Stock Market Update: Wednesday, September 23, 2020

Wall Street started the day’s session slightly higher following reports an agreement has been reached by Congress on a continuing resolution to avoid a government shutdown at the end of the month — and more in Wednesday’s stock market update.

But it didn’t last as major indexes reversed course shortly after, with the Russell 2000 and the Nasdaq leading the way lower. The bulls managed to avoid Monday’s monthly lows, excluding the small caps, but continue to struggle to regain momentum.

Meanwhile, Johnson & Johnson (NYSE: JNJ) reported it is beginning a 60,000 patient phase three trial of its coronavirus vaccine, which will notably feature only one dose. The study is expected to cost $480 million.

Stock Market Update 

The Nasdaq fell for the fifth time in six sessions after plunging 3%, with the intraday low tapping 10,612.

The Russell 2000 was also down 3% after closing on the session and fresh monthly low of 1,451.

The S&P 500 sank 2.4% with the second half low reaching 3,232.

The Dow dropped 1.9% after testing an afternoon low of 26,716.

Energy and Technology were the weakest sectors, sinking 4.5% and 3.1%, respectively. There was no sector strength.

Stock Market Movers

Shares of Nike Inc. (NYSE: NKE) rallied 8% after the company reported a blowout quarter. Earnings came in at 95 cents a share on revenue of $10.6 billion versus forecasts for 47 cents a share and $9.14 billion in sales. Twenty analysts raised price targets for Nike following the news. Guggenheim led the way after adjusting to a high of $165 from $150.

GoodRX Holdings, Inc. (Nasdaq: GDRX) made its initial public offering debut with 34.615 million shares at $33. Shares opened at $46, traded to a high of $51.01 before settling at $50.50.

Stock Market Outlook 

Earnings will also be in focus Thursday with Accenture plc (Nasdaq: ACN), CarMax (Nasdaq: KMX) and Darden Restaurants (Nasdaq: DRI) reporting before the opening bell. Costco Wholesale Co. (Nasdaq: COST) and Vail Resorts Inc. (Nasdaq: MTN) will announce numbers after the closing bell.

Costco is expected to earn $2.82 a share with the high estimate at $3.03 and the low at $2.58. Revenue forecasts are for under $52 billion, on average, from the 28 analysts that cover the stock. The company missed forecasts by 6 cents last quarter following three beats over the past year of 4 cents, 2 cents and 15 cents.

Global Economy

European markets closed mostly higher following slightly upbeat economic news out of the eurozone.

UK’s FTSE 100 jumped 1.2% while France’s CAC 40 and the Stoxx 600 gained 0.6%. Germany’s DAX 30 was higher by 0.4%. The Belgium20 dipped 0.2%. 

The IHS Markit flash eurozone manufacturing purchasing managers index rose to 53.7 from 51.7, while the flash eurozone services PMI fell to 47.6 from 51.9. Forecasts were at PMI of 51.9 and a services PMI of 50.5. Taken together, the composite PMI was above the 50 mark indicating improving conditions, at 50.1.

Asian markets closed mostly higher on expectations the Reserve Bank of Australia could cut rates further from a record low of 0.25% within a couple of weeks.

Australia’s S&P/ASX 200 surged 2.4% and China’s Shanghai added 0.2%. 

Hong Kong’s Hang Seng edged up 0.1% and South Korea’s Kospi was up less than a point, or 0.03%. Japan’s Nikkei slipped 0.1%.

Market Sentiment

Federal Reserve Vice Chairman Richard Clarida stressed the central bank will not raise rates until until inflation hits 2%. The economy has recovered but it’s still facing a deep hole, he said. The baseline view is for a faster recovery than following the financial crisis, which took about 10 years. He expects it will take about three years to get unemployment rates back down, and for inflation to get to the 2% goal while saying additional stimulus will likely be needed.

The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) rebounded despite testing a low of $163.48. Near-term and upper support at $163.50-$163 was breached but held. A close below the latter would signal a further pullback toward $162.50-$162.

Lower resistance at $164.50-$165 was cleared but held on the run to $164.53 afterward, with more important hurdles at $165.50-$166 and the 50-day moving average..

Volatility Index

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) closed higher despite tagging an opening low of 25.19. Prior and upper support from last week at 25.50-25 and the 50-day moving average was breached but held.

The bounce to 29.73 cleared but held lower resistance at 29-29.50 and the 200-day moving average. A close above the latter would indicate a retest toward 31-31.50.

Stock Market Analysis

The SPDR S&P 500 ETF (NYSEArca: SPY) fell for the fifth time in six sessions after trading to an afternoon low of $322.10. Prior and upper support at $322.50-$322 was breached but held. A close below the latter would suggest additional weakness toward $320.50-$320.

Lowered resistance is at $327-$327.50 followed by $331-$331.50.

RSI is rolling over with key support at 40 failing to hold. This level had held since early April an reopens weakness toward 35-30. Resistance is at 45-50.

Sector

The Materials Select Sector Spider Fund (NYSE: XLB) was down for the third time in four sessions, with the late-day low reaching $61.42. Prior and upper support at $61.50-$61 failed to hold. A close below the latter would be an ongoing bearish signal with additional backtest potential toward $60-$59.50 and levels from early August.

Lowered resistance is at $62-$62.50 and the 50-day moving average. A close above $64 would be a more bullish signal of a near-term bottom.