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S&P Closes Higher for Second Straight Week, Slow Week for Economic Data as we Wait for 2nd Quarter Earnings Season

Weekly Update – July 10, 2020

  • Last week the S&P 500 index closed higher for a second straight week, led by gains in consumer discretionary stocks, even as investors continued to digest a worrisome resurgence in COVID-19 cases and the deteriorating relationship between the US and China.
  • The benchmark index closed at 3,185.04 on Friday, up 1.76% from last Thursday’s close of 3,130.01. Markets were closed Friday, July 3 in observance of the Independence Day holiday.
  • Online retailer Amazon’s (AMZN) meteoric rise resulted in another record high this week, forcing analysts to scramble to hike their price targets fast enough to keep up with its gravity-defying run. The stock brushed off Walmart’s (WMT) plan to launch a comparable subscription service, and risks to its generous tax structure from presumptive Democratic presidential candidate Joe Biden, to easily eclipse $3,000 and gain 10.7% for the week.
  • Communication stocks were the up 4.5% this week. Twitter (TWTR) was the best performing stock within this sector with a 14.7% weekly gain fueled by a potential subscription service, and a possible US government ban on its competitor Tik Tok.
  • Netflix (NFLX) shares were also instrumental in the bullish performance in the communications sector with this week’s 15% gain largely attributed to a price target hike by Goldman Sachs (street high of $670) and rising subscriptions as COVID cases spike.
  • Wall Street’s insatiable appetite for tech stocks, specifically semiconductors, translated into a 2.7% gain for the technology sector with Advanced Micro Devices (AMD) and Nvidia (NVDA) in the lead. With COVID cases on the rise and businesses likely to extend their stay-at-home orders, remote-work stocks enjoyed a solid tailwind.
  • Though this week’s economic data said otherwise, the risk to the economy as states reconsider reopening restaurants, gyms, and even schools weighed on the energy sector, leaving shares in that sector down by a collective 4.8%, making it the worst-performing sector in the S&P 500.
  • The industrial sector also gave up ground as airline stocks were battered by the risk of travel restrictions and atrophied profits. The sector was down 1.4% from last week with United Airlines (UAL) and American Airlines (AAL) both down more than 4% for the week.
  • It was a quiet week for economic data. A pair of indices measuring the services sector (PMI and ISM) both beat expectations with the ISM non-manufacturing index rising by a record amount to 57.1. The punishing pace of jobless claims slowed but stayed above 1 million for the 17th straight week.
  • Next week kicks off Q2 earnings season and the first look at how shutting down the US economy impacted corporate profits. Data includes June inflation, retail sales, factory production, and the preliminary July University of Michigan consumer sentiment index. Also, June [housing starts and permits on Friday are expected to show a 4.3% and 14% gain, respectively.

CPWM Weekly Market Monitor (2020.07.10)

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