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Consumer Staples and Discretionary Sectors lead S&P Lower, Energy and Industrials Edge Higher

Weekly Update – September 18, 2020

  • The S&P 500 index edged down 0.6% last week as gains in the energy, industrials, materials and health care sectors were outweighed by declines led by communication services, consumer discretionary and consumer staples.
  • The S&P 500 ended Friday’s session at 3,319.47, down from last week’s closing level of 3,340.97. This marks the index’s third consecutive week in the red; it is now down 7.5% from the intraday record high recorded Sept. 2. However, the index is still in positive territory for 2020 with a year-to-date gain of 2.75%.
  • Leading the week’s drop, the consumer staples and consumer discretionary sectors fell 1.5% each, followed by a 1.7% slip in communication services.
  • Still, four sectors rose from last Friday’s closing levels, led by the energy sector, which climbed 3% in a partial recovery from the 6.4% drop the sector recorded last week. Industrials advanced 1.5%, materials added 1% and health care edged up 0.9%.
  • The week’s mixed activity came as Federal Reserve Chair Jerome Powell signaled expectations the central bank’s policy-setting committee would keep rates low for the next three years, but the plans for continued low rates come amid expectations of longer spells of joblessness and economic weakness than the market had anticipated. Powell described the economic outlook as “highly uncertain.”
  • Among the decliners in communication services, Facebook (FB) shares fell 5.3% amid a Wall Street Journal report stating the social network operator could face a potential antitrust lawsuit from the Federal Trade Commission over concerns it has been using its market position to stifle competition. The report, citing people familiar with the matter, said the FTC has investigated such concerns for more than a year and could file suit against the social media giant by year-end.
  • In the consumer discretionary sector, shares of cruise operator Carnival (CCL) fell 13% as the company reported it swung to a fiscal Q3 adjusted net loss from an adjusted profit in the prior-year period. Carnival also warned it expects an adjusted net loss for the quarter ending Nov. 30.
  • On the upside, the energy sector’s climb came amid a jump in crude-oil futures as weekly US crude inventories fell for the seventh time in eight weeks and reached a five-month low. Among the gainers, Occidental Petroleum (OXY) shares rose 14% this week while Diamondback Energy (FANG) also climbed 14%.
  • In the industrial sector, General Electric (GE) shares jumped 16% as Chief Executive Larry Culp told investors he expects the company’s free cash flow to turn positive in the second half of the year. This comes after GE reported a negative cash flow of $2.1 billion in Q2 due to the COVID-19 pandemic.
  • Next week, the market will get August housing data, with existing home sales due Tuesday and new home sales due Thursday. Markit’s September purchasing managers indexes for both manufacturing and services are expected Wednesday, while investors will get August durable goods orders and capital goods orders Friday.

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