Telemus Weekly Market Review September 14th - September 18th, 2020

September 14 – September 18 Week in Review

It was a mixed bag for the stock market last week and another tough week for the mega-caps. Some rotation into cyclical and value stocks however helped to limit the major index declines. The S&P 500 and Nasdaq Composite both lost 0.6% and the Dow Jones Industrial Average fell 0.3%. The Russell 2000 rose 2.6% as investors also rotated money into small cap stocks.

Factors that contributed to the rotation into cyclical and value stocks included AstraZeneca resuming its COVID-19 vaccine trials in the UK, rebounding oil prices that favored energy stocks, upbeat guidance out of the steel industry, and General Electric providing positive cash flow expectations.

The week started on a bullish note, with the market broadly rebounding on Monday and Tuesday. The general weakness started on Wednesday after the FOMC policy decision announcement. The Fed did as expected, so we can't really blame the central bank. In a nutshell the Fed kept rates unchanged and signaled they will remain near zero through 2023.

The mega-caps showed weakness right off the bat and extended their losses throughout the rest of the week. Among the reasons helping their decline were valuation concerns sparked somewhat by a spectacular IPO from cloud data warehousing firm Snowflake, options expiration activity on Friday, and news that TikTok and WeChat will be banned from U.S. downloads on Sunday.

Speaking of mega-caps, Apple fell 4.6% last week, dragging the S&P 500 information technology sector down with it. The communication services, consumer discretionary, and consumer staples sectors fell even more, while the energy, industrials, materials, and health care sectors benefited from the rotational trade.

The financial sector outperformed on a relative basis, but the Fed's acknowledgement of lower rates for longer, and profitability concerns, helped dampen group sentiment. Citigroup fell 12% on news it could get reprimanded for failing to improve its risk management systems.

In other developments of note last week, NVIDIA agreed to acquire chip maker Arm Holdings from Softbank for $40 billion in cash and stock, and House Speaker Pelosi repeated that a stimulus deal must be at least $2.2 trillion. Ms. Pelosi's comments came after centrist lawmakers proposed a $1.5 trillion relief bill that President Trump said he liked.

In the bond market U.S. Treasuries traded basically flat for the week. The 2 year yield remained unchanged at 0.13%, and the 10 year yield increased two basis points to 0.69%.

In other markets he U.S. Dollar Index declined 0.4% to 92.95, WTI crude closed at $41.09 a barrel, a gain of 10.0% for the week, and gold closed at $1,957.10 an ounce.

September 21 – September 25 Economic Calendar