Week 36 in Brief

Analytics, 05 September 2020

U.S. equities ended lower on Friday after recovering sharply from low sessions on Thursday, in a week that saw a steep decline in tech stocks.
The Dow Jones Industrial Average closed 159.42 points lower, or 0.6%, at 28,133.31. At one point, the 30-stock index dropped as much as 628.05 points, or 2.2%; the S&P 500 slid 0.8% to 3,426.96, but closed well off its session low. The broader-market index was down 3.1% at its session low and briefly traded positive on the day; and the Nasdaq Composite fell 1.3% to 11,313.13, but also closed well above its low of the day.
For the week, the S&P was down 2.3%, the Nasdaq fell 3.3%, and the Dow lost 1.8%. Throughout Friday’s ferocious selloff, unloved sectors like financials gained ground at expense of tech equities, which have showed the most impressive gains since the March lows.

U.S. unemployment rate fell to 8.4% last month from 10.2% in July, though economists expected the rate to decline to 9.8%. The economy created 1.37 million jobs in August, topping an estimate of 1.32 million.

Shares of major tech companies closed mostly lower. Facebook, Amazon and Alphabet all lost more than 2% to close at $282.73, $3,294.62 and $1,581.21 respectively. However, Apple ended the day up 0.1% after falling as much as 8.3% and closed the week at $120.96. Tesla also erased a drop of more than 8%, ended the session up 2.8%, closing the week at $418.32.
The S&P 500 tech sector fell more than 1% a day after its worst session since March. For the week, the sector fell more than 4%. The fall in the tech sector this week indicates the long-predicted rotation from tech to other sectors is underway.
Meanwhile, Japan’s SoftBank reportedly bought billions of dollars in individual stock options in big tech companies over the past month, driving up volumes and contributing to a trading frenzy. The heightened options trading activity was credited by many analysts for adding froth to the stock market.
Boeing shares rose more than 1% (closing the week at $171.05), while bank stocks gained broadly. JPMorgan Chase and Citigroup were up 2.2% and 2%, respectively. Bank of America climbed 3.4%. Wells Fargo advanced 1.1%. Cruise operator Carnival climbed 5.4% and United Airlines advanced 2.2%.

The pan-European STOXX 600 index settled 1.1% lower after flitting between gains and losses, while also shedding about 1.9% for the week on a two-day technology rout.
In Germany, the DAX is down 1.65% while France’s CAC 40 is off 0.89% and London’s FTSE 100 is lower by 0.88%.
The European technology sector fell 2.7% to end at a one-month low, underperforming its peers for the week with a 4.1% drop.
German software developer Nemetschek bottomed out the STOXX 600, shedding 9.4%. Nemetschek closed Friday at EUR 61,40.
On the other hand, Bankia and Caixabank marked double-digit gains after both Spanish banks said they were considering a merger to create the biggest lender in the country.
Curevac rose 3.4% after the German biotech firm won nearly $300 million in government funding to speed up work on its prototype COVID-19 vaccine and build capacity to produce it at scale.

The Nikkei 225 is down 1.11% while China’s Shanghai Composite is off 0.86% and Hong Kong’s Hang Seng is lower by 0.82%.
More muted selling in Asia also focused on tech names with the sector leading losers on the Nikkei and chip makers falling in Korea where the SK Hynix dropped 2% and Samsung 1.7%.

Oil prices were dinged by concerns over crude demand and signs of rising supply from OPEC producers. The international benchmark Brent fell 3.8 per cent to $42.40 a barrel and West Texas Intermediate dropped 4.5 per cent to $39.52.
Gold futures ended lower for a third straight session on Friday, logging a weekly loss of around 2%, as better-than-expected monthly U.S. employment data helped to strengthen the U.S. dollar. December gold fell by $3.50, or 0.2%, to settle at $1,934.30 an ounce.
The yield on the benchmark 10-year Treasury note rose more than 8 basis points to 0.716 per cent, following a positive August jobs report, down from a 2-1/2 month peak of 0.7890% touched in late August.

The dollar, which has weakened significantly since July, was flat against a basket of six peers.
The Bloomberg Dollar Spot Index fell 0.1%. EUR was little changed at $1.1847. JPY was trading about 106.21 per dollar.

U.S. markets are closed on Monday for Labor Day.
Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.

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