Stocks rebound from sell-off

The major benchmarks overcame an early sell-off to end the week flat to modestly higher. On Monday, the S&P 500 Index recorded it biggest daily drop since May as investors worried about potential collapse of heavily indebted property developer China Evergrande Group. However stocks started gaining after China’s central bank injected $30 billion into its banking system over the course of the week, cooling contagion concerns over any fallout from the Evergrande crisis. Federal Reserve Chairman Jerome Powell on Wednesday, while delivering the central bank’s relatively hawkish policy outlook regarding interest-rate liftoff, assured investors that the unwinding of easy-money policies would come at a measured pace and take into account the uncertainties stirred by the mutating pandemic. 

Top Sectors last Week:

  • Energy Sector (ETF: XLE) up 7.38%
  • Financial Sector (ETF: XLF)  up 4.54%
  • Information Technology Sector (ETF: VGT) up 2.16%

Losers last week:

  • Utilities Sector (ETF: XLU) down 0.82%
  • Real Estate Sector (ETF: XLRE) down 0.41%

Interesting News:

  • China property crisis: The possibility of China property company “Evergrande” collapsing and overall worries about China’s crackdown on indebted firms took a toll on Hong Kong shares. The Hang Seng Index (HSI) fell more than 3% on Monday with China and Japan closed for a holiday. The benchmark index hit an 11-month low, with the index tracking construction and property off more than 6%. “Evergrande” sunk more than 11% and has fallen more than 80% this year as it struggles to meet debt payments. The company has more than $300B in debt and defaulted on an interest payment on a bond later in the week.
  • Nike and peers fall: NIKE (NKE) shares fell hard despite the company’s fifth consecutive earnings beat. Revenue for the quarter ended Aug 31, 2021, was slightly below expectations at $12.2B (+16% Y/Y), missing by $220M, and down $100M sequentially due to global supply chain issues and the Vietnam lockdown. The company reports that its owned physical retail stores have surpassed pre-pandemic levels, growing 24% Y/Y. Digital sales were up 25%, led by a 43% increase in North America. Keep in mind, that out of 20 analysts covering Nike, 17 have buy rating in the long term and average price target for Nike for next 12 month is $185.42 (23.95% upside) as of writing this article.
  • Facebook (NASDAQ:FB) holds its annual Gaming Developer Day this week. Bank of America thinks the event could be a share price catalyst with potential updates from the social media giant on gaming platform innovations and products anticipated. The average price target of 30 wall street analysts for Facebook for next 12 month is $421.97 (19.55% Upside) as of writing this article.

Earnings This week:

Monday, September 27th: Jefferies (JEF) and Aurora Cannabis (ACB).
Tuesday, September 28th: United Natural Foods (UNFI), IHS Markit (IHS) and Micron (MU).
Wednesday, September 29th: Jabil (JBL) and Cintas (CTAS).
Thursday, September 30th: CarMax (KMX), Bed Bath & Beyond (BBBY), McCormick (MKC) and New Oriental Education & Technology (EDU).


IPO’s this week:

IPOs expected to start trading during the week include Allvue Systems (ALVU) on September 29 and Olaplex (OLPX) on September 30. Warby Parker (WRBY) is scheduled to starts trading via a direct listing on September 30.