E US Stock Market Weekly Review Aug. 31- Sept. 4, 2020

After 4 weeks of consecutive gains, the US stock market declined with increased volatility, as September kicked in, a month which is considered to be a tough one for stocks historically. But with technology stocks leading the Nasdaq to new record highs amid a recession in the US economy, to a large extent, the stock market seems to be fully disconnected from current economic conditions and fundamentals. This stock market correction is not surprising, and even further volatility and wild swings like the ones during the previous Thursday can be expected? Profit-taking, stock rotation, uncertainty about the presidential election, and a tough road ahead to economic recovery are factors that can shake the stock market.

Economic News

There have been signs of stronger-than-expected economic indicators that point to future growth. For specific stocks, we are not journalists but financial analysts, and reading articles such as this stock is unstoppable are clear signs of irrational exuberance both from a valuation and a fundamental aspect. And yes many tech stocks are highly overvalued, but still, there are stocks with good fundamentals and attractive valuation in other sectors. The economic recovery probably is underway but as he Fed Chairman said the progress is going to be slow: “We do think it will get harder from here,” Powell said.

The initial jobless claims came in at 881,000, beating analysts' estimates. The Markit Manufacturing PMI Final reading was 53.1, missing the estimate of 53.6 but the ISM Manufacturing PMI beat the estimate of 54.5 with an actual figure of 56 showing expansion for the manufacturing economy. The US deficit reached a 12-year high with a figure of $-63.6B compared to the forecast of $-58B. The Non-Farm Payrolls missed the estimate of 1400K with an actual number of 1371K but the Unemployment Rate fell to 8.4%, beating the estimate of 9.8%. The fourth consecutive month of decline for the US unemployment, but still almost double the figure compared to the 4.4% back in March 2020.

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Disclosure: I have no position in any stock mentioned

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William K. 9 months ago Member's comment

Interesting, Things are getting better and some folks are getting called back to work. Unfortunately it seems that in addition to some very big winners there are a lot of losers. small enough that even the large quantity does not afflict the bright average.

It is easy to blame it all on the pandemic disrupting things, but it is also rather incorrect. The federal bank has been pushing in the wrong direction for quite a while, as evidenced by the incredibly low interest rates paid on savings. So we can see that the 1% group certainly does have friends in high places.