Stimulus Talks Flounder as Cyclicals Take Hold of Trade Rotations out of Tech

Market Recap Week ending 9/18/2020

Markets were mixed last week as a rotational trade out of mega-cap technology and into valued oriented cyclicals took hold.  The Federal Reserve’s monthly meeting offered no new news to investors.  The central bank indicated that it would likely keep rates near zero until at least 2023.  Fed Chairman Powell also continued to call for more help from fiscal policy to help the economy.  In Washington, Pelosi continued to press for a 2.2 trillion dollar stimulus package while Trump promoted a 1.5 trillion dollar package.  The administration also announced that it would ban further downloads of the popular app Tik-Tok on Sunday if an acceptable deal could not be reached.  The ban could further escalate tensions between the US and China. 

Merger and acquisition announcements were all over the tape last week, with the most notable being the NVidia acquisition of ARM Holdings for 40 billion.  Wall Street applauded the deal, and it will position the combined entity as a front runner in the artificial intelligence space.  Last week also saw the biggest IPO of the year come out.  Snowflake, which had a private valuation of 20 billion in February, saw its market capitalization increase to nearly 70 billion, well above expectations, and exemplifies how hot technology is for investors. 

For the week, the S&P 500 lost 0.60%, the NASDAQ fell the same amount while the Dow was unchanged, and the Russell 2000 rose 2.6%.  US Treasuries remained subdued with the 2-year note yield trading unchanged at 0.13%, and the 10-year bond yield ticking up two basis points to close at 0.69%.  Oil had a 10% move higher on the week with WTI increasing $3.75 to close at $41.09 a barrel.  Gold tacked on $14.40 for the week to close at $1962.70 an Oz.    There were no changes to our models last week.