Stock Market News for Sep 4, 2020 – September 4, 2020

Wall Street closed sharply lower on Thursday as investors realized profits on those stocks that have skyrocketed year to date. The technology sector suffered the major brunt of blow. Mixed economic data also dented market participants confidence. All three major stock indexes ended in the red after recording worst single-day performance since June. The market will remain close on Monday (Sep 7) on account of Labor Day.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) tumbled 2.8% or 807.77 points to close at 28,292.73, reversing 2-day winning run. Notably, 28 components of the 30-stock index ended in the red while 2 finished in green. The blue-chip index reentered into negative territory year to date. Meanwhile, the tech-laden Nasdaq Composite ended in negative territory to close at 11,458.10, plunging 5% or 598.34 points.

The S&P 500 plummeted 3.5% or 125.78 points to end at 3,455.06, reversing 2-day winning streak. The Technology Select Sector SPDR (XLK), the Materials Select Sector SPDR (XLB), the Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC), the Industrials Select Sector SPDR (XLI) and the Health Care Select Sector SPDR (XLV) tumbled 5.7%, 2.8%, 3.2%, 3.4% 2.8% and 2.7%, respectively. Notably, all  eleven sectors of the benchmark index closed in negative territory.

The fear-gauge CBOE Volatility Index (VIX) up 26.5% to 33.60, crossing its 200-day moving average. A total of 11.98 billion shares were traded on Thursday, higher than the last 20-session average of 9.22 billion. Decliners outnumbered advancers on the NYSE by a 4.14-to-1 ratio. On Nasdaq, a 4.20-to-1 ratio favored declining issues.

Technology Sector Plunges

The technology sector suffered the major brunt of yesterday’s market turmoil. Within the S&P 500 Index, this sector tumbled 5.7% on Sep 3 snapping a 10-day winning streak. Yet the technology sector is up an impressive 30.7% so far this year defying the pandemic. This overwhelming performance prompted several economists and financial experts to comment that the technology sector is overvalued.

Technology behemoths like Apple Inc. (AAPL Free Report) , Microsoft Corp. (MSFT Free Report) , Facebook, Inc. (FB Free Report) , Amazon.com Inc. (AMZN Free Report) , Alphabet Inc. (GOOGL Free Report) and Netflix Inc. (NFLX Free Report) plummeted 8%,6.2%, 3.8%, 4.6%, 5.2% and 4.9%, respectively. Apple carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

The Department of Labor reported that weekly jobless claims declined by 130,000 to 881,000 for the week ended Aug 29. The consensus estimate was 964,000 and previous week’s data revised upward to 1.011 million from 1.006 million reported earlier. However, the unadjusted initial jobless claims came in at 833,352 compared with 825,761 in the previous week. It was the fifth straight week in which unadjusted claims stayed below 1 million.

Continuing claims (people who are already receiving benefits) declined to 13.25 million for the week ended Aug 22 from 14.49 million in the prior week. Unadjusted continuing claims dropped to 13.1 million from 13.9 million in the prior week.

The Institute of Supply Management reported that the services index declined to 56.9% in August from 58.1% in July. The consensus estimate was 56.7%. Notably, any reading above 50% indicates expansions in services activities and a reading above 55% indicates strong services activities that constitutes nearly 70% of the U.S. GDP. Moreover, IHS Markit final purchasing managers index for the U.S. service sector for August was 55%, up from 54.8% in July.

The final reading of nonfarm productivity increased 10.1% in the second-quarter 2020 compared with 7.3% recorded in the initial estimate. The consensus estimate was 7.8%. The final reading of unit labor cost increased by 9% in the second-quarter 2020 compared with12.2% recorded in the initial estimate. The consensus estimate was 11.5%.

U.S. trade deficit in July was $63.6 billion compared with the consensus estimate of $55.8 billion. Trade deficit in June was revised to $53.5 billion from $50.7 billion recorded earlier. The trade deficit crossed the level of $60 billion for the first time since 2008.

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