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End of Day Briefing - Monday Sept. 21, 2020

Stocks end lower after passing of Justice Ginsberg and the EU considers re-tightening Covid restrictions

21-Sep-20 16:15 ET
Dow -509.72 at 27137.70, Nasdaq -14.48 at 10778.82, S&P -38.41 at 3281.06

[BRIEFING.COM] The S&P 500 declined 1.2% on Monday, although it was down as much as 2.7% intraday as increased uncertainty on the political, trade, and health fronts fueled economic growth concerns. The Nasdaq Composite declined just 0.1% amid relative strength in technology stocks, while the Dow Jones Industrial Average (-1.8%) and Russell 2000 (-3.4%) underperformed.

Political uncertainty was a big theme following the passing of Supreme Court Justice Ginsburg, as many suggested lawmakers would focus less on stimulus talks and more on a new appointee. Trade uncertainty was based on China updating its trade blacklist without naming any affected companies. Health uncertainty stemmed from the rising COVID-19 cases in Europe, raising the specter of shutdowns.

The ensuing weakness disproportionately affected the cyclical sectors -- industrials (-3.4%), materials (-3.4%), and energy (-3.3%) -- but the information technology sector (+0.8%) did partially benefit from the growth concerns. The tech sector, led by Apple ($AAPL 110.08, +3.24, +3.0%), was the only sector to close higher on Monday.

Notably, at its low today, the S&P 500 was down 10.0% from the record high it set earlier this month -- a decline often described as a "correction." This might have been the green light for many investors and traders to buy the dip in the last hour of trading.

Within the financials sector (-2.5%), banks were under pressure amid reports that several global institutions, including JPMorgan Chase ($JPM 95.31, -3.04, -3.1%) and Deutsche Bank ($DB 8.34, -0.75, -8.3%), moved more than $2 trillion in illicit funds for a period of nearly 20 years despite red flags.

Separately, shares of Oracle ($ORCL 60.82, +1.07, +1.8%) and Walmart ($WMT 137.07, +1.78, +1.3%) gained more than 1% on expectations that a TikTok deal will be approved. Microsoft ($MSFT 202.54, +2.15, +1.1%) agreed to acquire ZeniMax Media for $7.5 billion in cash. Illumina ($ILMN 270.13, -25.37, -8.6%) agreed to acquire Grail for $8 billion in cash and stock.

U.S. Treasuries finished higher on the longer-end of the curve. The 2-yr yield increased one basis point to 0.14%, while the 10-yr yield declined two basis points to 0.67%. The U.S. Dollar Index rose 0.7% to 93.56. WTI crude futures fell 3.9%, or $1.63, to $39.69/BBL.

Investors did not receive any economic on Monday. Looking ahead, the Existing Home Sales report for August will be released on Tuesday.

  • Nasdaq Composite +20.1% YTD
  • S&P 500 +1.6% YTD
  • Dow Jones Industrial Average -4.9% YTD
  • Russell 2000 -11.0% YTD

Market Snapshot

SP 5003281.06-38.41(-1.16%)
10-yr Note +3/320.672
NYSEAdv 439 Dec 2556 Vol 1.2 bln
NasdaqAdv 639 Dec 2666 Vol 3.8 bln

Industry Watch

Strong: Information Technology
Weak: Energy, Materials, Industrials, Financials, Real Estate

Moving the Market

-- Cyclical stocks lead market lower, but relative strength in technology stocks limit index declines

-- Increased uncertainty pertaining to politics, trade, coronavirus that fueled growth concerns

-- Banks pressured by reports of money laundering over a period of nearly 20 years

Stocks end lower after passing of Justice Ginsberg and the EU considers re-tightening Covid restrictions

Stocks tumbled to start the week after the passing of Supreme Court Justice Ruth Bader Ginsburg over the weekend added more uncertainty to an already fraught U.S. election and the inability of Congress to enact more fiscal stimulus. In addition, a pick-up in infections across Europe has revived worries that a re-tightening of virus restrictions will be implemented. Meanwhile, the still complicated TikTok saga has taken on the role of the proverbial "canary in the coal mine" for worsening U.S.-China relations.

ECONOMIC EVENTS: In the U.S., the Chicago Fed's National Activity index dropped 1.8 points to 0.79 in August after tumbling 3.3 points in July.

The latest data from the Johns Hopkins Whiting School of Engineering shows there are now 31.1M confirmed cases of COVID-19 worldwide, including 6.82M in the U.S., and 961,459 deaths due to the disease.

Meanwhile, The Wall Street Journal reported that House Democrats have proposed a spending bill that would keep the government running through December 11, though without farm-relief funds sought by the Trump administration.

TOP NEWS: Oracle ($ORCL) and Walmart ($WMT) announced tentative approval for an agreement with the U.S. government to resolve the outstanding issues that will now include Oracle and Walmart together investing to acquire 20% of the newly formed TikTok Global business, the companies stated. Walmart said: "While there is still work to do on final agreements, we have tentatively agreed to purchase 7.5% of TikTok Global as well as enter into commercial agreements to provide our ecommerce, fulfillment, payments and other omnichannel services to TikTok Global. Our CEO, Doug McMillon, would also serve as one of five board members of the newly created company."

In other M&A news, Illumina ($ILMN) announced they have entered into a definitive agreement to acquire Grail for cash and stock consideration of $8B upon closing of the transaction. Grail was founded by Illumina in 2016 and was spun out as a standalone company, powered by Illumina's NGS technology, to develop data science and machine learning and create the atlas of cancer signals in the blood, enabling multi-cancer early detection tests.

Meanwhile, Microsoft ($MSFT) announced plans to acquire ZeniMax Media, the parent company of Bethesda Softworks, which it calls "one of the largest, privately held game developers and publishers in the world," for $7.5B in cash. Bethesda, the creators of gaming franchises including The Elder Scrolls and Fallout, "brings an impressive portfolio of games, technology, talent, as well as a track record of blockbuster commercial success, to Xbox," Microsoft said.

Shares of JPMorgan Chase ($JPM) fell over 3% after the International Consortium of Investigative Journalists reported that it was among five banks that defied money laundering crackdowns by moving large sums of illicit cash for shadowy characters and criminal networks. In some cases the bank and peers kept moving illicit funds even after U.S. officials warned them they'd face criminal prosecutions if they didn't stop doing business with mobsters, fraudsters or corrupt regimes, the consortium said. Meanwhile, in Reuters' recounting of the documents submitted by banks to the U.S. government, it said the five global banks that appeared most often in the documents were JPMorgan, HSBC ($HSBC), Deutsche Bank ($DB), Standard Chartered ($SCBFY) and Bank of New York Mellon ($BK).

Shares of Nikola ($NKLA) plunged 19.3% after the electric truck making hopeful announced that Trevor Milton approached the board and proposed to voluntarily step aside as Executive Chairman. The board accepted his proposal, and Stephen Girsky, former Vice Chairman of General Motors ($GM) and a member of Nikola's board, has been appointed Chairman of the Board, effective immediately.

Meanwhile, The Wall Street Journal reported that short-form mobile-focused streaming service Quibi is weighing several strategic options, including a potential sale, as the company has struggled to grow its subscriber base in a competitive online-video marketplace. Publicly traded companies in the content streaming space include Netflix ($NFLX), AT&T ($T), Disney ($DIS), Comcast ($CMCSA), Amazon ($AMZN), and ViacomCBS ($VIAC).

MAJOR MOVERS: Among the noteworthy gainers was Cubic ($CUB), which rose 34.2% after announcing that its board of directors approved the adoption of a limited-duration shareholder rights plan in response to Elliott Management informing the company privately that it has acquired a direct ownership and derivatives position and that it, and a private equity firm with whom Elliott has partnered, is interested in acquiring Cubic, subject to various conditions. Also higher was Roku (ROKU), which gained 17.7% after Comcast's (CMCSA) Peacock and Roku announced the Peacock app is now available nationwide on the Roku platform.

Among the notable losers was Legend Biotech ($LEGN), which slid more than 14% after announcing that its CEO Fangliang Zhang is presently under residential surveillance by the People's Republic of China law enforcement. Also lower was Tenet Healthcare ($THC), which fell 13.1% after JPMorgan analyst Gary Taylor downgraded the stock to Underweight from Neutral on a stalled hospital recovery.

INDEXES: The Dow fell 509.72, or 1.84%, to 27,147.70, the Nasdaq lost 14.48, or 0.13%, to 10,778.80, and the S&P 500 declined 38.41, or 1.16%, to 3,281.06.

Source: (

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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