September 4, 2020 Weekly Market Recap

The rally runs into some profit taking…

The market’s August momentum bled into September to start the week, as the S&P 500 notched its 22nd record close of the year, but profit taking in the mega-caps and growth stocks ultimately took the major indices sharply lower by week’s end.

The S&P 500 fell 2.3%, the Nasdaq Composite fell 3.3%, the Dow Jones Industrial Average fell 1.8%, and the Russell 2000 fell 2.7%.

While the profit taking started on Thursday from an index perspective, it really started on Wednesday in Apple (AAPL), Tesla (TSLA), and Zoom Video (ZM). The day before, shares of Zoom surged 40% after crushing earnings expectations.

The top-weighted information technology sector (-4.2%), which was – and still is – this year’s best-performing sector, was among this week’s laggards amid a 6.4% decline in Microsoft (MSFT). The energy sector (-4.5%) declined the most, while the utilities (+0.4%) and materials (+0.8%) sectors were spared.

Granted, there wasn’t that much profit to take from the beleaguered energy sector, but it continued to get pounced amid weaker oil prices ($39.70/bbl, -3.27, -7.6%).

At the end of the week, the encouraging Employment Situation Report for August contributed to the relative outperformance of value/cyclical stocks and some curve-steepening activity. The Russell 1000 Value Index declined 0.3% versus a 3.4% decline for the Russell 1000 Growth index.

Note, the curve-steepening activity on Friday essentially undid the curve-flattening activity from earlier in the week. The 2-yr yield increased one basis point to 0.16%, while the 10-yr yield decreased one basis point to 0.72%. The U.S. Dollar Index advanced 0.5% to 92.79.

The CBOE Volatility Index spiked 33.9% to 30.75, as investors assumed some protection against further weakness in equities. For some context, the S&P 500 ended the week at levels it last traded on August 21.

Source: Briefing Investor