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Adaptive Advice – Weekly Market Update: Big week for IPOs, but not so much for the large-cap indices

October 01, 2021

A weekly recap of market activity and events, featuring commentary, analysis written with individual investors in mind.

In a week that saw the IPO of Airbnb and DoorDash achieve large gains, each of the major indices set incremental new highs mid-week, but the market grew tired legs at the back-end of the week. The Russell 2000 (+1.0%) still managed to close higher for its sixth straight weekly gain, while the S&P 500 (-1.0%), Nasdaq Composite (-0.7%), and Dow Jones Industrial Average (-0.6%) finished in negative territory.

One of the biggest reported headwinds this week was the new supply of stock issued in the form of IPOs and secondary offerings. Airbnb (ABNB) more than doubled in its IPO, DoorDash (DASH) surged 85% in its first day of trading, and Tesla (TSLA) sold $5 billion of common stock through an “at-the-market” offering program.

Airbnb and DoorDash were the largest IPOs, but the smaller ones had similarly bullish reactions, which market observers interpreted as a sign of speculative fervor that warranted a time-out. Still, lingering vaccine optimism and stimulus hopes mitigated selling interest.

Nine of the 11 S&P 500 sectors finished the week in the red. The real estate sector (-2.9%) lagged with a 3% decline, and the influential information technology sector fell 1.4%. The energy (+1.1%) and communication services (+0.1%) sectors closed higher.

In vaccine news, the UK began inoculating its citizens with the Pfizer-BioNTech vaccine, and the FDA advisory panel recommended that their vaccine be approved for emergency use. In addition, peer-reviewed data indicated that the AstraZeneca-Oxford vaccine is safe and effective in preventing symptomatic COVID-19 and that it protects against severe disease and hospitalization.

Separately, Treasury Secretary Mnuchin offered a new $916 billion stimulus bill, but Democratic Congressional leadership preferred to focus on the $908 billion bipartisan plan instead. Unfortunately, both sides continued to accuse each other of essentially negotiating in bad faith.

The 10-yr yield fell eight basis points to 0.89%, as Treasuries bounced back from recent losses. Yields move inversely to prices.

After facing a series of delays, the Senate approved a one-week temporary funding measure Friday afternoon to avert a governmental shutdown, hours before a critical deadline. After the Senate approved this measure it was sent to the President who signed off on it Friday evening.

S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. It is not possible to invest directly in an index.

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