Ending the week mixed. US markets opened relatively flat to end the week and news is quite light today. Former Vice President Joe Biden accepted the Democratic nomination for president Thursday night, wrapping up the first- ever virtual convention. European markets are trading mixed after disappointing manufacturing and services Purchasing Managers’ Index (PMI) data. Asian markets were mostly higher overnight, even though the United States hasn’t confirmed plans to meet with China to discuss the Phase 1 trade deal (contrary to earlier reports).
More of the same. The Nasdaq made another new high Thursday, number 35 so far in 2020. The S&P 500 Index, meanwhile, just missed reaching new high number 15. The FAANG stocks (Facebook, Amazon, Apple, Netflix, and Alphabet) were strong, with most gaining more than 2%. Only 11 of the 30 Dow stocks were higher, and only 151 stocks in the S&P 500 gained. Tech and communications have led much of this year, but they also have produced solid earnings. Although we would prefer to see more broad participation, we continue to advise to stick with the growth names that have benefitted from the current environment.
Technical update. While markets continue to make new all-time highs this week, including the Nasdaq high on Thursday, underlying breadth and momentum suggest caution in the near-term. Looking under the hood, 68% of the S&P 500 members are trading above their 50-day moving average, while only 56% are doing so for the Nasdaq Composite, each at lower levels than when new expansion highs were set in June and July. Meanwhile, low put/call ratios and an elevated Investor’s Intelligence bull/bear ratio also present near-term sentiment risk. We continue to view the 3150–3200 range as support for the S&P 500, and around 10750 as support for the Nasdaq Composite.
COVID-19 news. New cases continued to trend lower Thursday, falling 16.4% week-over-week, while the seven- day average dropped 13.5%. Hospitalizations fell 11.2% compared with the prior week, the biggest week-over- week decline since June 14 (source: COVID Tracking Project). House ew cold water on
the idea of a scaled-down coronavirus stimulus bill in a PBS interview.
LPL Research in the Media
LPL Research on CNBC Squawk Box. LPL Financial Chief Market Strategist Ryan Detrick joined Joe Kernan on Squawk Box this morning, live from LPL Focus. You can watch part of the interview here.
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