Market Insights

Stocks kept falling last week as the rout in technology stocks continued.

The S&P 500 slid 0.6 percent between Friday, September 11, and Friday, September 18. It was the index’s third straight drop — the longest stretch of declines since August 2019. The Nasdaq-100 fell more than twice as much.

Prominent technology and e-commerce names like Facebook (FB), Apple (AAPL) and eBay (EBAY) led the selling. They’re the same stocks that drove the market to new highs in August as investors piled into new-economy stocks that benefited from the coronavirus pandemic.

The S&P 500 is now under its 50-day moving average. The index is trying to hold its ground in positive territory for the year, near its price level before the coronavirus correction began. Stocks are in the midst of their first negative month since March.

Economy Reopening

Last week saw gains in old-fashioned stocks like industrials and energy. The change isn’t a huge surprise because data has shown business recovering from the coronavirus pandemic. Consider these developments last week:

• Initial jobless claims inched down to 860,000. It was the fewest Americans seeking unemployment benefits since the crisis began in March. Continuing claims also dropped under 13 million for the first time.
• NAHB’s homebuilder sentiment index set another new record. The combination of low interest rates, social distancing and years of underbuilding continue to support housing.
• Consumer sentiment beat estimates again as the public remained optimistic about the coronavirus pandemic winding down.

Are Transports Breaking Out?

While big tech stocks struggled last week, transportation stocks reached their highest levels in almost two years. Traditional “Dow Theory” analysis would see that as a sign of confidence in the economy.

Other non-technology corners of the market that lagged during the crisis advanced. The Russell 2000 small cap index, more focused on traditional parts of the economy, rose 2.6 percent. Industrials and materials gained at least 1 percent.

Sports-betting was also strong. DraftKings (DKNG) ripped more than 30 percent last week after signing a content deal with ESPN and the New York Giants. Penn National Gaming (PENN) added another 20 percent. Both hit new record highs.

Apple Draws Shrugs

Two big events last week drew only shrugs. Both were widely anticipated and investors mostly “sold the news” once it passed.

First, AAPL’s product event featured new Watches and iPads. However, iPhone lovers will have to wait until for new 5G handsets.

That dragged the tech giant back to its lowest price since the end of July, when it announced a stock split. Chart watchers could now eye the psychologically important $100 level for potential entries.

Second, the Federal Reserve promised to keep interest rates low through 2023. It was totally expected and may keep traders watching for signs of the U.S. dollar continuing lower.

Tesla, Nike, Powell in Congress

This week brings Tesla’s Battery Day and a few important earnings. Fed Chairman Jerome Powell will also testify in Congress about the need for more economic stimulus.

Here are some items to watch.

• Tomorrow morning: Powell begins three days of testimony on Capitol Hill.
• Tomorrow afternoon: Battery Day and Nike (NKE) earnings.
• Thursday: Jobless claims, new home sales, Costco (COST) earnings.