What Happened Last Week
Technology stocks led the stock market higher last week. Nasdaq index soared to new all time highs. The so-called FANNG stocks all had significant gains: Netflix (15.1%), Amazon (10.7%), Apple (5.4%), Google (5.3%) and Facebook (4.99%). The rise of coronavirus cases pushed investors back to stay-at-home trades.
On Monday, the Dow Jones Industrial Average has increased 347 points, or 1.3%. Nasdaq Composite, which measures predominantly tech companies, rose 1.7%. It is worth noting that tech companies appear to perform better than average.
On Tuesday, the Dow Jones Industrial Average dropped over 200 points, but it has overall gained more than it has lost this week. Novavax, a biotech company, gained a 29% increase to its stock, because it was awarded $1.6 billion to help develop a COVID-19 vaccine. Tesla stock has increased around 50% in two weeks. Tesla’s electric vehicles are in high demand, as consumers become more conscious of pollution from gasoline consumption and want to upgrade their cars to newer models.
On Wednesday, HSBC Holdings Plc slumped 3.1%, because of a report that Trump’s advisors planned to destabilize Hong Kong’s currency peg to the US dollar. This would limit Hong Kong’s access to the US dollar, and also limit China’s access, as Hong Kong has many critical banks that China depends on. This was a way of punishing China for limiting Hong Kong’s autonomy. However, the market did not react strongly, because Hong Kong has over $440 billion in reserves, for situations such as this. Currently, investors are continuing to invest and hold tech stocks, because they believe they are a new safe option. Nasdaq 100 has been increasing by the largest percentage in July.
On Thursday, the Dow dropped over 400 points, at 1.6%, and S&P 500 dropped 1.3%. Nasdaq Composite dropped 0.6%. This was because Florida reported a record spike on coronavirus deaths, at 120, and a record in hospitalizations. The market loss was recovered slightly when Dr. Anthony Fauci announced that Moderna would enter phase 3 of vaccine tests by the end of July. The volatility could be caused by the fact that recovery was turning out to be more complicated than expected, with coronavirus cases increasing. Companies especially affected by coronavirus had the greatest decrease in stock values this day. United Airlines, Delta, and American Airlines dropped by 4%. Kohl’s declined by 5.8% and Walgreens declined by 9%. It is believed that the pandemic problems will continue. Americans cannot travel to Europe, as the EU banned American travelers from entering. Investors are continuing to see stocks from tech companies as safe bets during this time. There is less regulation, as governments are focusing on dealing with the pandemic.
On Friday, the Dow increased by 200 points around noon, as investors saw positive potential about vaccines from Gilead Sciences. Its coronavirus treatment candidate drug, remdesivir, was associated with an improvement in clinical recovery and a reduction in mortality risk. Tesla could join S&P 500, drawing in mainstream investors. Tesla stock has risen more than 500% in the past year, according to CNBC. After hearing the news about vaccines, the stock values of airlines rose, and Carnival Cruise Lines stock rose 9.5%, as these companies expect a future increase in demand once a vaccine is distributed to the public. However, major tech companies had falling stock values today, Apple fell by 0.22% and Microsoft fell by 0.51%. Investors began to pay more attention to other stocks that could increase in the future after the pandemic ends.
Earnings In Focus – This Week
This week, second-quarter earnings season kicks into full gear with reports from big banks JPMorgan Chase, Citigroup and Wells Fargo on Tuesday and Bank of America on Thursday. It is likely for the S&P 500 companies to report a 40% year-over-year earnings decline in Q2.
Economic News – This Week
This week, investors will get a reading on inflation rate as the Consumer Price Index is reported on Tuesday. Weekly jobless claims will provide a gauge on the job market on Thursday. Retail sales number will offer an indication on consumption, which accounts for 70% of the whole economy.