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LIVE MARKETS U.S.-Stocks eke out gains, helped by tech

Thu 24th September, 2020 9:25pm
* Major indexes end choppy session slightly higher * Utilities, staples, materials lead S&P sector pct gainers * Healthcare sole loser * Dollar ~flat; gold, crude up; U.S. 10-Yr yield ~0.67% Sept 24 - Welcome to the home for real-time coverage of U.S. equity markets brought to you by Reuters stocks reporters and anchored today by Caroline Valetkevitch. Reach her on Messenger to share your thoughts on market moves: STOCKS EKE OUT GAINS, HELPED BY TECH (1610 EDT/2010 GMT) U.S. stocks closed modestly higher on Thursday, helped by gains in the S&P 500 technology sector .SPLRCT . The tech sector was up 0.6% after falling 3.2% in the previous session. A sell-off in tech has shaken investors in recent weeks. Continued worries about the economic recovery have kept investors cautious as well, and data Thursday showed a surprise increase in the number of Americans filing new claims for unemployment benefits last week. A stalemate in Congress over more fiscal stimulus has added to the concerns amid rising coronavirus cases. Goldman Sachs in a note late Wednesday cut its fourth-quarter U.S. economic growth forecast, saying it is unlikely Congress will give further fiscal support before next year. Here is the closing snapshot: (Caroline Valetkevitch) ***** DON'T WRITE OFF TECH (1430 EDT/1830 GMT) Investors should take advantage of recent choppiness in stocks and put money back into the market including in tech, Mark Haefele, chief investment officer global wealth management at UBS wrote in a note Thursday. With the Nasdaq .IXIC down more than 10% from its recent peak and a selloff in technology shares contributing to recent caution, investors may be worried about the tech space. "While tech stocks may continue to experience pressure, many of these firms are exposed to secular trends, making the sector an attractive investment opportunity, especially over the longer term," he wrote. But investors should consider branching out "beyond the traditional U.S. mega-cap stocks," he noted, saying: "We currently like companies involved in the rollout of 5G, China's new economy, and healthtech." Tech shares .SPLRCT were higher in Thursday trading. Uncertainty over further fiscal stimulus, rising coronavirus cases and mixed economic data have also contributed to recent investor nervousness, Haefele wrote. (Caroline Valetkevitch) ***** NORMAL CORRECTION, OR SOMETHING MORE? (1245 EDT/1645 GMT) Nicholas Colas, co-founder of DataTrek Research, is out with a note musing over whether recent market weakness is just a normal correction, or will ultimately prove to be something more. Indeed, at this morning's early low, the S&P 500 .SPX was down more than 10% from its Sept. 2 record closing high. Colas offers three reasons that could lead to a more severe decline. First off, politics. Colas says a contested election could lock up Washington for weeks, and no matter which party wins, bad blood between them may only get worse. Thus, there is great uncertainty over how things play out from October to March 2021. Colas notes that is exactly what happened in Q4 2008, saying that is why US equities did not bottom post-Financial Crisis until March 2009 – a month after the passage of ARRA, "the stimulus package that finally steadied the US economy." A second issue for Colas is a next round of COVID. Colas believes Americans still worry about contracting the virus, and more now than in May and June, according to a year-to-date Google Trend chart for "COVID symptoms." A third reason that a deeper decline could develop is "Unknown unknowns." DataTrek sees a textbook cyclical earnings recovery on the way, but Colas says, "we also understand that the global economy is fragile just now. That leaves little room for absorbing another shock, whether it be financial or geopolitical." That said, Colas does put forth some offsetting bullish arguments, stating that these issues are "transitory rather than structural." "A vaccine is coming. The election will deliver its verdict. Fiscal stimulus will happen. So... Keep a gas mask in the desk if that's your thing, but just remember to hunker down rather than go walking around." (Terence Gabriel) ***** NASDAQ RISES MORE THAN 1%, LEADS MARKET REBOUND (1155 EDT/1555 GMT) U.S. stocks are higher as the market approaches the halfway mark of the session. Nasdaq .IXIC is outperforming the other two major indexes as technology shares rebound. The S&P 500 technology sector .SPLRCT is up more than 1%, leading gains among sectors. The group fell 3.2% on Wednesday and was the biggest drag among sectors on the benchmark S&P 500 index .SPX . However, gains in the market may be limited by continued worries about the economic recovery, with data Thursday showing a surprise increase in the number of Americans filing new claims for unemployment benefits last week. A stalemate in Congress over more fiscal stimulus has added to the concerns. Goldman Sachs in a note late Wednesday cut its fourth-quarter U.S. economic growth forecast, saying it is unlikely Congress will give further fiscal support before next year. (Caroline Valetkevitch) ***** TO HAVE AND HAVE NOT: JOBLESS CLAIMS GROW, NEW HOME SALES SOAR (1110 EDT/1510 GMT) While data released on Thursday surprised to the upside and the downside, the combined story they told came as no surprise at all. The housing market has blasted off to the moon, while the rest of the U.S. economy sputters at the launching pad. The number of American workers applying for unemployment benefits USJOB=ECI grew unexpectedly last week to 870,000 according to the Labor Department.*:nL2N2GK1XW Economists polled by Reuters forecast claims would edge lower to 840,000. The persistent, bruisingly high jobless claims data, still much worse than the darkest week of the Great Recession, shows the U.S. economy continues to hemorrhage jobs as companies continue to grapple with plunging demand and as government stimulus wells run dry. "The momentum in the labor market is stalling," writes Ian Shepherdson, chief economist at Pantheon Macroeconomics. "Against this backdrop, the need for further fiscal action is obvious, but we no longer expect any meaningful relief bill until February." Shepherdson isn't alone in his expectations. In a research note released yesterday, Goldman Sachs cut its fourth-quarter GDP estimate in half, saying "further fiscal support will likely have to wait until 2021." Continuing claims USJOBN=ECI , reported on a one-week lag, came in at 12.58 million, a slight decrease from the prior week but 280,000 more than analysts expected. While this could suggest to an uptick in rehires, it could also mean laid-off workers are beginning to exhaust their benefits. But don't lay this doom and gloom at the housing market's doorstep. The sector, fueled by low mortgage rates and elevated demand driven by mass exodus to the suburbs, continues to run circles around the broader economy's much more languid recovery. A report from the Commerce Department showed the sales of newly built U.S. homes USHNS=ECI surprised to the upside in August, surging by 4.8% to 1.011 million units (SAAR). This, on top of July's whopping, upwardly-revised 14.7% jump, puts new home sales at levels not seen since 2006, near the apex of the housing bubble. As Nancy Vanden Houten, lead U.S. economist at Oxford Economics outpoints "Strong sales have depleted inventories of new homes for sale." Indeed, supply of new, single-family homes is now down to record low 3.3 months supply. This should support new construction, which explains robust homebuilder sentiment. Speaking of which, homebuilders welcomed the data. The S&P Homebuilders index .SPHOMES promptly flipped from red to green following the release. Those gains pared by late morning and the index is last up 0.2%. Markets oscillated between negative to positive territory in morning trading. (Stephen Culp) ***** GOLDMAN LOWERS Q4 GROWTH EXPECTATIONS (1030 EDT/1430 GMT) Goldman Sachs cut its fourth-quarter GDP growth forecast from 6% to 3% on a quarterly annualized basis, saying it is "now clear" Congress will not give further fiscal support until next year, its economic research team wrote in a note. "At this point we think it is clear that Congress will not pass additional fiscal stimulus this month. This implies a meaningful hit to disposable income that will weigh on consumption and GDP growth in Q4," they wrote in the note late Wednesday. It suggests also that any further fiscal support will likely have to wait until 2021, they wrote. In terms of forecasts, it "leaves more room for catch-up later," they added, "and we have therefore raised our 2021Q2-Q4 growth forecasts as a partial offset. Our new forecasts imply full-year growth of -3.5% in 2020 and +5.8% in 2021 (or -2.5% in 2020 and +5.5% in 2021 on a Q4/Q4 basis)." (Caroline Valetkevitch) ***** S&P 500: FLIRTING WITH CORRECTION TERRITORY (1006 EDT/1406 GMT) The S&P 500 .SPX is down close to 10% from its Sept. 2 record closing high. Amid increasing technical damage across the market*:nL2N2GK0HW*:nL2N2GK0HW, the 40-week moving average may now be a strong magnet. (Click on chart below) After being repulsed by a weekly log-scale resistance line in early September*:nL1N2G10JF, the SPX has reversed sharply lower. Indeed, in late August, the benchmark index appeared extended as it also ended 13.7% above its 40-week moving average (WMA). This was its greatest disparity vs this long-term moving average since a 15% reading in early 2011. Now that the SPX has reversed to the downside, the 40-WMA, at around 3,100, may have an especially strong gravitational pull. Indeed, since early 2018, pull backs have seen the SPX threaten, or close below, this moving average. Of note, the SPX was able to right itself in the wake of near-touches, or just one marginal weekly close below it. However, two straight weekly closes below this moving average in October 2018, and March 2020, led to much deeper declines. Therefore, in event the 40-WMA, and the June trough (2,965.66), were to give way, the SPX could be on the cusp of a substantial collapse, if it were to oscillate down to its support line from late 2018. This line resides below the March low, now at just over 2,100. Indeed, such a decline would put the SPX around 30% below its 40-WMA, which would coincide with where a support line comes in on the disparity chart. On a more immediate recovery attempt, the 20 and 50-day moving averages, now in the 3,350-3,390 area, can present stiff hurdles.*:nL2N2GI0K7 (Terence Gabriel) ***** FUTURES FALL EARLY, EXTEND LOSSES ON JOBLESS CLAIMS (0848 EDT/1248 GMT) U.S. stock index futures were lower early on Thursday, extending losses after data showed a surprise increase in the number of Americans filing new claims for unemployment benefits last week. That underscored worries about the economic recovery which have been mounting, with the coronavirus pandemic far from over. A stalemate in Congress over more fiscal stimulus has added to the concerns. The Labor Department said on Thursday initial claims for state unemployment benefits totaled a seasonally adjusted 870,000 for the week ended Sept. 19, compared to 866,000 in the prior week. Economists polled by Reuters had forecast 840,000 applications in the latest week.*:nL2N2GK1XW On Wednesday, stocks ended ended sharply lower, with Nasdaq .IXIC falling more than 3%, and leading the market's slide as worries about the economic recovery mounted. The information technology sector .SPLRCT fell 3.2% and was the biggest drag among sectors on the benchmark S&P 500 index .SPX . With Wednesday's losses, the S&P 500 finished down 9.6% from the Sept. 2 record closing high, while the Nasdaq ended down 11.8% from that date. Here is the premarket snapshot: (Caroline Valetkevitch) ***** <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ U.S. premarket snapshot SPX09242020 Jobless claims New home sales Midday US market snapshot Closing US market snapshot ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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