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.

The United States Unemployment Rate

“The US unemployment rate fell to 8.4 percent in August of 2020 from 10.2 percent in the previous month, below market expectations of 9.8 percent, and marking the 4th straight decline after April's all-time high of 14.7 percent. The number of unemployed persons dropped by 2.8 million to 13.6 million, as many businesses continued to rehire employees following coronavirus lockdowns. Still, the jobless rate remains well above 3.5 percent in February, before the pandemic hit but lower than the 2008/2009 Global Financial Crisis peak of 10 percent. Official figures still may be far off the reality as many people are being classified as employed even though they are absent from work.”

Source: Trading Economics

For the week of August 31– September 4, 2020, the major US stock market indexes closed as follows on Friday, September 4, 2020:

• Dow Jones Industrial Average: Close 28133.31, -1.82% for the week, -1.42% Year-to-date

• S&P 500 Index: Close 3426.96, -2.31% for the week, +6.07% Year-to-date

• Nasdaq: Close 11313.13,-3.27% for the week, +26.09%, Year-to-date

• Russell 2000: Close 1535.30, -2.73% for the week, -7.98% Year-to-date

Weekly Stocks Gainers

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

1. Kensington Capital Acquisition Corp Cl A (KCAC), Close 22.50, 5-day change +127.62%

2. Gogo Inc (GOGO), Close 10.04, 5-day change +100.80%

3. Tracon Pharma (TCON), Close 3.10, 5-day change +71.27%

Weekly Stocks Losers

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

1. Aditx Therapeutics Inc (ADTX), Close 2.36, 5-day change -39.18%

2. Vir Biotechnology Inc (VIR), Close 28.57, 5-day change -31.39%

3. Kelly Services Inc Cl B (KELYB), Close 20.96, 5-day change -30.33%

Economic events for the week September 7- September11, 2020:

Important economic data for the week will be the Weekly Jobless and the Inflation Rate.

Sources:

https://www.wsj.com/market-data/stocks/us/indexes

https://www.barchart.com

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