Stocks Bounce as Traders Await iPhones and Other Catalysts this Month

Stocks just broke a four-week losing streak. Now’s the last lull before a surge of activity in the market.

The S&P 500 rose 1.5 percent between Friday, September 25, and Friday, October 2. More than three-quarters of the index’s members advanced as investors shifted to companies that would benefit from the coronavirus pandemic easing.

Those included shopping-center owners, traditional retailers, financials and small caps. Economic news was mostly positive. Consumer confidence rose much more than expected as Americans were optimistic about the job market. The separate consumer-sentiment report was revised higher for a similar reason. Jobless claims also fell more than expected.

Biggest Gainers in S&P 500 Last Week
Paycom Software (PAYC) +17%
Gap (GPS) +13%
Discover Financial (DFS) +13%
DXC Technology (DXC) +13%
Etsy (ETSY) +11%

Other employment numbers were mixed. ADP’s private-sector payrolls report beat projections while the Labor Department’s non-farm payrolls missed. Both showed strong gains in home construction and manufacturing. State and local education jobs were the main weak spot, down a massive 280,500 last month — equivalent to the population of Newark, New Jersey.

Solar, Housing Lead the Surge

Last week also featured a record number for pending home sales as millennials abandon cities, begin families and capitalize on low interest rates. That helped lift the iShares U.S. Home Construction ETF (ITB) 7 percent to its highest close ever.

But the real standouts were solar-energy stocks. The Invesco Solar Energy ETF (TAN) spiked 15 percent as investors continue to embrace “ESG” stocks and abandon fossil fuels.

Shopping-center companies like Regency Centers (REG), Federal Realty (FRT) and Simon Property (SPG) broadly advanced. Ditto for traditional retailers like Gap (GPS), Ross Stores (ROST) and TJX (TJX). Traders may want to keep an eye on these stocks into the holidays.

S&P 500 index, daily chart, with 50- and 200-day moving averages.

Small caps could be another area to watch because they’re sensitive to improvements in the broader economy. Last week the Russell 2000 small cap index ripped 4.4 percent, almost triple the gain of the S&P 500.

Don’t Forget About China

China’s continuing to improve as well. Its September manufacturing numbers were broadly positive. A separate government report showed industrial profits up more than 19 percent in August.

The Asian giant could also host a major event this month when Ant Group goes public in Hong Kong and Shanghai. News reports suggest it will be the largest initial public offering (IPO) ever. While U.S. investors won’t have direct access, they may target Alibaba (BABA), which owns about one-third of the company. Ant, the “PayPal of China,” is the world’s biggest fintech company.

Biggest Decliners in S&P 500 Last Week
Halliburton (HAL) -8.6%
National Oilwell Varco (NOV) -8.5%
Valero Energy (VLO) -7.3%
EOG Resources (EOG) -7%
Hess (HES) -6.8%

Apple iPhone, Earnings Season

Several other events come before Ant’s IPO. Apple (AAPL) is widely expected to release its new 5G iPhones on October 13. Third-quarter earnings season will begin the same day and Amazon.com’s (AMZN) will hold its annual Prime Day.

Those events could help refocus sentiment on the same narratives that have lifted stocks to record highs this year despite coronavirus.

But they’re still a week away. In the meantime, we have the last quiet stretch before Thanksgiving. Aside from monitoring President Trump’s health and coronavirus, here are the key items to watch this week:

  • Monday: The Institute for Supply Management’s services index.
  • Wednesday: Oil inventories and minutes from the last Federal Reserve meeting.
  • Thursday: Jobless claims.

This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 05/10/2020.

David Russell
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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