Stock Market Update: Wednesday, October 14, 2020

The stock market struggled while closing lower for the second straight session after Treasury Secretary Steven Mnuchin said getting a stimulus deal done before the Nov. 3 election will be difficult — and more in Wednesday’s stock market update.

Mnuchin said there has been progress on certain issues, but added talks are far apart on others.

Stock Market Update 

The Russell 2000 was down 0.9% following the late-session fade to 1,623.

The Nasdaq gave back 0.8% with the midday low tapping 11,714.

The S&P 500 was lower by 0.7% with the intraday low hitting 3,480.

The Dow dropped 0.6% after bottoming out at 28,461.

Industrials and Energy were the strongest sectors with gains of 0.6% and 0.4%, respectively. Communications Services and Real Estate fell 1.2% to lead sector laggards. 

Stock Market Movers

Shares of NIO Inc. (NYSE: NIO) surged 22% after an analyst upgraded the company to “buy” from “neutral” with a price target of $33.20, up from $18.10. The analyst raised his volume and margin assumptions, as well as the valuation multiple he’s applying to the stock. He estimates NIO’s accumulated order backlog increased by 100% to 7,000 units since the end of September, which dramatically improved its margin visibility.

Stock Market Outlook 

The Financial sector will remain in focus Thursday with Charles Schwab Corp. (NYSE: SCHW) and Morgan Stanley (NYSE: MS) announcing earnings ahead of the opening bell. Charles Schwab has missed estimates the past three quarters and is expected to report a profit of 46 cents a share on revenue of $2.43 billion. 

Morgan Stanley topped estimates in three of the past four quarters, including an 84-cent beat in the previous quarter. Current forecasts have the company earning $1.28 a share on $10.64 billion in revenues.

Global Economy

European markets closed mostly lower.

UK’s FTSE 100 fell 0.6% while the Belgium20, France’s CAC 40 and the Stoxx 600 slipped 0.1%. Germany’s DAX 30 edged up 0.1%. 

Asian markets were mixed after Chinese President Xi Jinping reiterated his plan to open the economy to focus on both capital market reform and technology.

Hong Kong’s Hang Seng and Japan’s Nikkei added 0.1%. South Korea’s Kospi dropped 0.9% and China’s Shanghai fell 0.6%. Australia’s S&P/ASX 200 was lower by 0.3%.

Stock Market Sentiment

Federal Reserve Vice Chairman Richard Clarida said the economy has seen a surprisingly strong bounce, but still has a long way to go. He noted forecasts for Q3 GDP to have bounced 25% to 30% at an annual rate, adding gains have been broad-based, as aggregate demand benefited from robust fiscal and monetary support. 

Clarida added it might take another year, however, for the level of GDP to return to its pre-pandemic peak. It will likely also take longer for the unemployment rate to drop back to a level in line with the Fed’s maximum employment mandate. He reiterated the FOMC’s new policy framework and stated that while it represents an evolution in monetary strategies, there’s no change to the dual goals of maximum employment and price stability.

The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) extended its winning streak to three straight sessions with the intraday high reaching $162.75. Prior and lower resistance at $162.50-$163 was breached but held. A close above the latter would indicate additional upside towards $163.50-$164 and the 50-day moving average.

Rising support is at $161.50-$161 followed by $159.50-$159 and the 200-day moving average.

Volatility Index

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was also up for the third straight session after trading to an afternoon peak of 27.23. Key resistance 27.50 was challenged but held. A move above this level 27.50 would signal a retest towards 29.50-30 and the 200-day moving average.

Current support is at 25.75-25.25 and the 50-day moving average.

Stock Market Analysis

The iShares Russell Growth 1000 ETF (NYSEArca: IWF) fell for the second straight session after tagging a midday low of $226.01. Current and upper support at $226-$225.50 was challenged but held. A move below the latter would be a bearish signal for additional weakness towards $224-$223.50.

Resistance is at $230-$230.50 followed by $232-$232.50.

RSI is showing signs of rolling over with key support at 60 holding. A close below this level would suggest additional weakness towards 55-50. Resistance is at 65-70.

Sector

The Communication Services Select Sector SPDR (NYSE: XLC) had its five-session winning streak snapped following the intraday pullback $61.06. Near-term and upper support at $61.50-$61 was tripped and failed to hold. A close below the latter keeps downside risk towards $60.50-$60 and the 50-day moving average in focus. 

Resistance is at $62-$62.50 followed by $63-$63.50.

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