Before The Bell
The U.S. stock market moved higher yet again last week, and may wrap up the month of August on a mixed note. Overnight, the international markets put in a decent showing. The S&P 500 futures had been quite strong earlier today, but are now pointing to a more divided session, as the opening bell approaches.
Of note, shares of Apple (AAPL) and Tesla (TSLA) will begin trading on a split-adjusted basis today. While a stock split does not change fundamentals or valuations, a lower share price can make it easier for retail investors to take meaningful positions. Shares of Apple and Tesla have been flying high lately, and given their popularity, further gains may be in store for these names. In addition, it should be noted that the Dow Jones Industrial Average is being reshuffled. Specifically, ExxonMobil (XOM), Pfizer (PFE), and Raytheon Technologies (RTX) are being replaced by Salesforce.com (CRM), Amgen (AMGN), and Honeywell International (HON). Meanwhile, there are not too many companies posting quarterly results today. However, we will hear from Zoom Video Communications (ZM). This stock has gained considerable ground in recent months, as the coronavirus pandemic has increased demand for digital conferencing.
In economic news, there are no major reports due to be released today. Tomorrow, we will get a look at the ISM Manufacturing Index for the month of August, and construction spending for July. On Wednesday and Thursday numerous issuances will be posted and that should keep investors engaged. Meanwhile, the main event this week takes place early Friday morning when the government delivers the August employment figures. Analysts are currently looking for roughly 1.4 million nonfarm jobs to be added to the economy during the month. The headline unemployment rate is anticipated to dip to 9.8%, moving below the key 10% mark. It should be mentioned that the monthly employment report is widely watched on Wall Street, and investment portfolios may be repositioned ahead of this event.
Technically, the S&P 500 Index has now moved past the 3,500 mark, representing a dramatic move up from the lows hit in March. The rapid recovery of equity prices has some traders wondering if conditions are approaching overbought (extreme) levels. By some measures, such as an elevated Relative Strength Index (RSI), the market may be getting ahead of itself. In addition, price-to-earnings multiples have gotten extended, in our view. Much of the progress made over the past several months assumes that the economy will remain open and that a vaccine for the coronavirus will be found. Further, the Federal Reserve has vowed to keep interest rates low, even allowing for some inflation. No doubt, these factors are also playing a role in the market’s strength. Stay tuned.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
