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End of Day Briefing - Wednesday August 26, 2020

Another day, another record high as mega-caps power rising stocks

Dow +83.48 at 28331.92, Nasdaq +198.59 at 11665.06, S&P +35.11 at 3478.73

[BRIEFING.COM] The S&P 500 (+1.0%) and Nasdaq Composite (+1.7%) rallied to fresh record highs on Wednesday, propelled higher by some eye-popping gains in the mega-cap stocks. The Dow Jones Industrial Average increased just 0.3%, while the Russell 2000 was left in the dust with a 0.7% decline.

Highlighting a few of the moves: Salesforce ($CRM 272.32, +56.27, +26.0%) surged 26% following its earnings report, Facebook ($FB 303.91, +23.09, +8.2%) rose 8% on no news, and Netflix ($NFLX 547.53, +56.95, +11.6%) rose 11% on no news. Apple ($AAPL 506.09, +6.79, +1.4%) and Tesla ($TSLA 2153.17, +129.83, +6.4%) were fueled by a pair of Street-high price-target increases.

Consequently, today's leadership came from the S&P 500 communication services (+3.7%), information technology (+2.1%), and consumer discretionary (+1.5%) sectors, which are home to many of the mega-caps. In the afternoon, the gains broadened out to the materials (+1.0%), industrials (+0.1%), and consumer staples (+0.1%) sectors.

Notably, the market internals weren't as bullish. Declining issues outnumbered advancing issues at the NYSE and Nasdaq by a comfortable margin. The biggest laggards were found within the energy (-2.2%), utilities (-1.2%), and real estate (-0.7%) sectors.

In other developments, durable goods orders increased 11.2% m/m in July ( consensus +3.9%), and Moderna ($MRNA 70.50, +4.25, +6.4%) said its COVID-19 vaccine generated a promising immune response in ten elderly patients.

For some perspective on today's record-setting performance, the S&P 500 finished the day up 58.7% from its March 23 low, up 7.7% for the year, and 13.0% above its 200-day moving average (3079). The latter raises the risk for a technical correction, although the momentum in the market can go on for longer than expected.

U.S. Treasuries finished the day little changed. The 2-yr yield decreased one basis point to 0.15%, and the 10-yr yield increased one basis point to 0.69%. The U.S. Dollar Index declined 0.1% to 92.91. WTI crude futures increased by 0.1% to $43.39/BBL.

Reviewing Wednesday's economic data:

  • New orders for durable goods increased 11.2% m/m in July ( consensus +3.9%) from an upwardly revised 7.7% (from 7.6%) in June. Excluding transportation, new orders jumped 2.4% m/m ( consensus +1.8%) following an upwardly revised 4.0% increase (from 3.6%) in June.
    • The key takeaway from the report is that increased orders were seen across the manufacturing complex (other than nondefense aircraft and parts), underscoring a recovery-minded disposition in the wake of the COVID shutdown period.
  • The weekly MBA Mortgage Applications Index declined 6.5% following a 3.3% decrease in the prior week.

Looking ahead, investors will receive the weekly Initial and Continuing Claims report, the second estimate for Q2 GDP, and Pending Home Sales for July on Thursday.

  • Nasdaq Composite +30.0% YTD
  • S&P 500 +7.7% YTD
  • Dow Jones Industrial Average -0.7% YTD
  • Russell 2000 -6.5% YTD

Market Snapshot

SP 5003478.73+35.11(1.02%)
10-yr Note -1/320.695
NYSEAdv 1158 Dec 1809 Vol 745.0 mln
NasdaqAdv 1432 Dec 1910 Vol 3.4 bln

Industry Watch

Strong: Information Technology, Communication Services, Consumer Discretionary, Materials
Weak: Energy, Utilities, Real Estate, Financials

Moving the Market

-- S&P 500 and Nasdaq closed at fresh record highs on back of continued mega-cap leadership

-- Upbeat earnings reports, economic data

-- Declining issues outpaced advancing issues at NYSE and Nasdaq by a comfortable margin

Stocks end higher as investors await Powell speech

The tech-heavy Nasdaq was the day's outperformer as it got a boost from the blow-out quarter reported by Salesforce ($CRM), which would have been a benefit to the Dow as well if it came next week, when the cloud company is scheduled to join the blue chip index. As it was, the Dow was the laggard but still notched a gain ahead of Federal Reserve Chair Powell's speech tomorrow at the virtual Jackson Hole Symposium.

ECONOMIC EVENTS: In the U.S., durable goods orders climbed 11.2% in July, which was almost triple expectations and marks a third straight monthly pop after two big pandemic-related drops in March and April.

Meanwhile, the New York Times reported that the U.S. Centers for Disease Control and Prevention was pressured by higher-ups within the Trump administration to update its COVID-19 testing guidelines this week to exclude individuals who do not have symptoms of COVID-19, even if they have been recently exposed to the virus. One official told the Times that the directive came from the top down, while another official said that the guidelines were not written by the CDC but were forced by the White House.

TOP NEWS: A day after being selected to join the Dow, Salesforce impressed with fiscal Q2 results that Barclays analyst Raimo Lenschow said beat even the most aggressive buy-side expectations. Morgan Stanley analyst Keith Weiss, who was among the many on the Street who raised his price target on Salesforce following the report, added that he thinks investors will likely be encouraged to hear CEO Marc Benioff say the focus now is "about our own execution" following a series of large M&A deal over the past several years. Later on, however, The Wall Street Journal reported that the company has started to notify some of its staff that they could lose their job. In a statement to the Journal, Salesforce said it is "reallocating resources to position the company for continued growth. This includes continuing to hire and redirecting some employees to fuel our strategic areas, and eliminating some positions that no longer map to our business priorities." Salesforce shares closed with a gain of 26% at $272.32.

In other earnings news, shares of HP Enterprise ($HPE) and Dick's Sporting Goods ($DKS) rose 3.6% and 15.7%, respectively, following their own "impressive" results. Meanwhile, shares of Nordstrom ($JWN) and Pure Storage ($PSTG) fell 5.5% and 10%, respectively, after reports last night from the department store owner and storage technology provider.

In a regulatory filing last night, Palantir Technologies ($PLTR) said it is filing for a NYSE direct listing under the ticker "PLTR." The company noted that it will have Class A, Class B, and a Class F for its common stock, and that it won't raise any proceeds from a direct listing. The secretive data-analytics company, which was co-founded by Facebook ($FB) board member Peter Thiel, provides tools to help companies, nonprofits, and government agencies analyze large data sets.

Meanwhile, Bloomberg reported that Google ($GOOGL) CEO Sundar Pichai said that the company is not planning to buy ByteDance's TikTok. Multiple previous media reports have indicated that Oracle ($ORCL) and Microsoft ($MSFT) are potentially in the running to buy TikTok's U.S. assets.

MAJOR MOVERS: Among the noteworthy gainers was Fluidigm ($FLDM), which rose 30% after receiving emergency use authorization from the FDA for the company's saliva-based test to detect nucleic acid from the SARS-CoV-2 virus. Also higher were Anaplan ($PLAN) and Urban Outfitters ($URBN), which each advanced roughly 21% apiece after reporting quarterly results.

Among the notable losers was Garrett Motion ($GTX), which fell 44% after it said it is exploring alternatives for a balance sheet restructuring. Also lower were Express ($EXPR) and Autodesk ($ADSK), which declined 4% and about 2%, respectively, after reporting quarterly results.

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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