Stock Market Update: Thursday, October 8, 2020
Wall Street showed continued momentum in renewed hopes for stimulus and ongoing support from monetary policy — and more in Thursday’s stock market update.
President Donald Trump said he see progress, and added he’s looking at more than just airlines. However, trading turned choppy after House Speaker Nancy Pelosi, D-Calif., said there is not going to be any stand-alone bill unless there is a bigger bill and it can be part of that, or it could be in addition to it.
The Dow was the only index that gave up its gains and traded in the red before recovering. The small-caps were the strongest performer for the third straight session.
Stock Market Update
The Russell 2000 rallied 1.1% with the intraday high tapping 1,630.
The S&P 500 advanced 0.8% following the late-session run to 3,447.
The Nasdaq tested a midday peak of 11,448 and closed 0.5% higher.
The Dow added 0.4% after trading to a morning high of 28,459.
Energy was the strongest sector after soaring 3.8% while Utilities and Real Estate rose 1.8% and 1.7%, respectively. There was no sector weakness for the second straight session.
Stock Market Movers
Shares of Eaton Vance Corp. (NYSE: EV) zoomed 48% after Morgan Stanley (NYSE: MS) agreed to acquire the company for $7 billion. By the terms of the merger agreement, Eaton Vance shareholders will receive $28.25 a share in cash and Morgan Stanley stock, representing a total value of $56.50 a share.
In addition, Eaton Vance common shareholders will receive a one-time special cash dividend of $4.25 a share.
Stock Market Outlook
The small-caps continue to show strong momentum and are breaking out to higher highs while the other major indexes are approaching prior resistance levels from early and mid-September.
Volatility remains the wildcard and has been trapped between the 50-day and 200-day moving averages for 20 trading sessions. More specifically, the VIX chart below shows 25 and 30 holding since early September with a move below or above the aforementioned levels likely setting the next major stock market trend.
The likelihood of trading ranges continuing into earnings season remains high as evidence of the ongoing mixed Monday/ Friday closes over the past few weeks. Higher closes on these days signal money is moving into the stock market while downs closes usually indicates cash is moving to the sidelines.
Global Economy
European markets were higher across the board.
The Belgium20 jumped 1.3% and Germany’s DAX 30 was up 0.9%. The Stoxx 600 rose 0.8% and France’s CAC 40 was higher by 0.6%. UK’s FTSE 100 gained 0.5%.
Asian markets were mixed after the Bank of Japan’s Kuroda said Japan’s economy remains in a severe situation, but added that things are starting to pick up.
Australia’s S&P/ASX 200 rallied 1.1% and Japan’s Nikkei jumped 1%. South Korea’s Kospi was up 0.2% while Hong Kong’s Hang Seng slipped 0.2%. China’s Shanghai remained closed for the rest of the week for a holiday.
U.S. Economy
Initial jobless claims fell -9,000 to 840,000 after dropping -24,000 to 849,000 in the prior week. The four-week moving average was slightly lower at 857,000 from 870,300. Claims not seasonally adjusted edged up 5,300 to 804,300 following the prior week’s -28,200 slide to 799,000. Continuing claims dropped -1,003,000 to 10,976,000 after falling -768,000 to 11,979,000 previously.
Stock Market Sentiment
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) rebounded with the intraday peak at $160.25. Lower resistance at $160-$160.50 was cleared and held with a close above the $162 level being a more bullish development.
Support remains at $159-$158.50. A close below the latter and the 200-day moving average would suggest additional weakness towards $157-$156.50 and levels from early June.
Volatility Index
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was down for the second straight session after plunging to an opening low of 24.88. Prior support from last week at 25.50-25 and the 50-day moving average was breached but held.
Resistance remains at 29.50-30 and the 200-day moving average.
Stock Market Analysis
The S&P 400 Mid Cap Index (NYSE: MID) was up for the second straight session and for the sixth time in seven after closing on the session peak of 1,991. Fresh and lower resistance at 2,000-2,050 was challenged but held. A close above the latter would indicate a run towards 2,075-2,125 with the late February all-time high at 2,109.
Near-term and rising support is at 1,950-1,900 and the 50-day moving average. A move below the latter would suggest a near-term top with additional weakness towards 1,850-1,800 and the 200-day moving average.
RSI (relative strength index) remains in an uptrend after clearing lower resistance at 65-70. A close above the latter and the August peak would signal additional strength towards 75 and the early June top. Support is at 60.
Sector
The SPDR S&P Homebuilders ETF (NYSEArca: XHB) showed strength for the second straight session after trading to an all-time high of $56.65. Unchartered territory and lower resistance at $56.50-$57 was cleared and held. A close above the latter would be an ongoing bullish signal for blue-sky upside towards $58-$58.50.
Rising support is at $56-$55.50 with backup help at $54.50-$54.
Check back after the closing bell for the most important news and numbers each day on the WealthPress stock market update.