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S&P Ticks Up as Jobless Claims Decline, Industrial, and Energy Sectors Move Higher

Weekly Update – August 14, 2020

  • The S&P 500 index rose 0.6% this week, led by the industrial, energy and consumer discretionary sectors as weekly jobless claims reached a five-month low, although the stock gains were limited amid a stalemate between Democrats and Republicans over pandemic relief.
  • The market benchmark ended the week at 3,372.85, up from last week’s closing level of 3,351.28. This marks the measure’s third week of gains in a row and puts the S&P 500 up 4.4% for the year to date. It has climbed 18% over the last three months.
  • This week’s advance was tempered as investors were relieved to see weekly jobless claims fall by more than expected to 963,000 last week, marking the lowest figure since March, but concerns persisted over an apparent lack of progress in pandemic relief talks. House Speaker Nancy Pelosi reportedly said the two sides were “miles apart.”
  • The industrial sector had the largest percentage increase of the week, up 3.2%, followed by energy, up 2.7%, and consumer discretionary, up 2.3%. Most other sectors were also in the black, although there were three exceptions: Utilities fell 1.8%; real estate slipped 1.75% and communication services edged down 0.2%.
  • The industrial sector’s gainers included the shares of shipping companies FedEx (FDX) and United Parcel Services (UPS), whose shares rose 13.7% and 2.5% this week, respectively. Both stocks have received boosted price targets from a number of analysts recently. Analysts are seeing an improving fundamental backdrop as the pandemic has boosted e-commerce shipping volumes.
  • The energy sector’s climb came as crude-oil futures rose. Among the gainers, shares of Southwestern Energy (SWN) rose 1.6% on the week. The company unveiled a deal Wednesday to acquire Montage Resources (MR) in an all-stock transaction under which shareholders of Montage Resources will receive 1.8656 shares of Southwestern Energy for each share they hold. Shares of Montage Resources jumped 9.1%.
  • In consumer discretionary, shares of MGM Resorts International (MGM) jumped 14.6% this week after IAC/InterActive Corp (IAC) said Monday it has accumulated a 12% interest in the company over the last few months for a total of about $1 billion. In a letter to shareholders, IAC Chairman Barry Diller and Chief Executive Joey Levin said they believe MGM presents “a ‘once in a decade’ opportunity for IAC to own a meaningful piece of a preeminent brand in a large category with great potential to move online.”
  • On the downside, in utilities, shares of Duke Energy (DUK) fell 5.2% this week as Goldman Sachs cut its price target on the shares.
  • The real estate sector’s decliners included Essex Property Trust (ESS), which received a cut to its price target from RBC Capital. In moving its price target on the stock to $252 per share from $256, the firm described Essex’s Q2 results as “weak” amid increased tenant delinquency, adding “we believe the company is set for improved results going forward, but regulatory concerns will likely remain an overhang over the near term.” The shares fell 1.8% this week.
  • Next week’s economic calendar is heavy on housing data, with the National Association of Home Builders housing market index for August set to be released Monday, followed by reports on July building permits and housing starts Tuesday. Friday, existing home sales for July will be released. Friday’s data also includes preliminary August readings on the manufacturing and services sectors.

CPWM-Weekly-Market-Monitor (2020.08.14)

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