Stock Market Update: Wednesday, Oct. 21, 2020

Wall Street struggled after trading on both sides of the ledger and in tighter ranges as stimulus uncertainty continues to weigh on sentiment — and more in Wednesday’s stock market update.

Both sides of the political aisle say progress has been reached over the past 24 hours, with a deal hopefully being hammered out by the end of the week.

The Republican-controlled Senate remains a potential sticking point though, with Senate Majority Leader McConnell, R-Ky., urging against agreeing to a big coronavirus deal with Democrats before the presidential election. The lower finish kept 10-session trading ranges in play for the major indexes with volatility also setting higher intraday highs.

Stock Market Update 

The Russell 2000 fell 0.9% following a late-day flop to 1,603.

The Dow fell 0.4% after tapping an intraday low of 28,106.

The Nasdaq dipped 0.3% with the midday low reaching 11,476.

The S&P 500 slipped 0.2%, with the morning low reaching 3,433.

Communications Services jumped 1.7% to lead sector strength. Energy and Industrials were the weakest sectors after falling 1.9% and 1%, respectively.

Stock Market Movers

Snap Inc. (NYSE: SNAP) soared 28% after topping Wall Street’s earnings estimates. The company reported a third-quarter profit of a penny a share versus forecasts for a loss of 5 cents. Revenue was also much better than anticipated after coming in north of $678 million versus expectations of $550 million. 

The company also predicted 47%-50% revenue growth for the current quarter given an improving advertising environment. Snap also expects Daily Average Users (DAU) of approximately 257 million for Q4, implying year-over-year growth of approximately 18%, which is consistent with the growth rate observed in the third-quarter.

Stock Market Outlook 

Tesla Inc. (Nasdaq: TSLA) will announce their quarterly results after today’s close. The company is expected to report a profit of $0.56 a share on revenue of $8.26 billion based on the 16 Wall Street analysts that follow the stock. However, the high estimate is at $0.98 a share while the low estimate is at $0.23 a share. 

These estimates could produce a headline beat of 42 cents, or a miss by 33 cents, and would add to the expected volatility once the numbers are released. Over the past four quarters, earnings have topped forecasts by 43, 28, 7 and 45 cents a share. 

During the last earnings conference call, Tesla said delivering half-a-million vehicles in 2020 remains the target. Additionally, the electric carmaker said it still sees semi deliveries beginning in 2021. Tesla also said it sees fiscal year 2020 regulatory credit revenue doubling 2019’s output.

UPDATE: Tesla reported adjusted earnings per share of 76 cents versus 57 cents; revenue of of $8.77 billion versus $8.36 billion and a net income of $331 million versus $394 million (all per Refinitiv). It also reported delivery of 139,300 vehicles for the quarter, a new record for the company. Shares of Tesla were up more than 3.5% in after-hours trading. 

Global Economy

European markets settled lower across the board as lockdown worries to slow coronavirus cases outweighed strong earnings.

UK’s FTSE 100 tumbled 1.9% and the Belgium20 sank 1.8%. France’s CAC 40 tanked 1.5% and Germany’s DAX 30 flopped 1.4%. The Stoxx 600 lost 1.3%.

Asian markets closed mostly higher following news China’s fiscal revenues grew 4.7% in Q3 from a year earlier.

Hong Kong’s Hang Seng rose 0.8% and South Korea’s Kospi added 0.5%. Japan’s Nikkei climbed 0.3% and Australia’s S&P/ASX 200 edged up 0.1%. China’s Shanghai slipped 0.1%.

U.S. Economy

MBA Mortgage Applications dipped -0.6% after slipping -0.7% in the prior week. The weakness was in the purchase index, which dropped -2.1% and represented a fourth straight weekly decline. The refi index inched up 0.2% following a -0.3% slide previously. The 30-year mortgage rate inched up to 3.02% from the record 3% all-time low set last week, with the five-year ARM rising to 2.86% from 2.63%.

Stock Market Sentiment

The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) extended its losing streak to five straight sessions following the first-half fade to $158.37, a fresh monthly low. Prior and upper support from mid-June at $158.50-$158 was breached but held. A close below the latter would indicate additional weakness towards $157-$156.50.

Lowered resistance is at $159.50-$160 and the 200-day moving average.

Volatility Index

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) had its seven-session winning streak snapped after tagging an afternoon low of 28.45. Current and upper support at 28-27.50 was challenged but held with more important recovery hurdles at 26.50-26 and the 50-day moving average. 

Resistance is at 30.50-31 and the 200-day moving average.

Stock Market Analysis

The SPDR Dow Jones Industrial Average ETF (NYSE: DIA) fell for the second time in three sessions despite trading to a morning peak of $284.47. Current and lower resistance at $284.50-$285 was challenged but held. A move above the latter would suggest a retest towards $286.50-$287.

Upper support at $282-$281.50 failed to hold on the backtest to $281.83 afterwards. A move below the latter reopens downside risk towards $280.50-$280. 

RSI is in a slight downtrend with key support at 50 holding. A close below this level would signal near-term weakness towards 45-40 and prior levels from late September. Resistance is at 55-60.

Sector

The iShares MSCI Emerging Markets ETF (NYSE: EEM) was up for the second straight session after testing a intraday high of $46.31. Current and lower resistance at $46-$46.50 was reclaimed. A close above the latter and this month’s 52-week peak at $46.34 would be a bullish signal for a possible breakout towards $47.50-$48.

Rising support is at $45.50-$45 followed by $44.50-$44 and the 50-day moving average.

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