Market Pullback – Monday Morning Market Memo – September 14, 2020

Market Pullback – Monday Morning Market Memo – September 14, 2020

The major stock market averages all declined last week. The Dow Jones Industrial Average fell 1.7%, the Standard & Poor’s 500 Index dropped 2.5% and the NASDAQ Composite shed 4.1%, its biggest weekly decline since March. Reasons behind the market pullback included the failure of Congress to reach a deal on a new coronavirus stimulus package and some normal profit-taking, especially in the technology sector, where the selling pulled the NASDAQ Composite into correction territory last week.

Remember, stocks go up and down, and market corrections can happen at anytime for “any” reason, or even for “no” reason. Corrections (drops of 10% or more) are inherent in the stock market and they historically happen about once every 1 to 2 years on average (depending upon methodology and time periods considered). While stock market corrections are inevitable, history shows they pose little danger to long term investors not focused on short term swings! We believe in time in the market, not timing the market!

Second Quarter Earnings Season Wrap: According to FactSet, for the second quarter of 2020 (with 100% of the companies in the S&P 500 reporting actual results), 84% of S&P 500 companies have reported a positive EPS (earnings per share) surprise and 65% reported a positive revenue surprise. The second quarter marked the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008. Remember, earnings reports are a game of expectations, and companies clearly beat the expectations last quarter!

Looking to the week ahead (besides all the usual factors including the pandemic, additional stimulus to come or not to come out of Washington, U.S./China economic relations, etc.) and speaking of earnings – FedEx is due out with their earnings report. FedEx is widely considered a bellwether of economic activity, and investors will be looking at their results for a “sneak peek” into what the upcoming earnings season may be like.

Notable economic data due out this week includes initial jobless claims, housing starts, retail sales, and the University of Michigan Consumer Sentiment Index. As always, call us with any questions you may have or if you would like to set up a meeting.

All the best – Southport Station Financial Management, LLC