Hi Everyone,
The Dow and the S&P 500 broke their three-day winning streaks, as today’s choppy session finished on a negative note due to the weakness in the key cyclical sectors. The Dow was down 170 or 0.7%, to 26,120, the Nasdaq lost 15, or 0.2%, to 9,911, while the S&P 500 fell by 11, or 0.4%, to 3,113. Decliners outnumbered advancing issues by a 7-to-3 ratio on the NYSE, where volume was light.
Traders said that today’s losses were minuscule compared to the rally of the past two sessions, and volatility continued to decline. As one trader explained, “While the vast majority of stocks pulled back and small-caps lagged the broader market today, the Volatility Index (VIX) finished lower for the fourth straight day, supporting the bullish outlook for stocks.”
Global risk assets had a promising day in the face of the troubling COVID-related news and the geopolitical worries, but interestingly, safe-havens such as Treasuries, the Japanese yen, and the dollar were strong too. The dollar hit its highest level against the euro in over two weeks, but compared to last week’s brief risk-off period, the main asset classes remained remarkably calm. The banking sector’s weakness is something that might qualify as a red flag, but as long as volatility continues to drop, bulls will remain in control on Wall Street.
President Trump signed a bill calling for sanctions against China because of the repression of the Uighur Muslims today. The bill was passed by Congress with bipartisan support earlier, and it could weigh on the already tense U.S.-Chinese relations. China also had a military skirmish with India in a disputed area between the two countries, resulting in 20 casualties on the Indian side, and given the worrisome standoff between North and South Korea, geopolitics might yet again take center stage later this week.
Despite the company’s exposure to China, Apple (AAPL) hit a new all-time high today amid the fears of a second wave in the country. The company’s services segment remains the main driver behind the rally, but the iPhone’s growing market share and the promise of a 5G-enabled iPhone have also been boosting Apple’s outlook. Citigroup (C) just raised its price target to $400, citing its wearable segment as a bullish catalyst as well. Since Apple’s market capitalization recently topped $1.5 trillion, its strength could soon propel the Nasdaq to another all-time high.
As always, have a great evening and stay tuned!!!
Joe
