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The stock market’s September swoon continued last week on concerns about a slowing economic recovery and a lack of action in Washington for another stimulus package. Markets were on pace to extend their losing streak into a fourth week.
On Monday, electric truck maker Nikola’s popular chairman Trevor Milton resigned from his position following fraud allegations from short seller Hindenburg Research and reports of investigations by both the Securities and Exchange Commission and the Justice Department. Nikola’s share price dropped more than 40% during the week.
Shares of electric vehicle maker Tesla also dropped more than 10% last week after the company’s much-hyped Battery Day failed to live up to expectations. At the event, CEO Elon Musk said Tesla can produce a $25,000 fully autonomous EV “about three years from now,” but he did not reveal the so-called “million-mile battery” that many investors had anticipated.
A Nike store in Premium Outlets Way (Photo: Serena O’Sullivan/Arizona Republic)
Better vaccine news, then jobs news
The fight against COVID-19 got some reinforcements on Wednesday when Johnson & Johnson announced it has begun Phase III testing of its coronavirus vaccine candidate. Johnson & Johnson is now the fourth company to enter Phase 3 testing on a vaccine, joining Moderna, Pfizer and AstraZeneca.
On Thursday, the Labor Department reported a surprise uptick in U.S. weekly initial jobless claims, which increased to 870,000 for the week ending Sept. 19. The weekly jobless claims number exceeded the prior week’s 860,000 claims and the 850,000 claims economists were expecting.
Shawn Cruz, manager of trader strategy at TD Ameritrade, says even the slightest changes in expectations can have an outsized impact on markets.
“When the market is being pulled higher by high-growth names it becomes very sensitive to changes in growth expectations. The growth outlook becoming a little more uncertain can drive volatility,” said Cruz
Nike and Costco see online sales rise
Nike and Costco were the earnings headliners of the week. Both companies came in above analyst expectations for earnings and sales, but the real star was online sales. Nike reported online sales rose 82% year-over-year in the second quarter, while Costco said online sales grew 90% year-over-year.
Shares of drugstore chain Rite Aid dropped 15% last week after the company reported 11% revenue growth in the second quarter but guided for an adjusted net loss of at least $140 million in fiscal 2021.
This week, investors will get key earnings reports from United Natural Foods on Monday, Micron on Tuesday and PepsiCo on Thursday.
Economic numbers to watch for
Following last week’s disappointing weekly jobs numbers, investors will be closely monitoring this week’s initial jobless claims report for the week ending Sept. 25 on Thursday and the Labor Department’s monthly U.S. jobs report for September on Friday.
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