The Week on Wall Street
Stocks powered to another week of gains as the S&P 500 and Nasdaq Composite set multiple new record highs along the way.
The Dow Jones Industrial Average was essentially unchanged while the Standard & Poor’s 500 rose by 0.72%. The Nasdaq Composite index added 2.65% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.71%.
The S&P 500 Sets Record High
The S&P 500 closed at a record high on Tuesday, erasing the steep losses suffered in February and March. The recovery has been powered by unprecedented monetary accommodation, fiscal stimulus, and investor willingness to look ahead with confidence that global economies will get past the pandemic challenge. Technology stocks continued to lead the market and helped push the NASDAQ Composite to new highs.
Stocks were mixed as the week progressed amid some weak economic news, a message of economic caution from the Fed, and continuing uncertainty over a new fiscal stimulus plan. Technology momentum provided support for the broader market, with a late Friday afternoon rally pushing the S&P 500 and Nasdaq Composite to close out the week at fresh record highs.
Not All Sectors Are Participating
Behind last Tuesday’s headline that the S&P 500 had set a new record high lies a story of a deeply bifurcated market.
Despite a new high, more than half the companies in the index were still trading below where they began the year. When dissected on an industry sector basis, the year-to-date performance dispersion was quite wide, with sectors like Technology (+25.53%), Consumer Discretionary (+16.68%), and Communication Services (+12.70%) posting strong performance, while Energy (-37.56%) and Financials (-20.08%) remained sharply down. In fact, nearly half (5 out of 11) of S&P 500 sectors were still in negative territory year-to-date.
THIS WEEK: KEY ECONOMIC DATA
Tuesday: Consumer Confidence. New Home Sales.
Wednesday: Durable Goods Orders.
Thursday: Jobless Claims. Gross Domestic Product (GDP).
Friday: Consumer Sentiment.
THIS WEEK: NOTABLE COMPANIES REPORTING EARNINGS
Tuesday: Salesforce.com (CRM), Best Buy (BBY), Intuit (INTU)
Thursday: Marvell Technology (MRVL), Dollar General (DG), Dollar Tree (DLTR), Dell Technologies (DELL), VMware (VMW)
Final Thoughts When one looks at all the economic forces (pandemics, need for a vaccines, uncooperative political leaders, and elections), they could arrive at the conclusion there is little hope for a robust economy once again. I mean, what if the Democrats are elected to office, or what if the Republicans are elected to office? I've got news for you, this is the thought the media espouses every election. After all, scared viewers make loyal viewers. Don't get suckered in. The stock market is going to wax and wane over time. However, the economy and market is going to grow over time. My entire career there have been so-called "reasons" not to invest. Yet, over that time the Dow Jones industrial average has gone from about 6,000 to 28,000. This too, shall pass.
The adversity of recent times has opened a new horizon for global companies that can adapt quickly, and that have proven themselves as an attractive choice for private capital investment. The United States is not the only country in the world facing adversity and new paradigms of global trade. It seems rational and prudent to remain engaged in large, blue-chip companies who will continue to adapt to new horizons in global trade, and will provide us some downside protection in the form of dividends to soften the bumps along the way.
The odds for market performance in the near future may remain unknown, but when we take the longer perspective, there is no doubt our capital markets will remain the envy of free global capital, and the most desirable choice for investment. What we have to do is manage the risk, overcome the bumps, and continue our chosen path to success and new highs.
Have a great week! 
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August 24, 2020
