Here’s why the stock market tumbled last week and what’s ahead for Wall Street


A bout of volatility returned to financial markets with a vengeance last week, disrupting a nearly uninterrupted climb to records for U.S. stock indexes and raising questions about the path for Wall Street headed into a hornet’s nest of challenges for investors.

Perhaps, the overarching question is, “What the heck just happened to equity markets in the 48 hours after the S&P 500 index
SPX,
-0.81%

and Nasdaq Composite Index
COMP,
-1.26%

on Wednesday notched their 22nd and 43rd closing records of 2020 respectively, and the Dow
DJIA,
-0.56%

scored its first finish above 29,000 since February, bringing it within 2% of its Feb. 12 all-time closing high?”

The bull perspective

From the bull’s perspective, not a lot has changed.

Bullish investors see the promise of lower interest rates for years to come and further injections of money by the Federal Reserve into various parts of the financial system, along with perhaps another fiscal stimulus from the government, as buttressing the market and offering a floor against future dramatic losses.

Optimists see the slump that the equity market experienced this week as a bump in the road to greater gains.

“Since the current bull market kicked off in March, there have only been two pullbacks of more than 5%. Recent bull markets have tended to have three or four setbacks over the first nine months,” wrote SunTrust Advisory chief market strategist Keith Lerner in a research note on Thursday — see chart:

Lerner also notes that the five-month winning streak for the S&P 500 since August, which has only occurred 27 times since 1950, is a good sign because it tends to imply that further returns are ahead.

So, investors may view this retreat as a natural corrective phase that removes some of the euphoric froth from equity valuations that had far exceeded the metrics that pragmatic investors use to assess an asset’s value compared against its peers.

MarketWatch’s William Watts wrote last Thursday, citing Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors, that technology stocks — particularly, a cohort that includes Facebook
FB,
-2.88%
,
Amazon.com
AMZN,
-2.17%
,
Netflix
NFLX,
-1.84%
,
Microsoft
MSFT,
-1.40%
,
Apple
AAPL,
+0.06%

and Google parent Alphabet
GOOGL,
-2.96%

GOOG,
-3.09%

(or FANMAG) — had seen their valuations rise by dint of multiple expansion, or rapidly rising prices, while other segments of the market had seen earnings estimates fall out of whack with their prices, distorting the “P” portion of the commonly used priced-to-earnings metric, or P/E, used to gauge a stock’s worth.

“But these two groups of stocks have gotten more expensive for completely different reasons,” he noted. “FANMAG’s P/E has risen because their ‘P’ (prices) has gone up faster than their ‘E’ (earnings), while the P/E for the rest of the S&P 500 has expanded because ‘E’ has gone down much more than ‘P’,” wrote Suzuki.

Indeed during the period between the market’s March lows and early last week, investors have maintained a voracious appetite for technology-related stocks, and a group known as “stay-at-home companies”, including Zoom Video Communications Inc.
ZM,
-2.99%
,
due to the belief that not only are they receiving a boost from the COVID-19 pandemic but also that they are best positioned to benefit when the economy eventually emerges from the recession.

A bounce off Friday’s lows, aided by moves into financials also was viewed as constructive for the broader market, heading into the three-day Labor Day weekend.

“The move higher was mostly led by financials, which came as a result of slightly higher rates rate on the long end of the curve, notably the 10 basis point move in the 10-year Treasury,” wrote Peter Essele, head of portfolio management for Commonwealth Financial Network, via email.

Yields in the 10-year Treasury
TMUBMUSD10Y,
0.721%

benchmark bond rose to 0.72%, marking the biggest single-day rise on Friday since May 18.

It’s unusual for yields to climb as stocks are falling as they did on Friday because investors usually turn to the perceived safety of government debt, driving prices higher and yields lower, in times of uncertainty. That didn’t occur on Friday and may be interpreted by some as signaling that at least fixed-income investors see the move in stocks as indicative of a temporary pullback rather than a more significant and lasting decline.

UBS Global Wealth Management’s chief Investment Officer Mark Haefele said that he viewed this week’s market drop as investors consolidating gains. “We view the latest selloff as a bout of profit-taking after a strong run,” he wrote.

“The S&P 500 enjoyed its strongest August in 34 years, gaining 7%, and added a further 2.3% in the first two days of September, to reach a fresh record high,” he wrote. “Stocks are still well-supported by a combination of Fed liquidity, attractive equity risk premiums, and a continuing recovery as economies reopen from the lockdowns.”

The bear’s perspective

From a bearish vantage point, the outlook for stocks looks more uncertain for investors. This uncertainty may have well laid the groundwork for substantial episodes of turbulence if not gut-wrenching drops in stocks, some experts say.

“The mini-tech selloff on Thursday has left a lot of scarring; it is not overly surprising that in New York equities trading, things were relatively muted into a long weekend,” wrote Stephen Innes, chief global markets strategist at AxiCorp, in a Friday research note.

September is a notoriously weak month for investors, and even if that weakness is somewhat moderated in an election year, October also has the hallmarks of a rough patch for Wall Street, with the Nov. 3 presidential election looming.

Chris Senyek, chief investment strategist at Wolfe Research, said the possibility of a resurgence of COVID-19 headed into the fall and winter also is cause to lighten up on stocks.

“Our sense is that a similar resurgence in infection rates is likely to occur in the United States this fall as children and college students returns to school and flu season begins,” analysts at Wolfe Research wrote on Friday.

Michael Kramer, founder of Mott Capital Markets, in a blog on Friday described the recent swings in the market as “insane” and said that it is difficult to gauge what’s ahead for the market, but he notes that an explosion in volumes related to the selloff could signal a change in the uptrend for stocks.

He noted that for the first time since April 3, the S&P 500 closed below its uptrend. “This is typically not something we want to see; it would indicate that momentum is likely shifting,” he wrote (see attached chart).

Of Friday’s paring of losses into the close, Kramer said: “The rally into the close was impressive, but it could have just as easily been on the heels of short-covering as it was on real buying.”

Part of the downturn occurred as two popular companies saw their shares drop after stock splits: Apple
AAPL,
+0.06%

and Tesla
TSLA,
+2.78%
.

Tesla has been among the highest of highfliers in recent months and viewed by some as a gauge of sentiment in the overall market. Its recent retreat is something bearish investors have pointed to as a signal of weakness in the market.

On top of that, Tesla wasn’t announced as a new entrant into the S&P 500 index late Friday, which may cast a pall over the stock that has lost about 20% from its peak.

The road ahead

Looking ahead, investors turn next to the Federal Reserve’s Sept. 15-16 policy meeting, which could be important in clarifying the length of the time interest rates could be held lower but also what, if any, new quantitative easing the central bank will implement.

Fed Chairman Jerome Powell in an interview with National Public Radio conducted Friday afternoon said that the 1.4 million jobs added to the labor market in August and an unemployment rate falling to 8.4% from 10.2% as a good sign of progress in the economy.

But he did emphasize that progress is going to be slow: “We do think it will get harder from here,” Powell said.

Doubts that the government will soon provide a fresh round of fiscal stimulus for out-of-work Americans has put some pressure on the Fed to do more to dull the impact on the economy from disruptions caused by the pandemic.

The Fed’s role may be the most important feature of whether the stock market is able to continue to make progress higher. As it stands now, there are few alternatives to stocks, with long-dated government bonds yielding around 1% or less.



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Facing immense pressure, Facebook had no choice but to ban new political ads week before election


Facebook Inc.’s first action to limit political advertising in the U.S. with a ban of news ads in the week preceding the Nov. 3 elections announced Thursday comes amid unrelenting criticism that its platform fuels misinformation and is a haven for far-right groups.

Chief Executive Mark Zuckerberg, who in particular has taken heat for political manipulation of the social-media company’s platform during the 2016 U.S. elections, made the announcement early Thursday in another attempt to tamp down meddling.

“It’s important that campaigns can run ‘get out the vote campaigns’, and I generally believe the best antidote to bad speech is more speech, but in the final days of an election there may not be enough time to contest new claims,” Zuckerberg said.

The specter of voter manipulation has weighed heavily on Facebook. The company is running what it calls the largest voting information campaign in American history, with a goal of helping 4 million people to register and vote. Last month, Facebook launched a Voting Information Center to help users with accurate, easy-to-find information about voting wherever they live. The addendum will link to a new voter information hub similar to one about COVID-19 that Facebook says has been seen by billions of people globally.

See also: Facebook hardens digital defense for misinformation ahead of elections

However, Facebook’s latest election-integrity move was immediately met with skepticism from privacy groups that argue Facebook should be fact-checking and removing political ads, in addition to intentionally deceptive posts, that proliferate across its platform that includes Instagram, WhatsApp, and Messenger. Some openly questioned why the ban didn’t extend longer, and if money trumped principle.

“Nothing more than a PR stunt designed to distract from the fact that Facebook is the single biggest vector of dangerous misinformation and voter suppression campaigns in the United States. It falls well short of even being a half measure,” Shaunna Thomas, co-founder and executive director of national women’s organization UltraViolet, said in a statement.

Others were more positive about the new policy. “It’s a strange feeling to read something by Mark Zuckerberg and say, ‘Yup, yup, yup,’” said Claire Wardle, the U.S. director of First Draft, a nonprofit group that combats misinformation. “I’m pretty excited by it.”

Election interference remains top of mind at Facebook, which is as concerned about vote counting in the days and perhaps weeks following Nov. 3. Officials at Facebook, Twitter Inc.
TWTR,
-4.22%

and elsewhere have hinted there could be attempts by politically motivated groups to question the legitimacy of votes, including mail-in ballots.

Read more: Facebook and Twitter are concerned about what is going to happen after Election Day

Facebook, which is under investigation for anti-competitive business practices by the Federal Trade Commission, faces immense political pressure for the torrent of information it fire-hoses to its 2.7 billion monthly active users.

Despite the relatively civil relationship between Zuckerberg and President Donald J. Trump, who has nearly 31 million followers on the social network, it might only take a mild disciplinary action by Facebook over Trump’s profile feed to raise his ire and prompt regulatory punishment, Anurag Chandra, a partner at venture-capital firm Fort Ross Ventures, told MarketWatch.

The White House said as much in a terse statement Thursday.

“In the last seven days of the most important election in our history, President Trump will be banned from defending himself on the largest platform in America,” Samantha Zager, the campaign’s deputy national press secretary, said in a statement. “When millions of voters will be making their decisions, the President will be silenced by the Silicon Valley Mafia, who will at the same time allow corporate media to run their biased ads to swing voters in key states.”

The campaign of Trump’s Democratic opponent, former Vice President Joseph R. Biden Jr., had no immediate comment.

Facebook
FB,
-2.88%

shares declined 3.8% in trading Thursday in a as tech stocks were routed in a selloff.



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Dividend Challenger Highlights: Week Of August 30


Introduction

The Dividend Champions list is a monthly compilation of companies which have consistently increased their annual dividend payouts, and the latest edition may be found here. However, since this list is only produced once per month, the data in it can quickly get out of date. Furthermore, with over 750 companies on the list, the sheer amount of data can quickly become overwhelming. In this weekly series, I highlight recent and upcoming dividend related activity for companies holding Challenger (5-9 years) status.

In the data presented below, Yield is forward annualized and Years reflects the up-to-date streak, including dividends declared since the last edition of the Dividend Champions list.

Dividend Changes

In the past week, the following companies on the Challengers list declared dividends which changed from their previous payouts.

Increases:

Company

Symbol

Ex-Div

Pay

Old Rate

New Rate

Increase

Yield

Years

EastGroup Properties Inc.

(EGP)

9/29

10/15

0.75

0.79

5.33%

2.34%

9

Lam Research Corp.

(LRCX)

9/29

10/14

1.15

1.3

13.04%

1.48%

7

Decreases:

None

Last Chance to Buy

These companies have ex-dividend dates approaching. The following tables indicate the last day you can buy these stocks in order to be eligible for the upcoming dividend. Tables are sorted alphabetically by symbol.

Monday, Aug. 31 (Ex-Div 9/1)

Company

Symbol

Pay Date

Payout

Price

Yield

Years

Avery Dennison Corp.

(AVY)

9/16

0.58

118.18

1.96%

9

Houlihan Lokey, Inc.

(HLI)

9/15

0.33

59.46

2.22%

6

Kearny Financial Corp.

(KRNY)

9/16

0.08

7.89

4.06%

6

EnPro Industries Inc.

(NPO)

9/16

0.26

60.03

1.73%

6

Nvidia Corp.

(NVDA)

9/24

0.16

525.91

0.12%

8

Everest Re Group Ltd.

(RE)

9/16

1.55

221.67

2.80%

7

Tuesday, Sept. 1 (Ex-Div 9/2)

Company

Symbol

Pay Date

Payout

Price

Yield

Years

Peoples Bancorp of North Carolina

(PEBK)

9/15

0.15

17.16

3.50%

8

Wednesday, Sept. 2 (Ex-Div 9/3)

Company

Symbol

Pay Date

Payout

Price

Yield

Years

American National Bankshares Inc.

(AMNB)

9/18

0.27

23.38

4.62%

5

Bank of America Corp

(NYSE:BAC.PK)

9/25

0.18

26.3

2.74%

6

First Merchants Corp.

(FRME)

9/18

0.26

26.11

3.98%

8

Mercantile Bank Corp.

(MBWM)

9/16

0.28

22.56

4.96%

9

Open Text Corp.

(OTEX)

9/25

0.1746

46.18

1.51%

7

Regions Financial Corp.

(RF)

10/1

0.155

11.71

5.29%

7

Trane Technologies

(TT)

9/30

0.53

120.3

1.76%

8

United Fire Group Inc.

(UFCS)

9/18

0.33

25.92

5.09%

7

Thursday, Sept. 3 (Ex-Div 9/4)

Company

Symbol

Pay Date

Payout

Price

Yield

Years

Popular, Inc.

(BPOP)

10/1

0.4

38.1

4.20%

6

Friday, Sept. 4 (Ex-Div 9/8)

Company

Symbol

Pay Date

Payout

Price

Yield

Years

Ameren Corp.

(AEE)

9/30

0.495

78.66

2.52%

6

Avnet Inc.

(AVT)

9/23

0.21

28.12

2.99%

7

Hewlett Packard Enterprise Company

(HPE)

10/7

0.12

9.83

4.88%

5

Public Service Enterprise Group Inc.

(PEG)

9/30

0.49

52.16

3.76%

9

TFS Financial Corporation

(TFSL)

9/23

0.28

15.58

7.19%

7

Money on the Way

The following companies have dividend pay dates in the upcoming week (Tuesday through the following Monday). Check if you want your DRIPs to reinvest at these yields…or take the cash and go have a steak dinner!

Company

Symbol

Pay Date

Payout

Yield

Assured Guaranty Ltd.

(AGO)

9/2

0.2

3.6%

Aramark Services Inc.

(ARMK)

9/2

0.11

1.5%

BWX Technologies, Inc.

(BWXT)

9/8

0.19

1.4%

Cable One, Inc.

(CABO)

9/4

2.5

0.5%

Cogent Communications Holdings Inc.

(CCOI)

9/4

0.705

4.3%

Cortland Bancorp

(CLDB)

9/1

0.14

4.0%

Discover Financial Services

(DFS)

9/3

0.44

3.2%

Entergy Corporation

(ETR)

9/1

0.93

3.8%

FLIR Systems Inc.

(FLIR)

9/4

0.17

1.9%

HNI Corp.

(HNI)

9/1

0.305

3.8%

Home Bancshares Inc.

(HOMB)

9/2

0.13

3.1%

Honeywell International Inc.

(HON)

9/4

0.9

2.1%

Intel Corp.

(INTC)

9/1

0.33

2.6%

LyondellBasell Industries NV

(LYB)

9/8

1.05

6.2%

Matson Inc.

(MATX)

9/3

0.23

2.3%

MKS Instruments Inc.

(MKSI)

9/4

0.2

0.7%

Materion Corp.

(MTRN)

9/4

0.115

0.8%

National Instruments Corp.

(NATI)

9/8

0.26

2.9%

ONE Gas Inc.

(OGS)

9/1

0.54

2.9%

Paccar Inc.

(PCAR)

9/1

0.32

1.5%

Pinnacle West Capital Corp.

(PNW)

9/1

0.7825

4.3%

Phillips 66

(PSX)

9/1

0.9

5.8%

RE/MAX Holdings Inc.

(RMAX)

9/2

0.22

2.5%

Selective Insurance Group Inc.

(SIGI)

9/1

0.23

1.5%

Skyworks Solutions Inc.

(SWKS)

9/1

0.5

1.4%

TCF Financial Corp.

(TCF)

9/1

0.35

5.1%

TE Connectivity Ltd.

(TEL)

9/4

0.48

2.0%

Truist Financial Corp.

(TFC)

9/1

0.45

4.5%

Timken Company

(TKR)

9/3

0.28

2.0%

Tetra Tech Inc.

(TTEK)

9/4

0.17

0.7%

Vulcan Materials

(VMC)

9/4

0.34

1.1%

Zoetis Inc.

(ZTS)

9/1

0.2

0.5%

Conclusion

I hope you found this article useful. Please let me know if you have any ideas for improving the format or data included in this series.

Looking for more in depth analysis of high quality dividend stocks? Check out the Dividend Kings marketplace service!

Disclosure: I am/we are long INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.





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U.S. IPO Week Ahead: The Quiet Before The Post-Labor Day IPO Storm


There are no IPOs scheduled for the week ahead, though a few SPACs may join the IPO calendar. New filings should continue to pour in as well.

While the calendar is quiet for the time being, a wave of filings this past week indicates that activity is set to explode following Labor Day. The list of companies set to launch in the second week of September contains a slew of high-profile names, including several that will vie to be the first Silicon Valley tech IPO of 2020.

High-Profile Companies Set for Post-Labor Day Launches

Issuer
Business

Deal
Size

Sector

File
Date

Asana (ASANA)

Direct Listing

Technology

08/24

Provides enterprise task management and collaboration software.

Palantir (PLTR)

Direct Listing

Technology

08/25

Data analytics platform focused on the government and financial sectors.

Snowflake (SNOW)

$2,000M

Technology

08/24

Provides cloud-based SQL database software and warehousing.

Unity Software (U)

$1,000M

Technology

08/24

Provides a real-time 3D video game development platform.

Bentley Systems (BSY)

$800M

Technology

08/21

Provides software for construction and infrastructure projects.

GoodRx (NASDAQ:GDRX)

$750M

Technology

08/28

Operates a prescription drug price comparison platform.

Pactiv Evergreen (PTVE)

$750M

Materials

08/24

The largest manufacturer of fresh food and beverage packaging in North America.

Amwell (AMWL)

$100M

Health Care

08/24

Provides a telehealth platform for insurers and patients.

Corsair Gaming (CRSR)

$100M

Technology

08/21

Designs and supplies personal computer and gaming hardware components.

JFrog (FROG)

$100M

Technology

08/24

Sells software tools that streamline app development.

Sumo Logic (SUMO)

$100M

Technology

08/24

Provides on-demand cloud log management solutions to enterprises.

Street research is expected for eight companies, and lock-up periods will be expiring for two companies.

IPO Market Snapshot

The Renaissance IPO Indices are market cap weighted baskets of newly public companies. As of 8/27/20, the Renaissance IPO Index was up 52.4% year-to-date, while the S&P 500 was up 7.7%. Renaissance Capital’s IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Zoom Video (NASDAQ:ZM) and Uber (NYSE:UBER). The Renaissance International IPO Index was up 37.9% year-to-date, while the ACWX was down 3.1%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Xiaomi and Meituan-Dianping.

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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.





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Wall Street futures tick up ahead of big retail earnings week By Reuters


© Reuters. The front facade of the of the NYSE is seen in New York

By Ambar Warrick

(Reuters) – U.S. stock index futures rose on Monday as retailers prepared to wind down a better-than-feared quarterly earnings season, while the countdown to Election Day was set to begin with the Democratic National Convention kicking off later in the day.

The benchmark S&P 500 () ended Friday below its pre-pandemic record closing high as a Wall Street rally lost steam with a clutch of data pointing to a wobbly recovery for the world’s biggest economy.

But figures this week are likely to show another jump in housing starts as demand surges for single-family homes in the suburbs, in turn benefiting sales of home improvement chains such as Lowe’s Companies Inc (N:) and Home Depot Inc (N:).

The retailers, along with Walmart Inc (N:), Kohls Corp (N:), and Target Corp (N:) are due to report second-quarter earnings later in the week.

As of Friday, 457 companies in the S&P 500 had reported results, of which 81.4% came in above dramatically lowered expectations, according to Refinitiv data.

Minutes of the Federal Reserve’s latest meeting, due on Wednesday, are expected to provide more insight into the central bank’s view of the recovery.

Investors are also girding their portfolios for market moves ahead of the U.S. presidential vote, as election season kicks into higher gear with the Democratic National Convention, which runs Monday through Thursday.

The Republican convention will be held from Aug. 24 to Aug. 27 and both will be mostly virtual this year due to the COVID-19 pandemic.

At 6:47 a.m. ET, were up 56 points, or 0.2%, S&P 500 e-minis were up 10.25 points, or 0.3%, and were up 70.25 points, or 0.63%.

Among individual movers, Principia Biopharma Inc (O:) jumped 9.7% premarket after French healthcare firm Sanofi SA (PA:) said it will buy the firm for about $3.7 billion.

Chinese ecommerce website Alibaba Group (N:) fell 1.2% after U.S. President Donald Trump said on Saturday he could exert pressure on more Chinese companies after he moved to ban TikTok earlier in the month.

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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