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End of Day Briefing - Recap of Friday Oct. 30, 2020

Market weighed down by the large cap techs

Dow -157.51 at 26501.54, Nasdaq -274.00 at 10911.52, S&P -40.15 at 3269.96

[BRIEFING.COM] The S&P 500 fell as much as 2.3% on Friday amid weakness in the mega-cap stocks, but a strong finish in the value stocks reduced that decline to 1.2% by the close. The tech-sensitive Nasdaq Composite dropped 2.5%, while the more value-oriented Dow Jones Industrial Average (-0.6%) and Russell 2000 (-1.5%) fared better.

Briefly, Apple ($AAPL 108.86, -6.46, -5.6%), Amazon ($AMZN 3036.15, -174.86, -5.5%), and Facebook ($FB 263.11, -17.72, -6.3%) declined at least 5.5% in sell-the-news reactions to their better-than-expected earnings reports. Alphabet ($GOOG 1621.01, +53.77, +3.4%) was a notable exception to the negative reaction trend.

The consumer discretionary (-3.0%) and information technology (-2.4%) sectors were consistent laggards all day, largely due to the losses in Apple and Amazon. Notably, the financials (+0.3%) and energy (+0.2%) sectors eked out gains as investors bought the dip into the close.

For what it's worth, the S&P 500 closed above its September closing low (3236.92) after briefly dipping below it.

Dow components Honeywell ($HON 164.95, +0.35, +0.2%) and Chevron ($CVX 69.50, +0.70, +1.0%) also closed slightly higher after beating EPS estimates. Twitter ($TWTR 41.36, -11.08, -21.1%) had a disappointing earnings reaction like the mega-caps, but its 21% decline was more severe.

In other negative-sounding developments, the U.S. set another record in daily coronavirus cases on Thursday with more than 90,000 new cases, and San Francisco paused some of its reopening efforts due to the alarming resurgence of the coronavirus. While disappointing, the news wasn't necessarily surprising given similar trends earlier this week.

Separately, the Fed announced it lowered the minimum loan size for three Main Street facilities to $100,000 from $250,000 to incentivize lending activity.

U.S. Treasuries started the session on a higher note amid the weakness in equities, but eventually succumbed to selling pressure that pushed longer-dated yields higher. The 2-yr yield was flat at 0.15%, and the 10-yr yield increased three basis points to 0.87%. The U.S. Dollar Index increased 0.1% to 94.05. WTI crude futures declined 1.2%, or $0.43, to $35.70/BBL.

Reviewing Friday's economic data:

  • Personal income increased 0.9% m/m in September (Briefing.com consensus +0.3%) and personal spending rose 1.4% (Briefing.com consensus 1.0%). The PCE Price Index increased 0.2% m/m, as did the core PCE Price Index, which excludes food and energy, leaving them up 1.4% yr/yr and 1.5% yr/yr, respectively.
    • The personal income and spending data were good, yet they were imputed in yesterday's Q3 GDP report, so there was less of a surprise pop from the favorable headlines; moreover, we're only a few days away from the start of November, so a report for September isn't altering the anxious mindset for a forward-looking market thinking about the election and the alarming rise in daily coronavirus case counts.
  • The final October reading for the University of Michigan's Index of Consumer Sentiment checked in at 81.8 (Briefing.com consensus 81.2), up from the preliminary reading of 81.2 and the final September reading of 80.4.
    • The key takeaway from the report is that changes in expectations seem to be oriented around election expectations. To that end, the Expectations Index rose by 50% among Democrats compared to three months ago and only 7% among Republicans. The ultimate outcome of the election, it was noted, can accelerate or narrow these partisan shifts.
  • The Q3 Employment Cost Index increased 0.5% (Briefing.com consensus 0.7%), seasonally adjusted, for the three-month period ending in September 2020 after increasing 0.5% for the three-month period ending June 2020. Wages and salaries, which account for about 70% of compensation costs, rose 0.4%, while benefit costs, which make up the remainder of compensation costs, increased 0.6%.
    • The key takeaway from the report is that compensation costs for civilian workers, private industry workers, and state and local government workers all moderated from the same period a year ago.
  • The Chicago PMI decreased to 61.1% in October (Briefing.com consensus 59.0%) from 62.4% in September.

Looking ahead, investors will receive the ISM Manufacturing Index for October, Construction Spending for September, and auto and truck sales for October on Monday.

  • Nasdaq Composite +21.6% YTD
  • S&P 500 +1.2% YTD
  • Dow Jones Industrial Average -7.1% YTD
  • Russell 2000 -7.8% YTD

Market Snapshot

Dow26501.54-157.51(-0.59%)
Nasdaq10911.52-274.00(-2.45%)
SP 5003269.96-40.15(-1.21%)
10-yr Note -26/320.867
NYSEAdv 1163 Dec 1799 Vol 1.2 bln
NasdaqAdv 968 Dec 2448 Vol 3.6 bln


Industry Watch

Strong: Financials, Energy
Weak: Information Technology, Consumer Discretionary


Moving the Market

-- Apple (AAPL), Amazon (AMZN), and Facebook (FB) sell off despite better-than-expected earnings reports

-- Alphabet (GOOG) and value stocks provided offsetting support

-- Fed lowered the minimum loan size for main street facilities


Source: (Briefing.com)(theFly.com)

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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