served as key support in early September before a plunge below this level and the 50-day moving average in mid-September, or nine trading sessions afterwards. Current support is at $178.50-$178.

RSI is approaching lower resistance at 50-55 with continued closes above these levels signal additional strength towards 60-65 and mid-August peaks. Support is at 45-40.

Check back for the most important news and numbers each day after the closing bell here in the WealthPress stock market update.