Weekly Market Review – August 23, 2020

The US stock market was led by the tech companies to new highs last week.  On August 18th, the S&P 500 reached a historic high of 3,395.06, surpassing its previous record of 3,393.52. After hitting a 52-week low on March 23rd, the S&P 500 has risen 54%. The gains were driven by major tech shares. Facebook rose 27%, Apple rallied 33.5%, Alphabet rose over 14%,  and Microsoft climbed 57.5%. Netflix rose 52.6% and Amazon rose 78%.  The Nasdaq Composite also hit a record, climbing 0.6%. On August 19th, the S&P 500 reached a new all-time high after gaining 0.1%. Apple’s market cap reached $2 trillion for the first time. Considering stocks are relatively steady now, the S&P 500 may hit a ceiling and not gain substantially further, or it would encounter more volatility, considering that colleges have shut down and school officials are cautious about students returning to school. 

New applications for unemployment benefits rose to 1.1 million the week that ended August 15, compared to just under 1 million the week before. The labor market recovery is slower than expected, indicating that businesses are still laying off employees. 

Protests in Belarus

Thousands of anti-government protesters have gathered in Minsk in a peaceful protest against Belarus’s authoritarian government and election fraud. This protest is the largest in Belarus’s history. President Alexander Lukashenko, who has been in power for 26 years, claimed to have won 80% of the vote in an election against opposition candidate Svetlana Tikhanovskaya, who was claimed to have won only 10%. However, Tikhanovskaya insisted that where votes were properly counted, she won 60-70%. Lukashenko sought help from Vladimir Putin, and Putin told him that Russia would be ready to provide aid if necessary. 

Drilling in the Arctic

The Trump administration approved an oil leasing program for the Arctic National Wildlife Refuge in Alaska. This would open the 19-million acre refuge to oil drilling. Environmentalists criticize this decision, as the oil drilling would disrupt and threaten wildlife such as polar bears and caribou. Investors are also skeptical, as crude oil demand is relatively low and the industry worldwide is glutted with supply. There are doubts about whether there really is a large amount of oil under the ANWR, enough to make drilling worth its costs. Goldman Sachs and Wells Fargo have ruled out funding for the drilling operation. 

Trump vs. Huawei

The US Commerce Department has issued new rules curbing Huawei’s access to foreign-made chips. Non-US companies are forbidden to sell US technology to Huawei without a special license. Trump has argued that Huawei is spying on Americans, and is a threat to national security. The restrictions may put the US semiconductor industry at risk, because business may gravitate to foreign competitors. 

Joe Biden Becomes Democratic Nominee

Joe Biden has become the Democratic nominee after the convention. Convention speakers offered many arguments in support of Biden, but there were many arguments against Trump as well. The fall 2020 election process appears more as a referendum on the incumbent, rather than a typical election. 6 out of 10 Biden voters supported him more to get rid of Trump, according to a Wall Street Journal/NBC News poll. 

Earnings Report This Week

Salesforce.com, Dollar General and Dell Technologies will report second quarter earnings. 

Economic News This Week

We will have a good look at the housing markets this week. FHFA Home Price index, New Home Sales, Pending Home Sales and Building Permits data will be released. The housing market is expected to be strong given the current record low mortgage rates.