The week on Wall Street

Stocks slipped in the final days of trading last week on higher jobless claims and rising tensions in the U.S.-China relationship.

The Dow Jones Industrial Average lost 0.76%, while the Standard & Poor’s 500 dipped 0.28%. The Nasdaq Composite Index dropped 1.33% for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, rose 1.24%.1,2,3

Stocks Lose Momentum

Stocks marched higher to begin the week on progress with a COVID-19 vaccine and a string of upbeat corporate quarterly reports. Firming oil prices and the passage of a fiscal stimulus bill by the European Union also helped buoy investors’ spirits.

Market sentiment, however, turned negative after Thursday morning’s report of an uptick in new unemployment claims, which suggested a possible slowdown in hiring. The market was led lower by the technology sector ahead of quarterly reports from some of the sector’s biggest names.4

U.S.-China Tensions Escalate

Tensions escalated last week as the U.S. ordered China to close its consulate in Houston, which the White House claimed was stealing American information. A day earlier, the U.S. had accused China of attempting to steal COVID-19 research data. China responded by ordering the U.S. to close its consulate in the city of Chengdu.5,6

The markets appear more focused on the apparent deteriorating relations between the two nations, worried about a repeat of the trade battle in 2018. Whether the rancor is managed is likely to remain a top concern for investors in the weeks ahead.

Final Thoughts

The mega-cap technology companies’ market dominance is a concern to some. Last week it was reported that six of these mega-cap stocks represent 41% of the Nasdaq market capitalization.Five mega-cap names included in the S&P 500 Index account for 22% of that index’s market capitalization.7

Investors have embraced these firms because they appear to be able to show solid financial performance in the midst of an economy coping with COVID-19.

© Mahoney Asset Management

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