Hi Everyone,
The stock market finished the week with a broad rally on Friday, as an early report regarding a promising COVID-19 drug trial and the U.S. reopening plan boosted investor confidence. The Dow was up 705, or 3.0%, to 24,242, the Nasdaq gained 118, or 1.4%, to 8,650, while the S&P 500 rose by 75, or 2.7%, to 2,875. Advancing issues outnumbered decliners by a 6-to-1 ratio on the NYSE, where volume was heavy.
Traders said that the promise of a highly-efficient drug caused a massive short squeeze on Friday, and despite the dismal Chinese GDP print, investors remained upbeat throughout the day. As one trader explained, “While the tech sector’s weakness was clear on Friday, the beaten-down cyclical issues shined, and the session ended with an old-fashioned short-squeeze in the final hours of trading.”
Although a lot of tech issues pulled back on Friday, the Nasdaq was still the clear winner of the week, as investors loaded up on e-commerce-related and home-entertainment stocks. Most notably, Amazon (AMZN) and Netflix (NFLX) hit new all-time highs on Thursday, despite the nationwide lockdowns, as the pandemic likely peaked out globally and in the U.S. alike. The Trump Administration unveiled the plan to reopen the economy in the coming months, despite the debate between some of the governors and the Federal government. This also boosted investor confidence toward the end of the week. Despite the positive week, the global economy is likely in a deep recession, and the post-COVID world could still cause some negative short-term surprises to investors.
The technical picture improved thanks to the Nasdaq’s relative strength, but the short-term indicators are still mixed, at best, despite the strong rally from March lows. The S&P 500 and the Dow closed the week near their declining 50-day averages, while the Nasdaq managed to rally above its short-term moving average. The tech benchmark is now also above its 200-day moving average, but the Dow and the S&P 500 remain well below their long-term indicators. Small-caps had another bearish week, despite Friday’s bounce, as the Russell 2000 lagged behind the large-cap indices and finished well below both its moving averages. The Volatility Index (VIX) continued to drift lower throughout the week, dipping below its 50-day moving average in the process and finishing near 38 on Friday, its lowest level in over a month.
Investors are in for a crucial week with regards to the pandemic, the global economy, and the fate of the rally in equities. Stocks remained stable this week, despite the economic weakness, but the rally will face another huge test, as we will get the global Manufacturing and Services PMI’s on Thursday. The weekly number of new jobless claims will also be out on Thursday, while the durable goods report is scheduled for Friday. Although the pandemic likely peaked globally, the improvements have been very slow in Europe. Bulls hope that next week we will see a larger drop in the number of new cases both in the Old Continent and the U.S., which could support the now slightly “overbought” major indices.
As always, have a great evening, stay calm, stay home, stay healthy, do your part to flatten the curve and stay tuned!!!
Joe
Joseph Esposito
President
The Pinnacle Financial Group
T: 516.763.9700
F: 516.763.9706
Joseph.Esposito@lpl.com
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Investment Advice offered through The Pinnacle Financial Group, a Registered Investment Advisor.
The Pinnacle Financial Group is a separate entity from LPL Financial.
