Company / Analytics

Week 46 in Brief

North America

U.S. stocks closed mixed Friday, as investors assessed the COVID-19 surge in Europe and its impact on the global economic recovery. The tech-based Nasdaq Composite ended at a record high even as investors piled into the safety of the dollar and government bonds.

How did the major indices perform?

• The Dow Jones Industrial Average fell 268.97 points, or 0.75%, to 35,601.98, and fell 1.3% for the week.
• The S&P 500 index ticked 0.14% lower to 4,697.96 but still ended the week 0.3% higher.
• The Nasdaq Composite climbed 0.4%, or 63.73 points, to end at 16057.44, its 46th record this year, and was up 1.2% for the week.
• The S&P 500 posted 45 new 52-week highs and nine new lows; the Nasdaq Composite recorded 100 new highs and 309 new lows.

What drove the US market?

• Covid-19in Europe: Equities took a hit after Austria announced early in the day that it would re-enter a full national lockdown due to a spike in Covid cases. That followed new restrictions for unvaccinated people in Germany, introduced Thursday as a fourth wave sent daily cases to a record high. The market was predictably spooked and didn’t seem to take into account developments in vaccines, antiviral pills, and other ways to fight the virus.
• Corporate earnings: About 95% of S&P 500 companies have reported their financial results for the third quarter, and 81% of them exceeded analyst expectations. S&P 500 companies are on track to grow profit by 42.3% year over year. The earnings indicate that while investors may have entered earnings season with some trepidation, there are some clear signs that consumers are resilient and corporate balance sheets are strong despite pricing pressures.
• Monetary Policy: The US House of Representatives voted Friday to pass President Biden’s $1.7 trillion social safety net bill, sending it to the Senate, where it is likely to face an uphill battle in the coming weeks. But its passing still removes some of the uncertainty that had clouded the market. Any removal of uncertainty in this market is a good thing. Investors are also keeping an eye on President Joe Biden’s pick for the next Federal Reserve chair, which he is expected to unveil by the weekend. Many expect an even more dovish central bank if Fed Governor Lael Brainard is named its chief, meaning it would take longer to raise interest rates or tighten policy than under Jerome Powell.

Which US stocks were in focus Friday?

• The Nasdaq Composite Index was above 16,000 points for the first time on Friday, in its second-straight record finish powered by technology stocks, while pandemic jitters sent the Dow to its fourth losing session in the last five.
• The information technology segment, up 0.8%, was the best performer on the S&P 500. It was buoyed by Intuit Inc, which jumped 10.1% as brokerages lifted their price targets on the income tax software company after it beat quarterly estimates and raised forecasts. The TurboTax developer also raised its full-year revenue guidance.
• Travel stocks: Shares of air carriers were among the first to drop. United Airlines fell 2.7%, while Delta fell 1%. Boeing lost 5.7%. In other travel names, Airbnb dropped 3.8% while Booking Holdings dipped 1.5%. Expedia was also down slightly. Norwegian Cruise Line Holdings was about 2% lower, and Royal Caribbean slipped 2.9%.
• The pullback in airline and travel stocks came about a week after the Biden administration lifted pandemic travel restrictions that have barred many international visitors for nearly 20 months. That move was cheered by airlines and other travel companies. But the increase in Covid cases and new restrictions in Europe was damping hopes for an immediate rebound in trans-Atlantic travel, a usually lucrative segment that is key to large carriers’ return to profitability.
• Energy stocks decline: Energy companies dominated the top decliners in the S&P 500 as demand concerns related to new lockdown orders hurt oil prices, which were already in a slump. Devon Energy fell 6.2%, and Hess fell about 5.7%. Baker Hughes and Diamondback Energy weren’t far behind, down more than 5%.
• The S&P energy index dropped 3.9%, the worst-performing sector, as crude prices fell on demand implications
• Vaccine stocks: Shares of Moderna jumped nearly 5% after the US Food and Drug Administration cleared its vaccine booster shot for all adults in the U.S. Moderna’s competitor Pfizer, ended lower.

How did the European markets perform?

• European stocks ended in the red on Friday, clocking their first weekly decline in seven weeks on concerns over the economic damage from fresh COVID-19 lockdowns in the region that hammered cyclical sectors such as banks and automakers.
• The pan-European STOXX 600 index fell 0.3% after hovering near record highs earlier in the session. The index ended the week 0.1% lower. European stocks have hit a series of record highs this month as a stronger-than-expected earnings season helped investors look past concerns about rising inflationary pressures.
• But now Europe has again become the Centre of the pandemic, prompting some countries including Germany and Austria to reintroduce restrictions in the run-up to Christmas and causing debate over whether vaccines alone are enough to tame COVID-19.
• Frankfurt shares fell 0.4%, while sectors more exposed to economic cycles such as banks, automakers, and travel & leisure fell between 1.5% and 2.2%. South European markets, including those in Spain and Italy, fell about 1.5% each.
• Irish airline Ryanair dropped 2.3% after announcing its intention to delist from the London Stock Exchange, citing costs related to retaining an additional listing.
• French luxury group Hermes gained 5.2%, after jumping more than 6% in the previous session, on market talks that it may be added to the Eurostoxx 50 index during a December review.

How did Asian markets perform?

• Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 1.13% and the Nikkei 225 rose 0.50%. The Hang Seng lost 1.07%.
• Hong Kong shares were dragged down by index heavyweight Alibaba after the Chinese e-commerce firm’s shares tumbled more than 10% as its second-quarter results missed expectations due to slowing consumption, increasing competition, and a regulatory crackdown.
• Alibaba numbers came in the wake of a recent sharp slowdown in Chinese retail data, fueling concerns over a broader slowdown in the recovery of the world’s second-largest economy, China.

Commodities and Bonds

• Oil prices continued their recent volatility. West Texas Intermediate crude slipped by 3.67% at $76.11 per barrel. Brent, oil’s international benchmark, shed 3.35% at $78.52.
• The yield on 10-year Treasury fell to 1.545% compared to Thursday’s 1.586%. Bond yields and prices move in opposite directions.
• Gold fell 0.67% to $1,847.08 per ounce.

Currencies

• The dollar rose 0.3% against its peers, while the euro held near six-year lows versus the Swiss franc.
• The euro has been on the receiving end this week after policymakers pushed back on market expectations the European Central Bank will raise interest rates to quash rising inflation.
• The euro is down more than 1% this week versus the U.S. dollar, a second consecutively weekly drop.
• Bitcoin was headed for its worst week in six months – 20% below recent record highs. That’s despite crypto miners raising funds and eyeing public listings.

Next Week

• Investors will get retail and tech earnings, as well as a slew of key economic data releases from across the world ahead of Thanksgiving holiday closures in the U.S. on Thursday.
• The next chair of the Federal Reserve could be decided by next week.