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S&P Sets New High, then Slides with Jobs Report

Weekly Update – December 11, 2020

  • The S&P 500 index fell 0.8% last week, taking a step back from its recent record highs and capping its latest win streak at two weeks, amid a continued rise in COVID-19 cases and higher-than-expected weekly jobless claims.
  • The market benchmark ended Friday’s session at 3,663.46, down from last week’s closing level of 3,699.12. The index set a fresh intraday record Wednesday at 3,712.39 after posting a new record close Tuesday at 3,702.25, but moved lower Thursday and Friday after the Labor Department’s weekly jobless data missed expectations.
  • The declines were led by real estate, which fell 1.9%, followed by a 1.1% drop in financials and a 1.7% decline in technology. All but one sector fell this week; energy climbed 3.6%, bucking the downward trend as crude futures rose.
  • The activity came as investors grappled with new records continuing to be set for COVID-19 cases in the US, where the daily death toll hit yet another record this week.
  • The market has largely looked past the escalating case levels in recent weeks, instead focusing on progress on the vaccine front. The US appears ready to approve its first COVID-19 vaccine after a special Food & Drug Administration panel recommended its broad distribution Thursday. The FDA is expected to make a decision on the emergency use authorization in the coming days, the vaccine’s developers – Pfizer (PFE) and BioNTech (BNTX) — said Thursday.
  • Concerns, however, were revived as the Labor Department reported seasonally adjusted claims rose by 137,000 in the week through Dec. 5 to 853,000, well above the consensus estimate according to Econoday of 724,000. Claims for the previous week were also revised higher.
  • The real estate sector’s decliners included Simon Property Group (SPG), which received a debt rating downgrade this week from Fitch Ratings while the firm said it has a negative rating outlook on the stock. The new rating is A-, down from A. The downgrade reflects the firm’s view that Simon’s credit metrics “will remain weakened by both the stress on its department store and apparel retailer tenant roster and the majority debt-funded Taubman transaction,” Fitch said. Shares fell 6.4% on the week.
  • In the technology sector, shares of chipmakers Intel (INTC) and Nvidia (NVDA) fell amid reports the companies received letters from US lawmakers seeking details on the sale of advanced computer chips that were allegedly used by China to conduct mass surveillance on Uighur Muslims in the country’s Xinjiang region. Shares of Intel fell 4.3% this week while Nvidia shed 4%.
  • On the upside, Occidental Petroleum (OXY) shares rose 12% on the week as the company upsized its previously announced cash tender offers and consent solicitations for some senior notes. Goldman Sachs raised its price target on the stock to $18.25 from $11.
  • Next week, the economic calendar features the Tuesday release of November import prices and industrial production, Wednesday reports of November retail sales and October business inventories, and the Thursday release of weekly jobless claims. November housing starts and building permits are also due Thursday.

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