Dow climbs in early Friday action as Wall Street attempts to cap tumultuous trading week with an upswing


Stock benchmarks on Friday rose modestly higher as investors looked to close out a volatile, holiday-shortened week that has the tech-heavy Nasdaq Composite on track for its biggest weekly loss since the height of the pandemic-induced market selloff in March.

How are major benchmarks trading?

The Dow Jones Industrial Average
DJIA,
+0.19%

rose 117 points, or 0.4%, to around 27,650, while the S&P 500
SPX,
+0.07%

gained 14 points, or 0.4%, to trade at 3,353. The Nasdaq Composite Index
COMP,
-0.09%

climbed 48 points, or 0.5%, at 10,952. But all three benchmarks were trading off their intraday peak near the open, highlighting the week’s choppy action.

The Dow on Thursday fell 405.89 points, or 1.5%, to close at 27,534.58, while the S&P 500 ended with a loss of 59.77 points, or 1.8%, at 3,339.19. The Nasdaq Composite fell 221.97 points, or 2%, to finish at 10,919.59. Through Thursday, the Dow was down 2.1% for the week, while the S&P 500 was off 2.6% and the Nasdaq was 3.5% lower; markets were closed Monday for Labor Day.

What’s driving the market?

A decline in the S&P 500 index for the week would mark the benchmark’s first back-to-back weekly drop since May.

“While monetary policy is set to remain supportive for several more quarters, valuations are high across assets and volatility is resurfacing,” said Elia Lattuga, co-head of strategy research at UniCredit Bank, in a note. “The breadth of the rally is still limited and the recovery uneven—hence developments in the economic outlook and political risks represent significant threats to risk appetite.”

Stocks were unable to follow through Thursday on a Wednesday bounce that saw equities recover somewhat from a three-day, tech-led rout that pushed the Nasdaq into correction territory, falling more than 10% from its record close set last week.

Weakness on Thursday was partly tied to the inability of U.S. politicians to agree on a new coronavirus rescue package after Democrats blocked a Republican bill on the Senate floor, leaving the way forward unclear, analysts said.

Meanwhile, investors have fretted that the sharp rally that took stocks from their March pandemic lows to new all-time highs had left valuations significantly stretched for the large-cap, tech-related stocks that had led the rally this year. Among those highfliers, shares of Apple Inc.
AAPL,
-0.85%

 and Netflix Inc.
NFLX,
+1.22%

 were on track for weekly declines of more than 6%, while Facebook Inc.
FB,
-0.57%

 is off more than 5%.

In U.S. economic news, the consumer-price index for August rose 0.4% last month, beating average economists’ estimates for a rise of 0.3% but falling below the past two months at 0.6%. On a year-over-year basis, the CPI increased 1.3% after gaining 1.0% in July, the Labor Department said on Friday

Looking ahead, Federal budget figures for August are due at 2 p.m. Eastern.

Which companies are in focus?
What are other markets doing?

The yield on the 10-year Treasury note
TMUBMUSD10Y,
0.675%

 rose 0.4 basis point to 0.687%. Bond prices move inversely to yields.

The ICE U.S. Dollar Index
DXY,
-0.12%
,
which tracks the performance of the greenback against its major rivals, fell 0.1%.

Gold futures
GCZ20,
-0.08%

were off 0.3% at $1,958 an ounce, threatening to snap a three-day winning streak. The U.S. crude oil benchmark
CL.1,
-0.10%

 fell 16 cents, or 0.5%, to $37.13 a barrel.

The Stoxx Europe 600 index
SXXP,
-0.11%

 was edging 0.1% lower, while the U.K.’s benchmark FTSE
UKX,
-0.26%

rose 0.2%. In Asia, Hong Kong’s Hang Seng Index
HSI,
+0.78%

and the Shanghai Composite Index
SHCOMP,
+0.78%

 both rose 0.8%, while Japan’s Nikkei
NIK,
+0.73%

rose 0.7%.



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This analysis of Wall Street stock ratings is sounding a warning for Tesla and 62 other stocks


In the financial media, “Wall Street” typically means U.S. brokerage firms and often the analysts who work for them. They are known as “sell-side analysts.” They work independently of the firms’ sales teams, but there’s no question that Wall Street’s job is to sell stocks. So when you see a high level of “sell” ratings on a stock, take heed.

Tesla Inc.
TSLA,
+2.78%

is the poster child for high-flying stocks during this pandemic year. The electric-car company’s shares are up 435% this year and 891% in the past 12 months. And as the shares have shot up, many analysts have continually increased their price targets.

But not all of them have kept doing so. And now, among 37 sell-side analysts polled by FactSet, eight rate the shares the equivalent of a “buy,” while 11 rate them the equivalent of a “sell.” The shares closed at $447.37 on Sept. 2. The consensus price target among those analysts is $284.97, implying 36% downside for the shares.

Tesla is not yet included in the benchmark S&P 500 Index
SPX,
-0.81%
,
although it is expected to be added soon. It is rare for any S&P 500 stock to have majority “sell” ratings, and none do at this time. But a quick look shows 33 stocks with “sell” ratings outweighing “buy” ratings.

Expanding to the Russell 1000 Index
RUI,
-0.85%

of the largest 1,000 publicly traded companies listed in the U.S. by market capitalization (including Tesla and subject to changes when stocks plunge), there are four companies with majority “sell” ratings.

Among the Russell 1000, there are 63 companies with “sell” ratings outweighing “buy” ratings. Here they are, sorted by market capitalization:

Company

Ticker

Share ‘buy’ ratings

Share ‘sell’ ratings

Market cap. ($ millions)

Total return – 2020 through Sept. 2

Tesla Inc.

TSLA,
+2.78%
22%

30%

416,863

435%

Exxon Mobil Corp.

XOM,
-0.07%
12%

20%

165,704

-41%

Illinois Tool Works Inc.

ITW,
-0.37%
13%

22%

63,849

14%

Public Storage

PSA,
-0.37%
13%

27%

37,436

3%

Southern Copper Corp.

SCCO,
+0.81%
15%

54%

37,092

16%

Walgreens Boots Alliance Inc.

WBA,
-0.53%
5%

9%

32,209

-35%

WEC Energy Group Inc.

WEC,
+0.13%
15%

38%

30,726

8%

Paychex Inc.

PAYX,
-0.36%
10%

19%

27,988

-6%

Hormel Foods Corp.

HRL,
+0.17%
8%

23%

27,698

15%

ResMed Inc.

RMD,
-2.41%
22%

33%

26,517

19%

McCormick & Co. Inc.

MKC,
-1.05%
17%

33%

26,001

25%

Brown-Forman Corp. Class B

BF.B,
+0.97%
6%

33%

24,715

19%

Consolidated Edison Inc.

ED,
+0.88%
6%

35%

24,161

-18%

Mettler-Toledo International Inc.

MTD,
-1.42%
0%

25%

24,095

27%

Equity Residential

EQR,
+1.23%
21%

26%

21,473

-27%

Expeditors International of Washington Inc.

EXPD,
-0.84%
7%

36%

15,218

17%

Avangrid Inc.

AGR,
+0.55%
9%

36%

14,968

-3%

Tiffany & Co.

TIF,
-0.31%
0%

7%

14,854

-8%

J.M. Smucker Co.

SJM,
-0.56%
6%

17%

13,786

19%

FactSet Research Systems Inc.

FDS,
-1.97%
0%

44%

13,452

33%

Waters Corp.

WAT,
-1.39%
0%

38%

13,442

-7%

C.H. Robinson Worldwide Inc.

CHRW,
+0.29%
18%

23%

13,438

29%

Jack Henry & Associates Inc.

JKHY,
-1.52%
10%

20%

13,113

18%

Cognex Corp.

CGNX,
-5.22%
22%

28%

12,376

28%

Brown-Forman Corp. Class A

BF.A,
+0.31%
6%

35%

12,170

15%

CenturyLink Inc.

CTL,
-0.09%
13%

44%

11,985

-11%

Ubiquiti Inc.

UI,
+0.13%
25%

75%

11,942

0%

Omnicom Group Inc

OMC,
-0.38%
25%

33%

11,588

-32%

Occidental Petroleum Corp.

OXY,
-2.70%
12%

19%

11,534

-68%

Lennox International Inc.

LII,
-0.42%
12%

29%

11,009

19%

Franklin Resources Inc.

BEN,
-1.02%
0%

43%

10,784

-14%

Carnival Corp.

CCL,
+5.40%
5%

20%

10,037

-67%

Western Union Co.

WU,
-0.86%
10%

29%

9,852

-9%

Allegion PLC

ALLE,
-0.74%
0%

9%

9,666

-15%

CNA Financial Corp.

CNA,
-0.34%
0%

25%

8,766

-22%

Watsco Inc.

WSO,
-0.95%
11%

22%

8,161

42%

Beyond Meat Inc.

BYND,
-3.06%
22%

30%

8,099

72%

Gap Inc.

GPS,
-0.90%
13%

17%

6,870

5%

Vornado Realty Trust

VNO,
+1.46%
15%

23%

6,830

-44%

Credit Acceptance Corp.

CACC,
+0.42%
0%

33%

6,807

-13%

American Airlines Group Inc.

AAL,
+1.87%
20%

45%

6,728

-54%

Grubhub Inc.

GRUB,
-0.77%
0%

4%

6,629

48%

Commerce Bancshares Inc.

CBSH,
+1.86%
0%

40%

6,599

-12%

Continental Resources Inc.

CLR,
-1.81%
10%

16%

5,992

-52%

Comerica Inc.

CMA,
+2.54%
19%

23%

5,587

-42%

Invesco Ltd.

IVZ,
+2.24%
11%

28%

4,881

-38%

Cullen/Frost Bankers Inc.

CFR,
+2.79%
20%

47%

4,403

-26%

Rayonier Inc.

RYN,
-2.17%
14%

29%

4,109

-6%

Xerox Holdings Corp.

XRX,
+1.52%
13%

25%

3,992

-48%

Unum Group

UNM,
+8.21%
9%

18%

3,802

-33%

Hawaiian Electric Industries Inc.

HE,
+0.20%
0%

67%

3,750

-25%

Antero Midstream Corp.

AM,
-1.63%
11%

22%

2,979

-2%

Brighthouse Financial Inc.

BHF,
+6.15%
9%

27%

2,865

-21%

Teradata Corp.

TDC,
-0.70%
14%

21%

2,611

-11%

Mercury General Corp.

MCY,
+0.17%
0%

50%

2,526

-3%

Trinity Industries Inc.

TRN,
+1.79%
17%

33%

2,469

-3%

Nordstrom Inc.

JWN,
+2.77%
14%

18%

2,448

-61%

Taubman Centers Inc.

TCO,
+1.24%
0%

11%

2,357

25%

Park Hotels & Resorts Inc.

PK,
+6.64%
7%

36%

2,300

-60%

Sabre Corp.

SABR,
+2.98%
22%

33%

2,253

-67%

First Hawaiian Inc.

FHB,
+1.12%
25%

50%

2,133

-41%

Associated Banc-Corp

ASB,
+2.79%
0%

10%

2,096

-36%

Chesapeake Energy Corp.

CHKAQ,
+2.36%
0%

100%

46

-97%

Source: FactSet



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Asian markets mixed as China export data offsets impact of Wall Street’s retreat


Asian markets were mixed in early trading Monday, following a sharp selloff on Wall Street last week.

Japan’s Nikkei 225
NIK,
-0.33%

dipped 0.3% while Hong Kong’s Hang Seng index
HSI,
+0.05%

gained 0.1%. The Shanghai Composite
SHCOMP,
-0.15%

declined 0.2% while the smaller-cap Shenzhen Composite
399106,
-0.25%

retreated 0.2%. South Korea’s Kospi
180721,
+0.76%

rose 0.7%, while benchmark indexes in Taiwan
Y9999,
-0.14%

, Singapore
STI,
+0.11%

and Indonesia
JAKIDX,
-0.13%

were mixed. Australia’s S&P/ASX 200
XJO,
+0.14%

were little changed.

Stocks in Hong Kong and mainland China improved after the release of data that showed China’s August exports were stronger than expected from the prior year, after another strong increase in July.

Shares of Chinese chip maker Semiconductor Manufacturing International Corp.
981,
-19.74%

tumbled about 20% in Hong Kong trading after a Wall Street Journal report that the Trump administration is considering placing export restrictions against it, as it has with fellow chip maker Huawei Technologies.

U.S. markets are closed Monday for the Labor Day holiday. Last week, the tech-heavy Nasdaq Composite
COMP,
-1.26%

saw a 3.3% weekly decline, its largest since March, while the Dow Jones Industrial Average
DJIA,
-0.56%

fell 1.8% and the S&P 500
SPX,
-0.81%

lost 2.3%.

“We view the latest selloff as a bout of profit-taking after a strong run,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note Friday.

“Stocks have had a nervy start to trading Monday after the massive two-day slide for global equities since June left investors on edge,” Stephen Innes, chief global markets strategist at AxiCorp, wrote in a note Monday. “In the short-term, more so with U.S. markets closed today, it should remain an extremely choppy affair, with bounces likely being sold by design.”

In energy trading, U.S. benchmark crude
CLV20,
-1.30%

fell to $39.34 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude
BRNX20,
-1.10%

, the international standard, slipped to $42.30 a barrel.

The dollar
USDJPY,
+0.01%

inched up to 106.29 Japanese yen from 106.24 yen Friday.



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S&P 500 adds three companies not named Tesla, sending car company’s shares down


Three new names will be added to the S&P 500 index this month, but none of them are Tesla Inc.

S&P Dow Jones Indices announced Friday afternoon that it will add three companies to the S&P 500
SPX,
-0.81%

— Catalent Inc.
CTLT,
-2.83%

, Etsy Inc.
ETSY,
-3.58%

and Teradyne Inc.
TER,
-4.06%

Tesla Inc.
TSLA,
+2.78%

was thought to be in line for the addition after announcing a fourth consecutive quarter of profitability, a requirement of the index, which many observers cited as a reason for a gigantic increase in the electric-car company’s stock in recent weeks.

“S&P 500 inclusion now likely a done deal,” Wedbush analyst Dan Ives said after Tesla reported a profitable quarter in July.

“This was a bit of a shocker and the Street assumed this was a foregone conclusion,” Ives said in an email to MarketWatch on Friday afternoon. “Tesla not getting into the S&P 500 club is a head scratcher and the stock will likely be down for the indexing implications.”

Tesla stock has added more than 31% since announcing second-quarter earnings on the afternoon of July 22, though that performance has declined this week — at the end of Monday’s trading session, the stock had gained 56% since earnings. Shares have suffered this week in the wake of a stock split, the announcement of a plan to sell up to $5 billion in fresh shares, and insider selling. Overall, the electric-car company’s shares have still quintupled this year, pushing its market capitalization to $380 billion as of Friday’s closing bell.

Three previous members of the S&P Midcap 400 will move up to the larger index instead, replacing three other companies that moved down to the midcap index, H&R Block Inc.
HRB,
+0.73%

, Coty Inc.
COTY,
+6.31%

and Kohl’s Corp.
KSS,
+2.44%

The changes will take effect before the open of trading on Sept. 21.

Tesla stock fell more than 5% in after-hours trading following the announcement. Catalent shares rose nearly 3%, Etsy shares added more than 5%, and Teradyne stock increased more than 2%.



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Stock-market rout: Why it’s too early to call tech plunge the start of a correction


Big rallies often come to an ugly end — and that was certainly the case Thursday for tech stocks and other high-flying sectors that have benefited from momentum-driven waves of buying. But that doesn’t mean a full-fledged correction for the most popular stocks — or the broader market — is under way.

“It’s very difficult to say definitively that something that is up 28% on the year and up [more than 70%] from the bottom going down 4% is a sustainable correction,” said David Bahnsen, chief investment officer at Newport Beach, Calif.-based The Bahnsen Group, referring to the tech-heavy Nasdaq Composite Index
COMP,
-4.96%

COMP,
-4.96%
.
While a potentially brutal Nasdaq correction is likely inevitable, there’s no “formulaic” way to tell when one has started, he said in an interview.

Key Words: Is this ‘the beginning of the end?’ Billionaire Bill Ackman shares his thoughts on the big market retreat

By the close, the Nasdaq was down 5%. The S&P 500
SPX,
-3.51%

fell 3.5% and the Dow Jones Industrial Average
DJIA,
-2.77%

ended the day down more than 800 points, or 2.8%, after falling more than 1,000 points at its session low. The drop marked the biggest one-day percentage declines for all three benchmarks since June, and ended a four-day winning streak for the Nasdaq and a 10-day string of gains for the S&P 500 tech sector.

See:These were the biggest stock-market losers on Thursday as tech shares tanked

Warning signs abounded as technology shares kept pushing higher, market watchers said. Options volatility remained stubbornly high even as stocks continued to rally — a sign of nervousness — and tech valuations, while a poor guide to market timing, became increasingly stretched, said Fawad Razaqzada, analyst with ThinkMarkets, in a note.

Related:Tech stocks and the rest of the market are both very expensive — for 2 ‘completely different reasons’

Also, momentum indicators, such as the relative strength index, were at levels perceived as extremely overbought on major indexes, which meant that “even the most bullish speculators chasing momentum would have found it difficult to justify buying at such extreme levels,” he said.

The selloff could be an indication of things to come, “where fundamentals play a larger part in valuations, as opposed to the irrational exuberance that has persisted in recent months within tech,” said Peter Essele, head of portfolio management for Commonwealth Financial Network.

Essele said the lack of a broad selloff across all sectors showed that “hot money” had been chasing large tech names.

Indeed, the lack of heavier selling outside the most high-flying sectors pointed to signs of rotation, a positive sign for the overall market, Bahnsen said.

While the Dow fell more than 800 points, shares of JPMorgan Chase & Co.
JPM,
-0.31%
,
the world’s largest bank, declined only 0.3% and shares of Exxon Mobil Corp.
XOM,
-0.20%
,
the world’s largest oil company, lost only 0.2% after spending much of the day in the green. All 11 S&P 500 sectors fell, but energy shares lost only 0.6% and financials declined 1.6% — both are among the most out of favor in 2020, down nearly 43% and 19% year to date, respectively.

Down days where you see energy and financials holding up despite steep losses elsewhere indicates rotation, not capitulation, a bullish sign overall, Bahnsen said.

Also, in the era of heavy ETF ownership, when a fund needs to sell off Apple shares, shares of companies that don’t have organic selling pressure get pulled down with them, he said.

So now what? Friday’s session already carried the potential for volatility, coming ahead of a three-day holiday weekend and after investors get a look at the July jobs report.

Economic Preview: U.S. likely added 1.2 million jobs in August, economists say, but hiring has slowed

Investors might have second thoughts about technology shares at still-elevated levels, Razaqzada said, which could make for either increased rotation into lagging sectors, pushing tech stocks into a period of consolidation or beginning a proper correction.



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