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Stocks fall on disappointing stimulus news
06-Oct-20 16:20 ET
Dow -375.88 at 27762.76, Nasdaq -177.88 at 11154.53, S&P -47.66 at 3360.94

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The S&P 500 fell 1.4% on Tuesday after President Trump said he called off stimulus negotiations until after the election. Prior to the news, the benchmark index was up 0.7% late in the day amid leadership from its cyclical sectors on growing expectations for a fiscal relief bill.

The Nasdaq Composite declined 1.6%, and the Dow Jones Industrial Average declined 1.3%. The Russell 2000 declined just 0.3% after rallying as much as 2.4% intraday.

Specifically, President Trump said the Republican $1.6 trillion bill was "very generous" but was upset that House Speaker Pelosi was not negotiating in "good faith." Whether the president felt emboldened by the rising stock market to flex a negotiating tactic is debatable, but the prospect of waiting even longer for stimulus because of political wrangling was detrimental for sentiment and stock performance.

The energy sector, which was up as much as 2.0% amid higher oil prices ($40.67/bbl, +1.38, +3.5%), relinquished its leadership position and declined 1.5%. The influential losses, however, came from the information technology (-1.6%), consumer discretionary (-2.1%), and communication services (-2.0%) sectors due to the daylong underperformance in their mega-cap components.

Investors returned to the Treasury market where longer-dated yields had been on the rise on stimulus hopes. The 2-yr yield increased one basis point to 0.15%, while the 10-yr yield declined two basis points to 0.74% after touching 0.79% at its intraday high. The U.S. Dollar Index increased 0.2% to 93.70.

Fed Chair Powell made it clear today, if not already, of the need for further fiscal relief. There is still hope among some investors that the president will change his tune, and it's worth pointing out the S&P 500 remained positive for the week. The benchmark index, however, did close back below its 50-day moving average (3368).

Separately, Boeing (BA 159.54, -11.66, -6.8%) and General Electric (GE 6.17, -0.24, -3.7%) were pressured by additional headwinds. Boeing cut its demand forecast for commercial airplanes in the next decade by 11%, versus 2019 estimates. GE disclosed the SEC could take action against the company for possible violations of securities laws.

NVIDIA (NVDA 549.46, +3.76, +0.7%) was a notable exception today after its price target was raised to $650 from $565 at BMO Capital Markets.

Reviewing Tuesday's economic data:

The trade deficit widened to $67.1 billion in August (Briefing.com consensus -$66.2 billion) from an upwardly revised $63.4 billion (from -$63.6 billion) in July. The widening deficit was a function of imports increasing more than exports.
The key takeaway from the report is the understanding that it reflects a pickup in trade activity from the pandemic lows, yet it is also a reminder of just how damaging the pandemic has been on trade activity. Year-over-year, average exports decreased $44.8 billion from the three months ending August 2019 while average imports decreased $34.7 billion.
August job openings decreased to 6.493 mln from a revised 6.697 mln in July (from 6.618 mln).

Looking ahead, investors will receive the FOMC Minutes from the Sept. 15-16 meeting, Consumer Credit for August, and the weekly MBA Mortgage Applications Index on Wednesday.

Nasdaq Composite +24.3% YTD
S&P 500 +4.0% YTD
Dow Jones Industrial Average -2.7% YTD
Russell 2000 -5.5% YTD

Market Snapshot
Dow 27762.76 -375.88 (-1.34%)
Nasdaq 11154.53 -177.88 (-1.57%)
SP 500 3360.94 -47.66 (-1.40%)
10-yr Note +4/32 0.747
NYSE Adv 1158 Dec 1818 Vol 992.0 mln
Nasdaq Adv 1394 Dec 1945 Vol 4.3 bln

Industry Watch
Strong: Utilities
Weak: Consumer Discretionary, Communication Services, Information Technology, Energy

Moving the Market

-- Stocks fall after President Trump said he called off stimulus negotiations until after election

-- Mega-caps underperformed all session, well before the disappointing stimulus news

-- Small-caps outperformed on a relative basis

WTI crude future settle above $40 per barrel
06-Oct-20 15:25 ET
Dow -339.94 at 27798.70, Nasdaq -156.47 at 11175.94, S&P -42.75 at 3365.85

[BRIEFING.COM] The S&P 500 is down 1.3% and is trading near session lows. The Russell 2000 is down 0.1% after trading higher by more than 2.0% a short time ago.

One last look at the S&P 500 sectors shows consumer discretionary (-2.0%), energy (-1.5%), and communication services (-1.8%) leading the decline, while the utilities sector (+0.6%) continues to outperform in positive territory. The energy sector was up 2.0% earlier.

WTI crude futures settled higher by 3.5%, or $1.38, to $40.67/bbl. Prices have retraced some gains after the President's stimulus tweet.