Stock Market Update: Wednesday, September 16, 2020

Wall Street pushed the stock market higher to open today’s action, with tech showing weakness shortly afterward and ahead of the Federal Reserve’s update on interest rates — and more in Wednesday’s WealthPress stock market update.

Volatility returned after the Fed kept its benchmark interest rates unchanged at 0%-0.25%. Comments from Fed Chair Jerome Powell then led to a mixed session.

Stock Market Update

The Nasdaq declined 1.3% with the late-day low tapping 11,046.

The S&P 500 fell 0.5% to snap a three session winning streak following the drop to 3,384 ahead of the closing bell.

The Russell 2000 rallied 0.9% after testing an afternoon high of 1,572.

The Dow was up for the fourth straight session after adding 0.1%, with the intraday high reaching 28,364.

Energy surged 4% and was the strongest sector. Technology and Communication Services were the weakest sectors after falling 1.6% and 1.1%, respectively.

Market Movers

Snowflake Inc. (Nasdaq: SNOW) made a big splash in the busiest week for initial public offerings in over a year. The company sold 28 million shares at $120 apiece, raising $3.36 billion, with Berkshire Hathaway Inc. (NYSE: BRK-A) and Salesforce.com Inc. (NYSE: CRM) agreeing to purchase $250 million in shares at the IPO price. Goldman Sachs and Morgan Stanley had access to an additional 4.2 million shares that could push the total raised to nearly $4.4 billion following today’s debut.

Shares opened at $245 and traded to a high of $319 before closing at $253.93. Snowflake produces database software that can be used in the cloud and scaled up or down as needed, with variable pricing to match. The premium the company commanded was due to the fact it is the only major pure-cloud play offering software to run on all of its platforms.

Market Outlook

Powell said the economy continues to recover despite the ongoing spread of the coronavirus, but there are some areas that will struggle until there is a vaccine.

The mixed close and stock market weakness came after Powell struggled in answering a question on the committee’s confidence in achieving its 2% inflation target. He said analysts are not looking at a rule in respect to what “moderately” and “some time” both mean in regard to inflation. The Fed chief said employment can’t be reduced to a number the way inflation can, saying it is more of a judgment assessment.

U.S. Economy

MBA Mortgage Applications fell 2.5% last week, following a 2.9% bounce in the prior week. The weakness was led by refinancings, where the index fell 3.7%, erasing a 3% gain in the first week of September. The purchase index slipped 0.5% after the prior 2.6% gain. Refis comprised 62.8% of the applications on the week, down from 63.1%.

The pace of 12-month gains slowed, with applications at a 20% year-over-year clip versus 51.8% in the prior week. Refiis are at a 30.2% year-over-year rate compared to 59.6%, and the purchase index was at 6% year-over-year from 40%. The 30-year fixed mortgage rate was steady at 3.07%, just shy of the all-time low of 3.06% from the first week in August. The five-year ARM rose from 2.99% to 3.20%.

Retail Sales increased 0.6% in August and rose 0.7% excluding autos, following respective gains of 0.9% and 1.3% in July. Strength in sales came from eating and drinking establishments, which rose 4.7% from the prior 4.1% gain. Clothing sales climbed from 2.2% to 2.9%, while furniture sales were up from 0.9% to 2.1%. Building materials rebounded from -2.4% to 2%,  while auto and parts sales edged up 0.2% after July’s 1% drop. Gas station sales were up 0.4% versus 4.4%, and electronics sales rose 0.8% from 20.7%. Food/beverage sales dropped 1.2% from a prior 0.6% gain. Non-store retailer sales were flat from 0.3%.

Business Inventories edged up 0.1% in July, matching expectations, and sales rose 3.2%. This represented the first increase in inventories since December and follows a 1.1% decline in June. Sales remained solid for a third straight month after climbing 8.6% in June and 8.5% in May. The inventory-sales ratio fell to 1.33 from 1.37.

NAHB Housing Market Index rose another 5 points to 83 in September, a fresh all-time high, after jumping 6 points to 78 in August. The single-family index increased 4 points to 88, while the future sales index was up 6 points to 84. Meanwhile, the index of prospective buyer traffic surged 9 points to 73. The report noted that lumber prices have jumped more than 170% since the middle of April due to the fires in the west, and that’s boosted home prices more than $16,000 for a typical new single-family home.

Global Economy

European markets closed mostly higher following a slightly positive development in Brexit talks, with Britain offering tentative concessions on fisheries in trade negotiations.

The Belgium20 rose 0.9% and the Stoxx 600 gained 0.6%. Germany’s DAX 30 climbed 0.3% and France’s CAC 40 nudged up 0.1%. UK’s FTSE 100 fell 0.4%.

Asian markets were mixed after the World Trade Organization ruled that the U.S. violated international regulations by imposing tariffs on more than $234 billion of Chinese exports.

China’s Shanghai fell 0.4% and South Korea’s Kospi declined 0.3%. Hong Kong’s Hang Seng slipped 7 points, or 0.03%. Australia’s S&P/ASX 200 rallied 1% and Japan’s Nikkei edged up 0.1%.

Market Sentiment

The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) was down for the third straight session despite trading to a morning high of $164.89. Near-term and lower resistance at $165-$165.50 was challenged but held, with more important hurdles at $166 and the 50-day moving average.

Upper support at $163-$162.50 was breached but held on the fade to $162.98 afterward.

Volatility Index

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) snapped a three session slide after tapping an intraday high of 26.59. Lower resistance at 26.50-27 was breached but held. A close above the latter would suggest a retest toward 28.50-29 and the 200-day moving average.

Support remains at 25.50-25 and the 50-day moving average.

Market Analysis

The Wilshire 5000 Composite Index (NYSE: WLSH) fell for the first time in three session despite testing an afternoon high of 35,126. Current and lower resistance is at 35,000-35,250 was cleared but held. A move above the latter would indicate further upside toward 35,500-35,750.

Support at 34,750-34,500 failed to hold on the late day pullback to 34,679. A close below the latter would signal additional weakness toward 34,250-34,000 and the 50-day moving average.

Sector

The iShares PHLX Semiconductor ETF (Nasdaq: SOXX) was down for the first time in three sessions despite the intraday push to $304.39. Prior and lower resistance $304-$304.50 was cleared but held. A close above the $305 level would be a more bullish signal for a retest toward the $307.50-$310 area.

Near-term support at $299-$298.50 was breached but held on the backtest to $298.57 afterward.

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