Market Update: Thu, Sept 10, 2020 | LPL Financial Research

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Daily Insights

Stocks opened higher after reversing earlier losses. European markets are slightly lower in midday trading after the European Central Bank left policy unchanged. Asian markets finished mixed—China’s Shanghai Composite and Hong Kong’s Hang Seng closed lower, while Japan’s Nikkei and South Korea’s KOSPI rose. The market continues to find a balance among:

  • A recovering economy bolstered by stimulus
  • The ongoing threat of COVID-19
  • Questions about whether stocks—particularly the high-flying growth stocks—have run too far too fast
  • Election uncertainty
  • US-China tensions

Jobless claims rose. Filings for initial jobless claims came in at 884,000 for the week ending September 5, above expectations (850,000 per Bloomberg) and about flat week over week (source: US Department of Labor). Continuing claims for the week ending August 29 (reported with a one-week lag) also disappointed, coming in at 13.4 million, above Bloomberg’s consensus of 12.9 million, and up marginally over the prior week. The job recovery still has a ways to go with claims above pre-pandemic record highs and a path that has become tougher as stimulus fades.

US earnings continue to stand out. Earnings estimates for the S&P 500 Index have inched higher in August and early September (source: FactSet), continuing the uptrend that began during earnings season. Estimates for 2020 are up about $2 to $132 since July 30. Meanwhile, estimates for the MSCI EAFE have started to roll over, supporting our preference for US equities over developed international. Estimates for the MSCI Emerging Markets Index have held up better than EAFE but have also weakened a bit.

Remember Brexit? Even though it isn’t in the news as much as it was a few years ago, the United Kingdom is still trying to leave the European Union. This of course is commonly known as Brexit. We take a closer look at the latest developments with Brexit later today on the LPL Research blog.

Technical update. Tech stocks led a market rebound yesterday as the S&P 500 gained just over 2%. Both the S&P 500 and Nasdaq Composite bounced as buyers stepped in at the indexes’ respective 50-day moving averages. Below the 50-day moving average (3312), the next level of support for the S&P 500 can be found in the 3200 range.

COVID-19 news. On Wednesday new cases in the United States fell just 1.1% week over week while the seven-day average is 8.5% below the prior week (source: COVID Tracking Project). The increase in testing after the holiday weekend likely contributed to the smaller pace of improvement. Hospitalizations rose week over week for the first time since August 23. The White House is reportedly considering another round of executive actions if bipartisan agreement on another stimulus package cannot be reached.

 

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