Stock Market Update: Wednesday, October 7, 2020
Stocks rebounded after tweets from President Donald Trump suggesting he is open to limited and focused agreements on airline support, paycheck protection and a $1,200 stimulus check — and more in Wednesday’s stock market update.
Trump tweeted the Congress should immediately approve $25 Billion for airline payroll support and $135 billion for the Paycheck Protection Program for Small Business. Both of these will be fully paid for with unused funds from the Cares Act, he added.
Stock Market Update
The Russell 2000 rallied 2.1% after testing an afternoon high of 1,614.
The Dow zoomed 1.9% following the late day push to 28,369.
The Nasdaq also soared 1.9% with the peak reaching 11,380.
The S&P 500 rose 1.7% after tagging an intraday high of 3,426.
Materials paced sector strength after surging 2.6% while Consumer Discretionary and Industrials jumped 2.3% and 2.2%, respectively. There was no sector weakness.
Stock Market Movers
Shares of Levi Strauss & Co. (NYSE: LEVI) were up 5% following strong earnings. The company reported a profit of 8 cents a share on revenue of $1.1 billion versus forecasts for a loss of 22 cents a share on sales of $822 million. An analyst upgrade from Citi raised the firm’s price target from $17 to $19 while keeping a buy rating.
The analyst said the company’s quarter was well ahead of expectations, with sales, gross margin and earnings all better than consensus forecasts.
Stock Market Outlook
Tonight’s vice presidential debate between current Vice President Mike Pence and Sen. Kamala Harris, D-Calif., could sway Thursday’s action, depending on the language. This debate will likely be different than last week’s debacle between Trump and former VP Joe Biden.
The President’s hospitalization has drastically changed the dynamic of the debate, with more focus now on Pence than Harris. However, the vice presidential debate has always been more of a discussion and less of a podium battle than the top-ticket debates.
This format works in Pence’s favor because that’s his style, but Harris will be aggressive in attacking Trump.
Global Economy
European markets closed mostly lower despite upbeat earnings as uncertainties surrounding a fresh U.S. stimulus package weighed on sentiment.
The Belgium20 fell 0.5% and France’s CAC 40 declined 0.3%. The Stoxx 600 and UK’s FTSE 100 slipped 0.1%. Germany’s DAX 30 added 0.2%.
Asian markets were mixed with China’s Shanghai closed for the rest of the week for a holiday.
Japan’s Nikkei fell 0.5% and Hong Kong’s Hang Seng slipped 0.2%. Australia’s S&P/ASX 200 jumped 1.3% and South Korea’s Kospi rose 0.9%.
Stock Market Sentiment
The Federal Open Market Committee released minutes from its mid-September meeting that revealed Fed officials worried that a lack of further stimulus would jeopardize an economic recovery that was moving faster than expected. The Fed held interest rates steady last month and approved language outlining its new approach to inflation.
The minutes described the recovery in GDP at that point as being rapid.
The meeting also featured extensive discussion about the economic outlook, as members said the economy was doing better than expected in part because of the fiscal help provided by Washington.
Meanwhile, Fed governor Neel Kashkari called for Congress to move quickly on more aid. He fears bank losses will rise, putting the financial system in jeopardy without more aid. He said the biggest banks do need more capital and he see any real moral hazard with the FOMC’s stance at this point.
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) was down for the third time in four sessions following the intraday fade to $158.86. Near-term and upper support at $159-$158.50 was breached but held. A close below the latter and the 200-day moving average would suggest additional weakness towards $157-$156.50 and levels from early June.
Resistance is at $160.50-$161 with a close above the $162 level signaling a possible near-term bottom.
Volatility Index
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) fell for the first time in seven sessions with the afternoon low tapping 27.94. Current and upper support at 27.50-27 was challenged but held, with more important recovery levels at 25.50-25 and the 50-day moving average.
Resistance remains at 29.50-30 and the 200-day moving average.
Market Analysis
The Invesco QQQ Trust (Nasdaq: QQQ) zig-zagged for the fourth straight session following the intraday bounce to $280.74. Lower resistance at $280.50-$281 was cleared but held. A close above the latter would indicate further upside towards the $282-282.50 area with the beginning of the month peak at $282.88.
Current support is at $277.50-$277 followed by $276 and the 50-day moving average.
RSI (relative strength indicator) is back in an uptrend with key resistance at 55 holding. Continued closes above this level would signal additional strength towards 60-65. Support is at 50-45.
Sector
The Health Care Select Sector SPDR Fund (NYSEArca: XLV) was up for the second time in three sessions with the second half high hitting $107.20. Current and lower resistance at $107-$107.50 was cleared but held on the close back above the 50-day moving average. A move above the $108 level would signal a possible retest towards $109.50-$110 with the early September and all-time peak at $109.74.
Support is at $106-$105.50 with backup help at $104-$103.50.
Be sure and check back after the closing bell for the most important news and numbers in the WealthPress stock market update.