Stocks Drop With Valuation Near Highest Since 2000: Markets Wrap

(Bloomberg) -- The stock-market euphoria abated in the last trading day of August as investors assessed whether lofty valuations can withstand the unwinding of pandemic-era stimulus.

The S&P 500 dropped from an all-time high, while European shares fell on signals the region’s policy makers will start discussing a reduction of bond purchases. Wells Fargo & Co. tumbled after Bloomberg News reported that the bank risks regulatory action over the pace of restitution. Traders also sifted through data showing a slide in U.S. consumer confidence and a surge in home prices.

American equities still notched their seventh straight monthly advance -- the longest winning streak since January 2018 -- amid a tonic of strong corporate profits and moderate monetary policy. As the tapering debate heats up at a time when the coronavirus resurgence is delaying reopenings in some parts of the world, there’s been concern about an overstretched stock market. The S&P 500 is currently trading near its highest valuation levels since 2000.

“Markets are taking a little bit of a breather,” said Cliff Hodge, chief investment officer at Cornerstone Wealth. After making it through strong economic data and stellar corporate earnings, “markets are now trying to grapple with: well, what’s next?”

Fourteen streaks of seven months or longer for the S&P 500 have occurred during the past 60 years, according to data compiled by Bloomberg. History points to three outcomes for the gauge after reaching such milestones. 

Five of them ended in the next month as the index fell. Another four were followed by gains of no more than 3.2% before the streaks ended. The other five delivered advances of 9.7% or more before they concluded -- including the most recent streak, which lasted 10 months and ran through January 2018.

Corporate insiders, whose buying correctly signaled the bear-market bottom in March 2020, are not afraid of chasing the record-setting rally. More than 1,000 executives and officers have snapped up shares of their own firms this month -- the most since May of last year, according to data compiled by the Washington Service.  

Some corporate highlights:

• Zoom Video Communications Inc. tumbled after the stay-at-home darling gave a sales forecast that fell short of some analysts’ estimates.
• Chinese gaming-related stocks listed in the U.S. rebounded from Monday’s drop, with NetEase Inc. and Bilibili Inc. rallying.
• Moderna Inc. climbed after a study showed its Covid-19 vaccine generated more than double the antibodies of a similar shot made by Pfizer Inc. and BioNTech SE.
• Allbirds Inc. is moving ahead with an initial public offering as it expands beyond the wool trainers that have become the unofficial footwear of Silicon Valley.

Read: CN Rail’s Kansas City Southern Deal Is Imperiled on U.S. Rebuff

Here are some key events to watch this week:

• OPEC+ meeting on output Wednesday
• Euro zone manufacturing PMI Wednesday
• U.S. jobs report Friday

For more market analysis read our MLIV blog.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.1% as of 4 p.m. New York time
• The Nasdaq 100 fell 0.1%
• The Dow Jones Industrial Average fell 0.1%
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.1% to $1.1809
• The British pound was little changed at $1.3751
• The Japanese yen was little changed at 110.01 per dollar

Bonds

• The yield on 10-year Treasuries rose three basis points to 1.31%
• Germany’s 10-year yield advanced six basis points to -0.38%
• Britain’s 10-year yield advanced 14 basis points to 0.71%

Commodities

• West Texas Intermediate crude fell 1% to $68.52 a barrel
• Gold futures rose 0.3% to $1,817.50 an ounce

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