Stocks end lower as Nasdaq leads averages on the downside
The major averages spent the early part of the session searching for direction, and were all in positive ground for a time, before moving lower and staying in the red for the rest of the session. The S&P 500 ran its losing streak to a third day as its losses accelerated after the benchmark index fell below its 50-day moving average. Technology shares, and in turn the Nasdaq, were among the day's notable underperformers.
ECONOMIC EVENTS: In the U.S., the current account deficit widened dramatically to a 12-year high of $170.5B in Q2 from a $111.5B gap in Q1. The leading economic indicators index rose 1.2% to 106.5 in August. The University of Michigan consumer sentiment survey rose to a 6-month high of 78.9 in the preliminary report for September, which was much better than expected and up from 74.1 in August. In energy news, Baker Hughes reported that the U.S. rig count is up 1 from last week to 255, with oil rigs down 1 to 179.
The latest data from the Johns Hopkins Whiting School of Engineering shows there are now 30.2M confirmed cases of COVID-19 worldwide, including 6.68M in the U.S., and 946,963 deaths due to the disease. In other COVID-19 news, the Centers for Disease Control and Prevention updated its guidance on COVID-19 testing, saying that due to the significance of asymptomatic and pre-symptomatic transmission, this guidance further reinforces the need to test asymptomatic persons, including close contacts of a person with documented SARS-CoV-2 infection.
TOP NEWS: The Department of Commerce announced prohibitions on transactions relating to mobile applications WeChat and TikTok to "safeguard the national security of the United States." In a statement, Commerce said, "The Chinese Communist Party has demonstrated the means and motives to use these apps to threaten the national security, foreign policy, and the economy of the U.S. Today's announced prohibitions, when combined, protect users in the U.S. by eliminating access to these applications and significantly reducing their functionality." As of September 20, 2020, the following transactions are prohibited: Any provision of service to distribute or maintain the WeChat or TikTok mobile applications, constituent code, or application updates through an online mobile application store in the U.S.; Any provision of services through the WeChat mobile application for the purpose of transferring funds or processing payments within the U.S. The President has provided until November 12 for the national security concerns posed by TikTok to be resolved. If they are, the prohibitions in this order may be lifted, the department added.
U.S. investors, including Oracle (ORCL), are poised to own at least a 60% interest in TikTok after the company's Chinese parent ByteDance agreed to a revised term sheet issued by the U.S. Treasury to address national security worries regarding a proposed deal, Reuters' David Shepardson has previously reported. The new company, known as TikTok Global, will have a majority of American directors and a U.S. CEO, the author said, noting that Oracle would take a 20% stake while Walmart (WMT) is also expected to take an equity interest under the proposed agreement.
Following the latest on the TikTok saga, Oracle shares closed down fractionally, while TikTok rival Snap's (SNAP) shares fell 2%.
On September 13, Microsoft (MSFT) said in a blog post that ByteDance had chosen not to sell the U.S. assets of TikTok to the company. "We are confident our proposal would have been good for TikTok's users, while protecting national security interests," the company said at that time.
Last night, the Federal Reserve Board released its hypothetical scenarios for a second round of bank stress tests, which it is performing "due to the continued uncertainty from the COVID event." Vice Chair Randal K. Quarles said: "Although the economy has improved materially over the last quarter, uncertainty over the course of the next few quarters remains unusually high, and these two additional tests will provide more information on the resiliency of large banks." In light of the heightened economic uncertainty, the Board previously required banks to take several actions to preserve their capital levels in the third quarter of this year. The Board will announce by the end of September whether those measures to preserve capital will be extended into the fourth quarter, the Fed reported. Some of the largest publicly traded U.S. bank companies include Bank of America (BAC), Citi (C), Goldman Sachs (GS), JPMorgan (JPM), Morgan Stanley (MS), U.S. Bancorp (USB) and Wells Fargo (WFC).
MAJOR MOVERS: Among the noteworthy gainers was Triumph Group (TGI), which rose 7.8% after Dealreporter said that sector advisors think the company may attract strategic suitors. Also higher was Fluidigm (FLDM), which gained 14.3% after Citron Research reiterated its long position on the stock with a $20 price target.
Among the notable losers was Beyond Meat (BYND), which slid 5.2% after JPMorgan analyst Ken Goldman downgraded the stock to Underweight from Neutral citing what he sees as "sluggish" fundamentals. Also lower was OneWater Marine (ONEW), which fell 9.7% after its 3.171M share secondary offering priced at $20.00.
INDEXES: The Dow fell 244.56, or 0.88%, to 27,657.42, the Nasdaq lost 116.99, or 1.07%, to 10,793.28, and the S&P 500 declined 37.54, or 1.12%, to 3,319.47.