Stock Market Update: Wednesday, Dec. 9, 2020

Wall Street opened higher with the four major indexes setting another round of all-time highs on better-than-expected economic news… before things quickly fell back to earth — and more in Wednesday’s stock market update. 

Weakness came following reports that a stimulus agreement looks to be in jeopardy again. Senate Majority Leader Mitch McConnell said Democrats brushed off his proposal for a relief bill that would leave out liability protections and state aid.

Stock Market Update 

The Nasdaq stumbled 1.9% with the afternoon low hitting 12,290

The Russell 2000 was down 0.8% after testing a second-half low of 1,889.

The S&P 500 fell 0.8% while trading to a late-day low of 3,660.

The Dow lost 0.4% following the intraday fade to 29,951.

Industrials and Energy paced sector strength after rising 0.2%, while Materials nudged up 0.1% to round out the winners. Technology and Communication Services were the weakest sectors, falling 1.9% and 1.2%, respectively.

Stock Market Movers

Shares of DoorDash (NYSE: DASH) zoomed 86% in its initial public offering after the company priced 33 million shares at $102, above the previous $90-$95 target range. Goldman Sachs Group Inc. (NYSE: GS) and JPMorgan Chase & Co. (NYSE: JPM) acted as joint book-running managers for the offering. Shares opened at $182 midday before settling at $189.51 in its first day of trading.

District of Columbia Attorney General Karl Racine on Tuesday sent DoorDash a letter ordering it to immediately cease and desist a policy of charging restaurants a 30% commission on each order in its DashPass subscription product.

In the letter, Racine said such a commission would be a violation of the D.C. code, which caps commissions at 15% for third-party food-delivery platforms. A DoorDash spokeswoman said the company is a premium marketing offering and provides benefits to many restaurants, but has decided not to charge D.C. restaurants their contractual DashPass rate at this time. 

Stock Market Outlook 

Lululemon Athletica (Nasdaq: LULU) will announce quarterly results after Thursday’s closing bell. The company is expected to earn a profit of 87 cents a share on revenue just north of $1 billion. The high estimate is at $1.08 a share with the low at 79 cents, which would equate to a 21-cent beat or an 8-cent miss.

The company topped forecasts in three of the past four quarters, with a 19-cent beat in the previous quarter that followed a penny miss. There are 35 analysts covering the stock with five “Strong Buy” ratings, 10 “Buys,” 17 “Holds,” two “Underperforms” and one “Sell” rating.

Global Economy

European markets settled mostly higher with France’s CAC 40 bucking the trend after falling 0.3%. 

Germany’s DAX 30 was up 0.5% and the Stoxx 600 climbed 0.3%. UK’s FTSE 100 and the Belgium20 edged up 0.1%. 

Asian markets closed mostly higher.

South Korea’s Kospi soared 2% and Japan’s Nikkei rose 1.3%. Hong Kong’s Hang Seng gained 0.8% and Australia’s S&P/ASX 200 rose 0.6%. China’s Shanghai sank 1.1%. 

U.S. Economy

MBA mortgage applications fell -1.2% following a previous -0.6% dip. All of the weakness was in the purchase component, which dropped -5%. The refi index bounced 1.8% after the prior -4.6% decline. The 30-year mortgage rate slid to 2.90%, another all-time low, versus the prior low of 2.92%. The five-year ARM dipped to 2.60%, also a new record low, from 2.63%.

Wholesale sales jumped 1.8% in October and inventories rose 1.1%, both above estimates. The inventory-sales ratio dipped to 1.31 from 1.32.

Stock Market Sentiment

The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) had its two-session winning streak snapped following the intraday pullback to $156.01. Current and upper support at $156.50-$156 was breached but held. A close below the latter would indicate a retest towards $155-$154.50.

Resistance is at $157.50-$158 followed by $158.50-$159 and the 50-day moving average.

Volatility Index

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) traded in a wider range after testing a morning low of 20.10. Current and upper support at 20.50-20 was breached but held.

A bounce to 22.93, a fresh monthly high, cleared but failed to hold lower resistance at 22.50-23. A close above the latter would signal a retest towards 23.50-24.

Stock Market Analysis

The SPDR Small-Cap 600 ETF (NYSE: SLY) was unchanged after testing an all-time high of $78.68. Uncharted territory and lower resistance at $78.50-$79 was breached but held. 

Current support is at $77-$76.50 followed by $75.50-$75.

RSI (relative strength indicator) has flatlined with key support at 70 holding. A move below the latter would indicate additional weakness towards 65-60. Resistance is at 75 and the November high.

Sector

The Financial Select Sector SPDR Fund (NYSE: XLF) showed weakness for a third straight session after trading to an intraday low of $28.59. Current and upper support at $28.50-$28.25 was challenged but held. A move below the latter would indicate further weakness towards $28-$27.75.

Key resistance is at $29. A close above this level would be a slightly bullish development with additional upside towards $29.25-$29.50 and prior levels from late January.

RSI is in a slight downtrend with upper support at 65-60 failing to hold. A close below the latter would indicate additional weakness towards 55-50 and levels from early November. Key resistance is at 70. 

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