Week review: Nasdaq outperforms as second wave fears sends jitters
The focus among traders this week was on central banks and the emerging second wave of the virus.
On the virus, traders reacted to news that a new wave was emerging in Beijing and in several states in the United States.
On central banks, the Fed chair testified to congress on Monday and warned that the US economy would continue to struggle.
In the same week, the Bank of Japan, Bank of England, and Swiss National Bank (SNB) delivered their interest rate decision.
The price of crude oil rose last week after OPEC+ committed to supply cuts and to make up for missed output cut targets.
The members pledged to reach 100% compliance to the targets announced this month.
Meanwhile, the biggest corporate news was from Germany, where Wirecard postponed its financial statements.
Wirecard, which was valued at more than EUR 24 billion is now valued at slightly above EUR 4 billion.
In a statement, the company’s auditor raised queries about the existence of about EUR 9 billion.
Nasdaq outperforms the indices
For two weeks in a row, Nasdaq 100 was the best-performing index in the United States.
From Monday to Thursday, the index rose by more than 5.50% while the Dow Jones and S&P 500 rose by 4.85% and 5% respectively.
The former two indices dropped for three consecutive days on Tuesday, Wednesday, and Thursday.
The biggest reason for the decline is that the number of coronavirus cases has been on an upward trend in several states. These include Texas, Florida, Arizona, and Oklahoma.
Traders are rightfully worried that the rising cases could lead to another round of lockdowns in the United States. While this lockdown will affect most companies, many in the Nasdaq index will not be affected.
Why Dow and S&P 500 lagged?
The main reason why the Dow Jones and S&P 500 have lagged is because many constituent companies would be affected by another lockdown.
In fact, the worst performing companies were airlines like Delta, United, and American. Cruise line firms like Norwegian and Royal Caribbean were also affected. Nasdaq does not have most of these firms.
Another reason is that banks continued to lag because of the fear of negative interest rates. Most analysts believe that another wave and lockdown would push the Fed to implement these rates.
US stocks two-week performance
Looking at the two-week chart, we see that the Nasdaq has been the better performer.
Its price has increased by 2% while the Dow Jones and S&P have fallen by 4.56% and 2.56% respectively.
As we wrote last week, the reason for this underperformance by the Nasdaq and Dow Jones are travel and hospitality stocks, which have fallen because of coronavirus cases.
Banks and investment firms have declined because of fears of negative rates.
Next week earnings calendar
The coming week will not be relatively busy in terms of earnings. Still, there will be several companies to watch out for.
On Tuesday, IHS Markit, the data provider will release its earnings. Analysts expect that the company’s revenue will be around $1 billion with its earnings per share being at $0.67.
Furniture seller, La-Z-Boy will release its earnings on the same day.
On Wednesday, we will receive earnings from Blackberry, Progress, and HB Fuller.
On Thursday, companies like Nike, Accenture, FactSet, Synnex, and Rite Aid will release their earnings. In Europe, H&M and Tesco will release.