A third consecutive week of gains for the US stock market, with the S&P 500 index surpassing its February 2020 all-time high and Nasdaq Composite outperforming setting a new record high. The economic data was mostly positive and supportive for stocks, but the FOMC minutes showed concerns of the Fed about the economic growth for the rest of the year.

Stock market irrational exuberance

Shares of Apple (AAPL) and Tesla (TSLA) continued rallying the previous week mainly due to their announced stock-split effective at the end of this month. But stock-splits do not affect the valuation or the fundamentals of stocks. My opinion is that a FOMO effect is still present in the US stock market. And soon the theme of the election may add further volatility.

Economic News

According to MarketWatch “The Federal Reserve’s staff told central bank officials in late July that they were lowering their estimate for economic growth over the second half of the year, according to the minutes of the Federal Open Market Committee’s meeting released Wednesday.

Fed staff members always present their forecast at the central bank’s eight interest-rate committee meetings each year.

At the latest meeting on July 28-29, the staff said they expected the rate of recovery in gross domestic product and the pace of declines in the unemployment rate to be “somewhat less robust than in the previous forecast.”

The housing market showed a lot of momentum with both Building Permits and Housing Starts coming in at higher figures compared to their previous numbers. The Existing Home Sales beat the estimate of 14.7% with a reported actual number of 24.7%. The Markit Manufacturing PMI Flash figure reported was 53.6, beating the estimate of 51.9 and most importantly was in the expansion zone for a second consecutive month. This shows strength for the performance of the manufacturing sector. The labor market though is still showing a fragile recovery. Continuing Jobless Claims came in at 14844K, better than the forecast of 15000K but Initial Jobless Claims actual figure reported was 1106K, worse than the forecast of 925K. This is negative as for three consecutive weeks the trend was downward and the previous week this trend was broken.

For the week of August 17– August 21, 2020, the major US stock market indexes closed as follows on Friday, August 21, 2020:

• Dow Jones Industrial Average: Close 27930.33, +0.0% for the week, -2.13% Year-to-date

• S&P 500 Index: Close 3397.16 ,  +0.72% for the week, +5.15% Year-to-date

• NASDAQ: Close 11311.80 , +2.65% for the week, +26.07%, Year-to-date

• Russell 2000:  Close: 1552.48, -1.61% for the week, -6.95% Year-to-date

Weekly Stocks Gainers

These are the top 3 gainers, stocks with 5 days of consecutive price advances:

1. Janone Inc (JAN), Close 7.15, 5-day change +57.14%

2. Audioeye Inc (AEYE), Close 21.28, 5-day change +57.05%

3. Lantern Pharma Inc (LTRN), Close 16.60, 5-day change +53.99%

Weekly Stocks Losers

These are the top 3 losers, stocks with 5 days of consecutive price declines:

1. Micron Technology (MU), Close 42.66, 5-day change -6.45%

2. Chubb Ltd (CB), Close 121.92, 5-day change -6.32%

3. Foster L B Company (FSTR), Close 14.25, 5-day change -6.25%

Economic events for the week August 24- August 28, 2020:

Important economic data for the week will be consumer confidence, durable goods, personal income, and spending.

Sources:

https://www.wsj.com/market-data/quotes/index/DJIA

https://www.barchart.com

https://www.fxstreet.com/economic-calendar

https://www.marketwatch.com/story/fed-staff-lowers-forecast-for-economic-growth-over-rest-of-year-fomc-minutes-2020-08-19