July 20 – July 24 Week in Review
China tensions and a spike in Covid-19 cases were enough to derail the markets last week. The week started with a mega-cap rally that powered the Nasdaq Composite to new heights, but the rest of the week saw money flow out of these mega-cap stocks into more value oriented names following earnings. The Nasdaq led the way, ending the week down 1.3% for its second straight weekly decline, followed by modest losses in the Dow Jones Industrial Average, down 0.8%, the S&P 500, down 0.3%, and the Russell 2000, down 0.4%.
The sector standings offered a more mixed picture. The information technology, communication services, and health care sectors underperformed the benchmark index, while the energy, financials, and consumer discretionary sectors rose more than 1.0%.
On the mega-cap front Microsoft and Tesla reported better than expected earnings results, but disappointing earnings reactions appeared to cause concern about similar responses in other mega-cap names when they report. Amazon, which surged 8% on Monday after its price target was raised to a Street high of $3800 at Goldman Sachs and Jefferies, bucked the trend and still ended the week higher by 1.6%. Intel, despite beating earnings estimates, disappointed investors with a six month delay of its next-generation 7nm chip technology, sending shares down 16% on Friday. Its rival Advanced Micro Devices gained 16.5% on the news.
Investors were also provided with positive COVID-19 vaccine data from the Pfizer and BioNTech collaboration and the AstraZeneca and the University of Oxford collaboration. In addition, Pfizer and BioNTech secured a $1.95 billion vaccine supply agreement with the U.S. government upon FDA approval, but none of the news was really market moving.
In other developments, the EU agreed to a €750 billion fiscal stimulus package, weekly initial jobless claims increased by 109,000 to 1.416 million, China ordered the closure of the U.S. consulate in Chengdu in response to the U.S. ordering the closure of the Chinese consulate in Houston, and a GOP coronavirus relief bill was delayed until next week.
In the bond markets U.S. Treasuries were mixed last week. The 2 year yield remained unchanged at 0.14%, while the 10 year yield declined four basis points to 0.58%.
In other markets WTI crude closed at $41.34 a barrel. Gold futures settled at their highest price ever at $1897.50 an ounce amid a 1.6% decline in the U.S. Dollar Index, which closed Friday at 94.40.
July 27 – July 31 Economic Calendar
Durable Goods Orders