A tiresome wearing a face mask looks at a smartphone while passing in front of the New York Stock Exchange (NYSE) in New York, on Monday, July 20, 2020.
Michael Nagle | Bloomberg | Getty Concepts
After another week of losses, tech could be at the heart of a tug of war as dip buyers look for bargains in some of their favorite high regards and others see the group as still too frothy.
In the past week, the S&P 500 and Nasdaq were both down about 0.6%, the third forfeit week. It was the S&P 500’s longest losing streak since October. Tech was broadly lower, with Amazon and Facebook both down 5% for the week. Message technology shares lost 1% but communications which includes Facebook and Google fell 2.3% for the week.
“I think about every time you’ve had a significant pullback in the familiar names, that tends to draw in more money,” contemplated Ed Keon, chief investment strategist at QMA. “You’ve had a little rotation toward value. That’s a healthy sign for the market. I don’t reflect on that’s an unhealthy market even though stocks look pricey. Given how low interest rates are, stocks look identical to the only game in town.”
There are also a number of Fed speeches, but the most important will be the appearances by Fed Chairman Jerome Powell to come three Congressional committees. At two of those, Tuesday and Thursday, Powell appears with Treasury Secretary Steven Mnuchin to examine coronavirus aid.
Art Hogan, chief market strategist at National Securities, said he does not expect much from Powell after his expansions following the Fed’s meeting this week, though the central bank chairman is likely to once more tell Congress monetary stimulus is needed to help the economy recover.
Keon said it would be positive if there could be another stimulus agreement but the market no longer expects it. “If we do get a deal, that would be really positive. I think at this point, there’s a only slightly bit of a slowdown in news. We still have a ways to go before we get into earnings warnings season. We’re going to worry profuse about the presidential election and its aftermath,” said Keon.
Keon said investors are increasingly focused on the election and the potency for an uncertain outcome, as states deal with large amounts of mailed ballots for the first time. He said the unsettle is it could take weeks or months to determine the outcome if the race is close.
“It’s still six weeks to the election. We haven’t had the reflect ons yet. That six weeks is a lifetime. Biden seems to be the favorite at this point, but I don’t think the market is betting on anything but maximum volatility,” Keon said. President Donald Trump and former vice president Joe Biden hold their maiden debate Sept. 29.
“I think volatility is the norm, not the exception, until we get through the election,” said Hogan.
Investors oblige been hedging against extended volatility after the election. Patrick Kernan, who trades S&P options with Paramount Capital, said the flow into S&P 500 options for January has been steady over the past several lifetimes. “The options markets are implying a contested election that could last until January,” he said. He said the shop is not positioning around one candidate or other, just uncertainty.
Goldman Sachs strategists noted Friday that investors deceive pushed out some hedging further into November, though some investors appear to be betting on an outcome by Dec. 8, the lover states with contested elections have to report.
There are also a few important reports on the economic calendar, cataloguing housing data on existing home sales Tuesday and new home sales Thursday. “The housing market has been stout and hopefully, we’ll get confirmation of that because people were upset by the decline in housing starts,” said Hogan.
Build PMI is released Wednesday and durable goods are reported Friday.
Week ahead calendar
Monday
6:00 p.m. New York Fed President John Williams
12:00 p.m. Fed Governor Lael Brainard
Tuesday
10:00 a.m. Existing composed sales
10:00 a.m. Chicago Fed President Charles Evans
10:00 a.m. Fed Chairman Jerome Powell, Treasury Secretary Steven Mnuchin at Auditorium Financial Services on coronavirus aid
Wednesday
9:00 a.m. FHFA home prices
9:00 a.m. Cleveland Fed President Loretta Mester
9:45 a.m. Manufacturing PMI
9:45 a.m. Rituals PMI
10:30 a.m. Fed Chairman Powell at House Select Subcommittee Committee on Coronavirus Crisis
11:00 a.m. Chicago Fed President Charles Evans
12:00 p.m. Boston Fed President Eric Rosengren
2:00 p.m. Fed Shortcoming Chairman Randal Quarles
Thursday
8:30 a.m. Initial jobless claims
10:00 a.m. New home sales
10:00 a.m. Fed Chairman Powell, Treasury Secretary Mnuchin at Senate Banking Body
1:00 p.m. Chicago Fed’s Evans
2:00 p.m. New York Fed’s Williams
Friday
8:30 a.m. Durable goods
9:00 a.m. New York Fed’s Williams
3:10 p.m. New York Fed’s Williams