Market grinds out a gain

  • Stocks post third-straight week of gains, tech leads
  • Stimulus seesaw continues
  • This week: Housing numbers, defense and aerospace earnings

Heading into the back half of October and the thick of earnings season, US stocks shook off more stimulus-deal turmoil, rising COVID cases, and mixed economic data to post their third-straight up week.

Thanks in large part to a big Monday rally that pushed the SPX to within 1.1% of its all-time high—with an assist from a key intraday reversal on Thursday—the big index was able to stay in the green for the week even though a promising Friday rally evaporated by the close:

Chart 1: S&P 500 (SPX), 7/9/20–10/16/20. S&P 500 (SPX) price chart. Another choppy week.

Source: Power E*TRADE

The headline: Stocks rebound despite stimulus-go-round.

The fine print: COVID relief is the headline tail that seems to have been wagging the market dog the past couple of weeks—arguably more so than the election or the virus itself. This week stocks were subjected to more day-to-day whiplash: Monday’s looks-like-a-deal-could-happen rally, followed by Wednesday’s comments from Treasury Secretary Steve Mnuchin that a deal was unlikely to happen before the election. After a sharp sell-off early Thursday, the market pivoted to the upside after Mnuchin and the White House signaled a willingness to negotiate.1

The numbers: Last Thursday’s higher-than-expected jobless claims number (898,000) didn’t do the market any favors, but a surprisingly strong retail sales number—1.9% vs. 0.7% estimated—appeared to give stocks a boost in early trading Friday.

The scorecard: The Nasdaq 100 (NDX) reasserted its muscle last week, while the Russell 2000 (RUT) retreated—in keeping with its historical pattern of underperforming after a two-week run of relative strength:

US stock index performance table for week ending 10/16/20. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE

Sector roundup: The strongest S&P 500 sectors last week were industrials (+1.1%), communication services (+0.9%), and utilities (+0.8%). The weakest sectors were real estate (-2.3%), energy (-2.1%), and financials (-0.9%).

Highlight reel: On Monday, Dillard’s (DDS) jumped 27% to $53.45, and Nio (NIO) rallied 23% to $26.50 on Wednesday. On the downside, Zynex (ZYXI) slid 23% to $15.20 on Monday, and Fastly (FSLY) tumbled 27% to $89.70 on Thursday.

Futures action: Last week a consolidating December gold (GCZ0) contract traded almost entirely within the range of its big October 9 up day, closing Friday at $1,906.40/ounce. December WTI crude oil (CLZ0) continued to bang its head on price resistance around $41.50–$42/barrel, closing slightly higher for the week at $41.12.

Last week's biggest futures up moves: November milk (DCX0) +6%, December wheat (ZWZ0) +5.3%, December hard red wheat (KWZ0) +4.3%. Last week's biggest futures down moves: December palladium (PAZ0) -4.8%, November lumber (LBSX0) -4.2%, December coffee (KCZ0) -3.9%.

Coming this week

The earnings calendar has a bit of everything—aerospace and defense, tech, household consumer brands, big pharma and biotech, and Netflix and Tesla:

Monday: International Business Machines (IBM), Halliburton (HAL), PetMed Express (PETS), Lennox International (LII)

Tuesday: Raytheon (RTX), Lockheed Martin (LMT), Procter & Gamble (PG), Snap (SNAP), Netflix (NFLX), Texas Instruments (TXN), Philip Morris (PM), Teradyne (TER)

Wednesday: AutoNation (AN), Abbott Laboratories (ABT), Biogen (BIIB), Las Vegas Sands (LVS), Whirlpool (WHR), Edwards Lifesciences (EW), Lam Research (LRCX), Verizon (VZ), Chipotle (CMG), Meritage Homes (MTH), Corelogic (CLGX), Tesla (TSLA), Xilinx (XLNX)

Thursday: American Airlines (AAL), Southwest Airlines (LUV), AT&T (T), Fifth Third Bancorp (FITB), Coca-Cola (KO), Intel (INTC), Check Point Software (CHKP), Union Pacific (UNP), Kimberly-Clark (KMB), Northrop Grumman (NOC).

Friday: American Express (AXP), Illinois Tool Works (ITW), Ventas (VTR), Honeywell (HON)

Housing data dominates this week’s economic calendar:

Monday: NAHB Housing Market Index

Tuesday: Housing Starts, Building Permits

Wednesday: Fed Beige Book

Thursday: Weekly Jobless Claims, Existing Home Sales, Leading Indicators

Friday: Markit Services PMI (flash), Markit Manufacturing PMI (flash)

Go to the E*TRADE market calendar (login required) for an up-to-date earnings schedule and a complete list of splits, dividends, IPOs, and economic reports. The Active Trader Commentary also lists earnings announcements, IPOs and economic report times each morning.

Market Mover Update: Intel (INTC) followed through on last Thursday’s upside reversal, rallying Friday to its highest high since July 24 (see “A fundamentally technical situation”).

Last week’s Tuesday-Thursday pullback interrupted what may have looked like the market’s best shot at making new record highs in more than a month, but traders who’d been watching the Cboe Volatility Index (VIX) got a bit of a heads-up: Even though last Monday was the SPX’s fourth-biggest up day since mid-June and its highest high since September 3, the VIX also closed higher that day, suggesting traders were edgy despite the rally. Typically, the VIX closes lower on a day the SPX closes much higher.


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1 The Hill. Trump says he's willing to raise stimulus offer over $1.8T. 10/15/20.

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