Stocks inched lower last week, but the real story is the emergence of a new regime dominated by the next generation of technology firms.
The S&P 500 fell 1 percent between Friday, December 4, and Friday, December 11. The Nasdaq-100 and Dow Jones Industrial Average, both dominated by large and established companies, also declined. Meanwhile, a whole universe of newer companies flew higher.
Airbnb (ABNB) and DoorDash (DASH) upsized their initial public offerings and still had enough demand to rally more than 60 percent. Smaller deals including C3.ai (AI), AbCellera (ABCL) and Certara (CERT) also spiked. Across the board, the focus is on artificial intelligence, virtualization and digital transformation. A whole new stock market is being born.
The economic picture remained murky because of coronavirus. Initial jobless claims spiked much more than expected as the pandemic starts shutting down businesses again. But on the other hand, investors are hoping for normalcy to return now that Pfizer (PFE) is distributing its vaccine.
|Biggest Gainers in the S&P 500 Last Week|
|Walt Disney (DIS)||+14%|
|Occidental Petroleum (OXY)||+12%|
|Eli Lilly (LLY)||+7.8%|
Aside from the IPOs, last week was also notable for the rallies in other newer technology-based companies:
New companies weren’t the only ones to benefit from digital transformation. Walt Disney (DIS) more than doubled the long-term growth targets for its Disney+ streaming service after reaching its earlier target three years early. The company is planning 15 new series and 15 new films. Including Hulu and ESPN+, DIS expects to have as many as 350 million digital subscribers by 2024.
The news lifted DIS 14 percent, its biggest weekly gain in 11 years. The stock also closed at a new all-time high above $175.
Energy was the only major sector to climb last week as investors continued to look for the economy to recover from the pandemic. Steelmakers, biotechnology and Chinese Internet stocks were also strong. Semiconductors and real estate investment trusts performed the worst.S&P 500, daily chart, with key features and levels.
The S&P 500 briefly traded above 3700 last week before pulling back. It formed a so-called outside candle on Wednesday, a potential reversal pattern. That may suggest it’s due for a pause after breaking out to new record levels last month.
The index’s problem isn’t bearish sentiment. It’s actually a bullish problem: Investors are so positive on stocks that they’re abandoning the largest companies like Apple (AAPL), Microsoft (MSFT) and Amazon.com (AMZN). Instead they’re buying smaller up-and-comers like Snowflake (SNOW) and Snap (SNAP), which aren’t in the main indexes. Keep reading Market Insights for more on this shift toward newer companies because it could remain a key trend well into next year.
Speaking of new companies, Tesla (TSLA) is joining the S&P 500 in a week. It will be the largest index addition ever, reducing the weighting of other stocks. That could drag on the broader market as investors trim other stocks to buy TSLA.
|Biggest Decliners in the S&P 500 Last Week|
|Borg Warner (BWA)||-8.4%|
|Leggett & Platt (LEG)||-7.8%|
|Cboe Global Markets (CBOE)||-7.8%|
This week features several important events, including a Federal Reserve meeting. It’s the last full week of the year, followed by Christmas and the New Year.
Wednesday has the following items:
Thursday has the following items:
This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 14/12/2020.
David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.
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