Tech weakness weighing on US markets early. The S&P 500 Index opened lower after the long holiday weekend as concerns about valuations and a shift in sentiment continued to weigh on some tech-oriented names. Similar concerns sent most major European indexes lower at midday, while most major Asian indexes were higher overnight.
Negative geopolitical backdrop contributing to negative market tone. Stalled stimulus talks, a hardened US stance on China, and the reappearance of Brexit concerns (the United Kingdom’s exit from the European Union) are all contributing to market jitters following the official end of summer, as election season heats up. News on COVID-19 treatment and vaccine efforts or further upside surprises from economic data could quickly shift the mood.
Week ahead. The short holiday week and post-jobs report hangover will still provide investors with data to help assess the recovery, including today’s National Federation of Independent Business (NFIB) Small Business Index and the Federal Reserve’s (Fed) consumer credit data. The Job Opening and Labor Turnover Survey (JOLTS) from the US Bureau of Labor Statistics will come Wednesday, and inflation data (consumer and producer) will be released Thursday and Friday. The European Central Bank (ECB) is expected to hold rates on Thursday.
New Market Signals podcast. In this week’s Market Signals podcast, LPL Financial Research strategists discuss the historic August bounce and usually weak September performance plus more on the impacts of a potential President Donald Trump second term. Access the podcast and video in today’s LPL Research blog.
Technical update. After closing down more than 6% from its intraweek highs last week, the Nasdaq is leading benchmark indexes lower in early trading again this morning. Despite the fall, the technology sector remained more than 21% above its 200-day moving average as of Friday’s close, suggesting the correction could have more room to go. Tech stocks are weighing on the S&P 500 as well, which bounced off its first level of technical support at 3393 on Friday, but may test its 50-day moving average today (3298), an indicator it hasn’t fallen below since April.
COVID-19 news. Daily new cases in the United States fell 9.5% week over week to less than 29,000 Monday, bringing the change in the seven-day average to a 3.2% decline week over week (source: COVID Tracking Project). Hospitalizations fell 28% week over week on Sunday and 40% on Monday. The effects of Labor Day gatherings and ongoing school openings will be closely watched. Nine pharmaceutical companies took a safety pledge to avoid testing shortcuts to hurry vaccine candidates.
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