Market Update- August 31, 2020
The Week on Wall Street
Stocks advanced relentlessly last week on positive COVID-19 developments, encouraging economic data, and a supportive policy shift in the Fed’s approach to its target inflation rate.
The Dow Jones Industrial Average increased by 2.59%, while the Standard & Poor’s 500 jumped 3.26%. The Nasdaq Composite index leaped 3.39% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 1.19%. i, ii, iii
Stocks Power Higher
Investors pushed stock prices higher all week as hopeful news came with each new day, from the announcement of a potential treatment for COVID-19 to news that U.S. and China negotiators had met by videoconference. Despite another high new jobless claims number, other economic data released during the week indicated a continuing economic recovery, further supporting investor enthusiasm for stocks. iv
The Fed’s announcement of a shift in its inflation policy, which suggested that rates are likely to remain low for a long time, helped push the market higher. The momentum carried over into Friday, leaving the S&P 500 and NASDAQ Composite at new record highs and the Dow Jones in positive year-to-date territory. v
Changes in the Dow Industrials
It was announced last week that the Dow Jones Industrial Average will be undergoing some changes. Starting Monday, August 31, Salesforce.com, Amgen, and Honeywell International will be added to the 30 stocks in the Dow Industrials and Exxon Mobil, Pfizer, and Raytheon Technologies will be removed. vi
In part, these changes were prompted by Dow-component Apple, which plans a four-to-one stock split on Monday, August 31. The Dow Jones Industrial Average is a price-weighted index, and Apple’s split reduces the impact of technology on the index. The new changes are an attempt to mitigate that issue. vii
Please remember that companies mentioned here are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
THIS WEEK: KEY ECONOMIC DATA
Tuesday: ISM (Institute of Supply Management) Manufacturing Index.
Wednesday: ADP (Automated Data Processing) Employment Report. Factory Orders.
Thursday: Jobless Claims. ISM (Institute of Supply Management) Services Index.
Friday: Employment Situation Report.
THIS WEEK: COMPANIES REPORTING EARNINGS
Monday: Zoom Video (ZM)
Wednesday: Macy’s (M), Cloudera, Inc. (CLDR), Mongodb (MDB), Crowdstrike Holdings (CRWD)
Thursday: Broadcom (AVGO), Docusign (DOCU)
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i The Wall Street Journal, August 28, 2020
ii The Wall Street Journal, August 28, 2020
iii The Wall Street Journal, August 28, 2020
iv CNBC.com, August 27, 2020
v CNBC.com, August 27, 2020
vi The Wall Street Journal, August 24, 2020
vii CNBC, August 20, 2020