What I’m Watching This Week – 26 October 2020

The Markets (as of market close October 23, 2020)

Last week started out poorly for equities as investors saw the faint hope of pre-election financial stimulus fade. The major indexes fell to their lowest levels in nearly two weeks by the close of trading last Monday. The Nasdaq and S&P 500 each dropped 1.6%, respectively. The Dow fell 1.4%, the Russell 2000 dipped 1.2%, and the Global Dow lost 0.4%. Treasury bond prices fell, driving yields higher. Crude oil prices and the dollar also lost value. All of the major market sectors closed in the red with energy, information technology, financials, real estate, and health care each falling by at least 1.5%.

Equities rebounded last Tuesday. Investors may have been looking to scoop up some discounted stocks or were encouraged by a glimmer of hope for fiscal stimulus before the election. In any case, each of the benchmarks posted moderate gains, led by the S&P 500 (0.5%), followed by the Dow (0.4%), the Global Dow (0.4%), the Nasdaq (0.3%), and the Russell 2000 (0.3%). Treasury yields and crude oil prices rose while the dollar fell. Among the major market sectors, energy, communication services, consumer discretionary, financials, and real estate were solid. COVID-19 news was mixed with the number of confirmed cases rising, countered by encouraging vaccine reports.

The prior day’s market rebound was short lived as stocks fell last Wednesday. While Democrats and the White House seemed to near a fiscal stimulus package, it does not appear that anything will happen before the November election. The major market indexes ended a volatile day finishing lower, led by the Russell 2000 (-0.9%), followed by the Dow (-0.4%), the Nasdaq (-0.3%), the S&P 500 (-0.2%), and the Global Dow (-0.2%). Most of the major market sectors fell, with energy dropping nearly 2.0%. Crude oil and the dollar lost value while Treasury yields rose.

Investors continue to be influenced by reports emanating from the ongoing negotiations over additional virus-related fiscal stimulus. This time, it was House Speaker Nancy Pelosi who told reporters last Thursday that a deal is “just about there.” That encouraging piece of news was enough to send stocks higher, with each of the benchmark indexes listed posting gains. Treasury yields also rose as bond prices slipped. Crude oil prices jumped 1.6%, and the dollar gained against a basket of currencies. Energy, financials, utilities, and health care gained on the day, while tech stocks fell.

Stocks were mixed by the close of trading last Friday. Poor performance from energy and technology offset strength in financials, materials, health care, and consumer discretionary. The Dow fell 0.1%, while the remaining benchmark indexes gained value, led by the Russell 2000 (0.6%), followed by the Global Dow (0.6%), the Nasdaq (0.4%), and the S&P 500 (0.3%). Treasury yields fell, pulled down by rising bond prices. Crude oil prices dropped 2.2% on the day, and the dollar fell. Investors were apparently unaffected by a lack of movement on the fiscal stimulus talks and last Thursday nights presidential debate.

Stimulus rhetoric aside, earnings reporting season is in full force and the results have been mixed, which certainly impacted stock values. For the week, the major indexes were mixed with the Global Dow and the Russell 2000 posting moderate gains, while the Dow, the Nasdaq, and the S&P 500 lost value. Year to date, the Dow fell below its 2019 closing value leaving only the Nasdaq and the S&P 500 ahead of their respective year-end marks. Crude oil prices fell last week, closing at $39.75 per barrel by late Friday afternoon, down from the prior week’s price of $40.75 per barrel. The price of gold (COMEX) closed the week at $1,904.90, up from the prior week’s price of $1,901.90. The national average retail price for regular gasoline was $2.150 per gallon on October 19, $0.017 lower than the prior week’s price and $0.488 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 10/23Weekly ChangeYTD Change
DJIA28,538.4428,606.3128,335.57-0.95%-0.71%
Nasdaq8,972.6011,671.5611,548.28-1.06%28.71%
S&P 5003,230.783,483.813,465.39-0.53%7.26%
Russell 20001,668.471,633.811,640.500.41%-1.68%
Global Dow3,251.243,044.303,071.740.90%-5.52%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.74%0.84%10 bps-107 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • The housing sector continued its strong showing in September. According to the Census Bureau, building permits were 5.2% above their August rate and 8.1% higher than September 2019. Housing starts last month were 1.9% above August and 11.1% more than last September. Housing completions soared in September, vaulting 15.3% over their August totals and 25.8% over September 2019. Low interest rates have helped drive new home construction and add to the number of new homes available for sale.
  • Existing home sales grew for the fourth consecutive month in September. According to the National Association of Realtors®, sales of existing homes were 9.4% above the August rate and 20.9% ahead of September 2019. The median existing-home price for all housing types in September was $311,800, 0.4% higher than the August price of $310,600, and 14.8% above the September 2019 price ($271,500). Inventory of existing homes for sale fell 1.3% in September from the prior month. Unsold inventory sits at a 2.7-month supply. Sales of single-family homes also advanced last month, outpacing the August rate by 9.7%. Single-family home sales were up 21.8% over the last 12 months. The median existing single-family home price was $316,200 in September, up 0.4% ahead of the August price of $315,000, and 15.2% higher than the price in September 2019.
  • For the week ended October 17, there were 787,000 new claims for unemployment insurance, a decrease of 55,000 from the previous week’s level, which was revised down by 56,000. According to the Department of Labor, the advance rate for insured unemployment claims was 5.7% for the week ended October 10, a decrease of 0.7 percentage point from the prior week’s rate, which was revised down by 0.4 percentage point. The advance number of those receiving unemployment insurance benefits during the week ended October 10 was 8,373,000, a decrease of 1,024,000 from the prior week’s level, which was revised down by 621,000. For perspective, a year ago there were 213,000 initial claims for unemployment insurance, the rate for insured unemployment claims was 1.2%, and 1,691,000 people were receiving unemployment insurance benefits.

Eye on the Week Ahead

The last week of October brings with it plenty of important economic reports that can move the market. The first estimate of the third-quarter gross domestic product is available. The economy contracted at an annual rate of 31.4% in the second quarter, largely due to the impact of COVID-19. At the end of this week, the latest information on personal income, expenditures and consumer prices for September is released. Personal income dropped 2.7% in August, while prices for consumer goods and services inched up only 0.3%.

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What I’m Watching This Week – 19 October 2020

The Markets (as of market close October 16, 2020)

Each of the benchmark indexes listed here advanced last Monday, climbing to their highest levels in more than a month. The Nasdaq advanced 2.6%, the S&P 500 gained 1.6%,the Dow added 0.9%, the Russell 2000 increased 0.7%, and the Global Dow picked up 0.7%. The Treasury market was closed for the Columbus Day holiday. Crude oil prices fell and the dollar was mixed. Mega-caps and tech stocks were big risers, along with communication services, consumer discretionary shares, and financials.

Stocks fell last Tuesday on dampened stimulus hopes. The Global Dow dropped 0.9%, followed by the Russell 2000 (-0.7%), the S&P 500 (-0.6%), the Dow (-0.6%), and the Nasdaq (-0.1%). Treasury yields fell while crude oil prices and the dollar rose. Real estate and financials fell sharply as bank stocks dropped nearly 3.0%.

Equities continued to slide last Wednesday following more rhetoric downplaying the prospects for a stimulus deal in the near term. Lower third-quarter earnings figures from some big banks added to investors’ trepidations. By the close of trading last Wednesday, the Russell dropped 0.9%, the Nasdaq fell 0.8%, the S&P 500 declined 0.7%, the Dow lost 0.6%, and the Global Dow gave back 0.4%. Treasury yields sank as bond prices increased. Crude oil prices advanced for the second consecutive day while the dollar weakened. Most of the major sectors were hit hard last Wednesday, with the largest declines in consumer discretionary stocks, communication services, and real estate.

Last Thursday proved no better for stocks, marking the third consecutive day of declines. Of the indexes listed here, only the Russell 2000 posted a gain (1.1%). The Global Dow fell 1.0%, followed by the Nasdaq (-0.5%), the S&P 500 (-0.2%), and the Dow (-0.1%). Ten-year Treasury yields advanced, crude oil prices dropped, and the dollar was mixed. Investors pulled back from technology stocks and FAANGs following news of stiffening COVID-related lockdowns in Europe and increasing unemployment claims in the United States. Market sectors that fell last Thursday include health care, communication services, information technology, and materials.

Stocks were mixed last Friday as the Dow, the S&P 500, and the Global Dow posted marginal gains, while the Nasdaq and the Russell 2000 lost value. Treasury yields climbed, crude oil prices dropped, and the dollar was mixed. Shares of large technology companies and energy stocks plunged. Investors got more discouraging news on possible virus relief from Democrats and Republicans, as it appears nothing of substance will happen until after the November 3 election.

For the week, the Dow, the Nasdaq, and the S&P 500 posted moderate gains, while the Global Dow and the Russell 2000 lost value. Year to date, the Nasdaq is more than 30.0% higher than its 2019 closing mark, pushed higher by mega-tech stocks. The S&P 500 is nearly 8.0% ahead of last year’s pace, while the Dow is barely above the break-even point. Crude oil prices inched higher last week, closing at $40.75 per barrel by late Friday afternoon, slightly ahead of the prior week’s price of $40.54. The price of gold (COMEX) fell following two consecutive weeks of increases, closing at $1,901.90, down from the prior week’s price of $1,934.20. The national average retail price for regular gasoline was $2.167 per gallon on October 12, $0.005 lower than the prior week’s price but $0.462 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 10/16Weekly ChangeYTD Change
DJIA28,538.4428,586.9028,606.310.07%0.24%
Nasdaq8,972.6011,579.9411,671.560.79%30.08%
S&P 5003,230.783,477.143,483.810.19%7.83%
Russell 20001,668.471,637.551,633.81-0.23%-2.08%
Global Dow3,251.243,073.413,044.30-0.95%-6.36%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.77%0.74%-3 bps-117 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • The Consumer Price Index climbed 0.2% in September after advancing 0.4% in August. Over the past 12 months, the CPI has increased 1.4%. Prices for food did not change last month. Energy prices increased 0.8% in September, driven by a 4.2% jump in natural gas prices. Prices at the pump inched ahead 0.1%. Prices for used trucks and cars rose 6.7% in September after advancing 5.4% in August. Consumer prices, less the more volatile food and energy components, increased 0.2% in September and are up 1.7% over the last 12 months.
  • According to the latest information from the Bureau of Labor Statistics, the Producer Price Index advanced 0.4% in September after climbing 0.3% in August. Producer prices are up 0.4% for the 12 months ended in September. Prices for services rose 0.4% last month, pushed higher by a 3.9% increase in prices for traveler accommodation services. Prices for goods also increased 0.4% in September, led by a 14.7% price jump for iron and steel scrap. Food prices rose 1.2% and trade prices inched up 0.2% last month. On the other hand, gasoline prices fell 2.8% in September.
  • Sales at the retail level increased by 1.9% in September following a 0.6% jump in August. Retail sales are 5.4% above the September 2019 pace. Motor vehicle and parts dealers saw sales climb 3.6% last month, while sales at clothing and clothing accessories stores surged 11.0%. Sales at food services and drinking places increased 2.1%. Nonstore (online) retail sales increased 0.5% last month after soaring 23.8% in August.
  • Prices for U.S. imports increased 0.3% in September following an advance of 1.0% in August. Despite the recent increases, overall import prices declined 1.1% for the year ended in September. Import fuel prices fell 2.9% in September following a 3.9% increase in August. The September fuel price decrease was the first since April. Nonfuel import prices advanced 0.6% in September following a 0.7% rise in August. Rising prices for nonfuel industrial supplies and materials; foods, feed, and beverages; automotive vehicles; consumer goods; and capital goods contributed to the advance in nonfuel import prices. Export prices advanced 0.6% in September after climbing 0.5% the previous month. Export prices are down 1.8% from September 2019. Agricultural export prices rose 2.7% in September following a 2.3% decrease the previous month. The September increase was the largest one-month advance since the index rose 3.8% in December 2018. Nonagricultural export prices advanced 0.3% in September after rising 0.8% in August. Even with the recent increases, nonagricultural export prices decreased 2.2% for the year ended in September.
  • Industrial production fell 0.6% in September, its first decline after four consecutive months of gains. The index increased at an annual rate of 39.8% for the third quarter as a whole. Although production has recovered more than half of its February to April decline, the September reading was still 7.1% below its pre-pandemic February level. Manufacturing output decreased 0.3% in September and was 6.4% below the February level. The output of utilities dropped 5.6% as demand for air conditioning fell more than usual in September. Mining production increased 1.7% in September; even so, it was 14.8% below a year earlier. Overall, total industrial production was 7.3% lower in September than it was a year earlier.
  • The government deficit for September, the last month of the fiscal year, was $125 billion. Monthly receipts totaled $373 billion while monthly expenses were $498 billion. The total deficit for fiscal year 2020 was a record-setting $3.132 trillion, an increase of 218% from fiscal year 2019. Expenditures increased 47% while receipts fell 1.0%. The extraordinary annual deficit pointed to large expenditures for COVID-19 relief.
  • For the week ended October 10, there were 898,000 new claims for unemployment insurance, an increase of 53,000 from the previous week’s level, which was revised up by 5,000. According to the Department of Labor, the advance rate for insured unemployment claims was 6.8% for the week ended October 3, a decrease of 0.9 percentage point from the prior week’s rate, which was revised up by 0.2 percentage point. The advance number of those receiving unemployment insurance benefits during the week ended October 3 was 10,018,000, a decrease of 1,165,000 from the prior week’s level, which was revised up by 207,000. For perspective, a year ago there were 218,000 initial claims for unemployment insurance, the rate for insured unemployment claims was 1.2%, and 1,689,000 people were receiving unemployment insurance benefits.

Eye on the Week Ahead The housing sector is in the news this week, with the latest reports from September available. The number of building permits issued and housing starts slowed in August compared to the prior month. The September numbers are expected to show a slight increase over the August totals. Sales of existing homes have surged over the past several months. Total sales jumped in August jumped 2.4%. A similar increase is expected for September.

What I’m Watching This Week – 12 October 2020

The Markets (as of market close October 9, 2020)

Last Monday saw stocks start the week on a high note, with each of the indexes listed here posting notable gains. The Russell 2000 led the way, adding 2.8%, followed by the Nasdaq (2.3%), the S&P 500 (1.8%), the Dow (1.7%), and the Global Dow (1.7%). Treasury yields and crude oil prices rose while the dollar fell. Energy, health care, and tech stocks led the market gains. Investors were encouraged by word that President Trump was expected to leave the hospital and return to the White House. That news, coupled with the possibility of fiscal stimulus in the near term, also helped propel stocks higher on the day.

Stocks plunged last Tuesday after President Trump called off stimulus talks until after the November election. The announcement came after Fed Chair Powell warned that the economy would likely regress without additional fiscal stimulus. Prior to that announcement, stocks were up as investors anticipated a deal was in the offing. By the end of trading, mega-caps, technology, communication services, and airlines were sectors that were hard hit. Each of the benchmark indexes listed here fell. The Nasdaq lost 1.6%, the S&P 500 fell 1.4%, the Dow dropped 1.3%, the Russell 2000 declined 0.3%, and the Global Dow sank 0.2%. Treasury prices surged pushing yields lower. Crude oil prices and the dollar advanced.

Equities rebounded last Wednesday as the president appeared to soften his stance on halting stimulus negotiations until after the election. Each of the major indexes listed here climbed higher, led by the Russell 2000 (2.1%), followed by the Dow (1.9%), the Nasdaq (1.9%), the S&P 500 (1.7%), and the Global Dow (0.9%). Treasury yields jumped ahead by 5.8%. Crude oil prices fell after a report showed that stockpiles increased. The dollar fell against a basket of currencies. Sectors that performed well include communication services, consumer discretionary, industrials, materials, and information technology.

Stocks posted a second consecutive day of gains last Thursday. Hopes for fiscal stimulus outweighed a larger-than-expected number of unemployment claims. Treasury bond yields and the dollar fell while crude oil prices rebounded from the prior day’s retreat. Energy, utilities, financials, and real estate led the market surge. The Russell 2000 (1.1%) posted the largest gain for the second day in a row, followed by the Global Dow (0.9%), the S&P 500 (0.8%), the Nasdaq (0.5%), and the Dow (0.4%).

Equities got a jolt last Friday following President Trump’s call for a bigger fiscal relief package. While the president said he favored a relief package larger than what has been proposed by either Democrats or Republicans, Senate Majority Leader McConnell warned that no deal was likely before the November election. The number of COVID-19 cases rose in several areas, with Europe emerging as a new hot spot. Nevertheless, each of the indexes listed here advanced by the close of Friday’s trading, led by the Nasdaq (1.4%), followed by the S&P 500 (0.9%), the Dow (0.6%), the Russell 2000 (0.6%), and the Global Dow (0.5%). Treasury yields rose while crude oil and the dollar fell.

For the week, the Nasdaq and the S&P 500 each posted their best weekly gains since July, climbing 4.6% and 3.8%, respectively. The Dow advanced 3.3% and the Global Dow gained 3.9%. But the week’s big winner was the Russell 2000, which shot up 6.4%. Sectors that helped drive the market last week include energy, health care, industrials, and information technology. For the year, the Dow is back in the black after this latest surge, joining the Nasdaq and the S&P 500 as the benchmark indexes with values ahead of their respective 2019 closing values. Crude oil prices rebounded last week, closing at $40.54 per barrel by late Friday afternoon, up from the prior week’s price of $37.00. The price of gold (COMEX) climbed for the second consecutive week, closing at $1,934.20, up from the prior week’s price of $1,905.40. The national average retail price for regular gasoline was $2.172 per gallon on October 5, $0.003 higher than the prior week’s price but $0.473 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 10/9Weekly ChangeYTD Change
DJIA28,538.4427,682.8128,586.903.27%0.17%
Nasdaq8,972.6011,075.0211,579.944.56%29.06%
S&P 5003,230.783,348.423,477.143.84%7.63%
Russell 20001,668.471,539.301,637.556.38%-1.85%
Global Dow3,251.242,957.083,073.413.93%-5.47%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.69%0.77%8 bps-114 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • According to the latest Services ISM® Report On Business®, the services purchasing managers’ index registered 57.8% last month, 0.9 percentage point higher than the August reading. Not surprisingly, with expanded demand, deliveries slowed in September. Prices also fell in the services sector, while new orders, employment, and inventories each grew in September over August.
  • According to the latest report from the Bureau of Economic Analysis, the goods and services trade deficit was $67.1 billion in August, up $3.7 billion from July. August exports were $171.9 billion, $3.6 billion more than July exports. August imports were $239.0 billion, $7.4 billion more than July imports. The August increase in the goods and services deficit reflected an increase in the goods deficit of $3.0 billion to $83.9 billion and a decrease in the services surplus of $0.7 billion to $16.8 billion. Year to date, the goods and services deficit increased $22.6 billion, or 5.7%, from the same period in 2019. Exports decreased $296.1 billion, or 17.6%. Imports decreased $273.5 billion, or 13.1%. The trade balance with notable trade partners, the deficit with Germany increased $1.6 billion to $4.6 billion in August; the deficit with Japan increased $1.0 billion to $4.3 billion; and the deficit with China decreased $1.9 billion to $26.4 billion.
  • There were 6.5 million job openings in August, according to the latest Job Openings and Labor Turnover report from the Bureau of Labor Statistics. The August total of job openings is slightly below the July figure of 6.7 million. There were 5.9 million hires in August, roughly the same number as from the prior month. August saw total separations decrease to 4.6 million from July’s 5.0 million total. The number of job openings in August decreased over the year to 6.6 million (-685,000), reflecting the continued impact of the COVID-19 pandemic on the labor market.
  • For the week ended October 3, there were 840,000 new claims for unemployment insurance, a decrease of 9,000 from the previous week’s level, which was revised up by 12,000. According to the Department of Labor, the advance rate for insured unemployment claims was 7.5% for the week ended September 26, a decrease of 0.7 percentage point from the prior week’s rate, which was revised up by 0.1 percentage point. The advance number of those receiving unemployment insurance benefits during the week ended September 26 was 10,976,000, a decrease of 1,003,000 from the prior week’s level, which was revised up by 212,000.

Eye on the Week Ahead The latest inflation indicators are available this week with the September release of the Consumer Price Index, the Producer Price Index, and the retail sales report. The CPI is up 1.3% year to date, while prices at the producer level are down 0.2%.

What I’m Watching This Week – 5 October 2020

The Markets (as of market close October 2, 2020)

Stocks began last week on a high note, with bank and energy stocks leading the way. European shares vaulted to heights not seen in more than three months. News from a large pharmaceutical company that its COVID-19 vaccine was yielding very favorable results helped drive cyclical stocks higher, while industrials, airlines, and energy shares also rallied. By the end of trading last Monday, the Russell 2000 climbed 2.4%, the Global Dow jumped 2.0%, the Nasdaq gained 1.9%, the S&P 500 advanced 1.6%, and the Dow gained 1.5%. Treasury yields and crude oil prices while the dollar dipped.

Equities reversed course last Tuesday, giving back most of the gains garnered the day before. Each of the benchmarks listed here lost value, led by the Global Dow (-0.6%), followed by the Dow and the S&P 500, each of which lost 0.5%. The Russell 2000 dropped 0.4% and the Nasdaq fell 0.3%. Investors may have been waiting for the first presidential debate as trading was light. Energy, airlines, and bank stocks led the decline, while communications and technology stocks held their own. Crude oil, Treasury yields, and the dollar fell.

Following last Tuesday’s presidential debate and renewed hopes for a fiscal stimulus package, stocks surged by the close of trading last Wednesday. The Dow jumped 1.2%, the S&P 500 gained 0.8%, the Nasdaq climbed 0.7%, the Global Dow advanced 0.3%, and the Russell 2000 added 0.2%. Crude oil prices and Treasury yields rose, while the dollar sank.

Last Thursday saw a dip in the number of jobless claims and ongoing negotiations between Congress and the White House toward more virus stimulus. Investors, buoyed by those favorable developments, turned to stocks. Tech stocks pushed the Nasdaq ahead 1.4%, while the S&P 500 (0.5%) and the Dow (0.1%) posted modest gains. The big winner last Thursday, however, was the Russell 2000, which surged by 1.6%. Crude oil prices, Treasury yields, and the dollar each fell by the end of trading.

Stocks slumped last Friday as news that President Trump tested positive for COVID-19 seemed to outweigh passage of a $2.2 trillion stimulus package in the House. Weakness in mega-caps and tech shares dragged the major indexes lower by the end of trading last Friday. The Nasdaq fell 2.2%, followed by the S&P 500 (-1.0%), the Dow (-0.5%), and the Global Dow (-0.1%). The Russell 2000 rebounded from a poor start to post a positive gain of 0.5%. The dollar was little changed, crude oil fell for the second consecutive day, and Treasury yields rose as bond prices fell.

Despite the drop last Friday, stocks still managed to gain over the prior week. The Russell 2000 climbed 4.4%, followed by the Dow, which gained 1.9%. The S&P 500 climbed 1.5%, followed by the Nasdaq (1.5%) and the Global Dow (1.4%). Year to date, the Nasdaq is 23.4% over last year’s pace, followed by the S&P 500 (3.6%), the only two benchmark indexes ahead of their 2019 year-end closing marks. Crude oil prices plunged last week, closing at $37.00 per barrel by late Friday afternoon, down from the prior week’s price of $40.12. The price of gold (COMEX) surged last week, closing at $1,905.40, up from the prior week’s price of $1,866.10. The national average retail price for regular gasoline was $2.169 per gallon on September 28, $0.001 higher than the prior week’s price but $0.473 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 10/2Weekly ChangeYTD Change
DJIA28,538.4427,173.9627,682.811.87%-3.00%
Nasdaq8,972.6010,913.5611,075.021.48%23.43%
S&P 5003,230.783,298.463,348.421.51%3.64%
Russell 20001,668.471,474.911,539.304.37%-7.74%
Global Dow3,251.242,916.012,957.081.41%-9.05%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.65%0.69%4 bps-122 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • Employment rose by 661,000 in September after adding 1.5 million new jobs the previous month. September’s job gains was below their February level by 10.7 million, or 7.0%. Notable job gains occurred in leisure and hospitality, in retail trade, in health care and social assistance, and in professional and business services. Employment declined in government, mainly in state and local government education. Last month saw the unemployment rate decline by 0.5 percentage point to 7.9%, and the number of unemployed persons fell by 1.0 million to 12.6 million. Both measures have declined for five consecutive months but are higher than in February, by 4.4 percentage points and 6.8 million, respectively. In September, 22.7% of employed persons teleworked because of the COVID-19 pandemic, down from 24.3% in August. Also last month, 19.4 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. In September, average hourly earnings, at $29.47, increased by $0.02 over the prior month. Over the past 12 months, average hourly earnings have increased by 4.65%. The average work week rose by 0.1 hour to 34.7 hours in September.
  • The third and final estimate for the second-quarter gross domestic product showed the economy regressed at an annual rate of 31.4%. The decline in second-quarter GDP reflected the response to COVID-19, as “stay-at-home” orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses. This led to rapid shifts in activity, as businesses and schools continued to work remotely and consumers and businesses canceled, restricted, or redirected their spending. The decrease in GDP reflected decreases in personal consumption expenditures (consumer spending), exports, nonresidential (business) fixed investment, private inventory investment, residential fixed investment, and state and local government spending that were partly offset by an increase in federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased. Consumer spending, as measured by personal consumption expenditures, contracted by an annual rate of 33.2%. The price index for gross domestic purchases decreased 1.4% in the second quarter, in contrast to a 1.4% increase in the first quarter. The personal consumption expenditures (PCE) price index (prices for consumer goods and services) decreased 1.6%, after increasing 1.3% in the first quarter. Excluding food and energy prices, the PCE price index decreased 0.8%, following a 1.6% gain in the first quarter.
  • Personal income decreased in August, falling 2.7% after advancing 0.5% in July. Disposable, or after-tax, personal income also dropped, decreasing 3.2% in August after climbing 0.3% the previous month. Consumer spending, as measured by personal consumption expenditures, ticked up 1.0% following July’s 1.5% gain. Prices for consumer goods and services, as measured by the personal consumption expenditures price index, rose 0.3% in August after advancing 0.4% in July. Over the past 12 months, consumer prices have risen 1.4%.
  • The international trade in goods deficit was $82.9 billion in August, up 3.5% from July’s deficit. August exports were $118.3 billion, 2.8% greater than July exports. Imports in August were $201.3 billion, 3.1% above July imports. Exports of industrial supplies increased 10.6% in August over July, while automotive vehicle exports fell 0.7% after vaulting 46.3% in July. Driving imports were consumer goods (7.0%) and automotive vehicles (6.2%).
  • According to the latest Manufacturing ISM® Report On Business®, manufacturing grew in September, but at a slower pace than in August. The September purchasing managers index (PMI®) registered 55.4%, down 0.6 percentage point from the August PMI®. Any reading over 50.0% indicates growth. The New Orders Index fell 7.4 percentage points from the August reading of 67.6%. The Production Index dropped 2.3 percentage points compared to the August reading of 63.3%. The Employment Index increased 3.2 percentage points from the August reading of 46.4%. The Inventories Index came in 2.7 percentage points higher than the August reading of 44.4%. The Prices Index climbed 3.3 percentage points compared to the August reading of 59.5%. The New Export Orders Index increased of 1 percentage point compared to the August reading of 53.3%. And the Imports Index was1.6 percentage point lower than the August reading of 55.6%.
  • For the week ended September 26, there were 837,000 new claims for unemployment insurance, a decrease of 36,000 from the previous week’s level, which was revised up by 3,000. According to the Department of Labor, the advance rate for insured unemployment claims was 8.1% for the week ended September 19, a decrease of 0.6 percentage point from the prior week’s rate, which was revised up by 0.1 percentage point. The advance number of those receiving unemployment insurance benefits during the week ended September 19 was 11,767,000, a decrease of 980,000 from the prior week’s level, which was revised up by 167,000.

Eye on the Week Ahead This week is a slow one for market-moving economic information. The Institute for Supply Management® report on the services sector for September is out this week. Services grew in August for the third consecutive month, and September is expected to continue that trend. Also out this week is the latest report on the international trade deficit for August. The July trade deficit was $63.6 billion, an increase of $10.1 billion over the June deficit.

QUARTERLY MARKET REVIEW: JULY-SEPTEMBER 2020

The Markets (third quarter through September 30, 2020)

July kicked off the third quarter with a bang as stocks surged throughout much of the month. Investors were encouraged by solid employment growth, a rise in personal income and consumer spending, a surge in the housing sector, and an increase in industrial production. All news was not positive, however. The second-quarter gross domestic product fell more than 31% and many states saw an increase in the number of reported COVID-19 cases. Nevertheless, investors stayed with equities, pushing values higher for the fourth consecutive month. Tech stocks drove the Nasdaq to a 6.8% gain, followed by the S&P 500 (5.5%), the Global Dow (3.5%), the small caps of the Russell 2000 (2.7%), and the Dow (2.4%). Treasury bond prices climbed, sending yields lower in July. Crude oil prices settled at $40.40 per barrel, nearly $1.00 ahead of their June closing values. Gold prices closed July at $1,990.00, about 11% higher than June’s closing price.

The positive run for stocks continued in August, as each of the benchmark indexes listed here advanced notably. The Nasdaq climbed nearly 9.6%, the Dow rose 7.6%, the S&P 500 advanced 7.0%, the Global Dow vaulted 6.0%, and the Russell 2000 gained 5.5%. Crude oil and gas prices rose marginally, while the price of gold fell. Throughout the month, states struggled to settle on appropriate protocols for reopening schools. Testing for the virus increased, and the number of reported COVID-19 cases and deaths rose.

September saw stocks fall on waning hopes of a second round of stimulus. Also, discord between the United States and China ramped up following President Trump’s threatened recourse against American companies that create jobs overseas or that do business with China. Technology shares took a sizable hit, particularly early in the month. September saw several days of favorable returns, likely due to bargain hunters. Unfortunately, there wasn’t enough buyers to prevent the benchmark indexes from falling lower by the end of each week of the month. September saw each of the indexes fall, led by the Nasdaq (-5.2%), followed by the Global Dow (-4.3%), the S&P 500 (-3.92%), the Russell 2000 (-3.45%), and the Dow (-2.28%).

Overall, the third quarter of 2020 produced the second consecutive quarter of notable market gains. Of the benchmark indexes listed here, the Nasdaq again proved the strongest, climbing more than 11.0% for the quarter, followed by the large caps of the S&P 500 and the Dow, which gained 8.5% and 7.6%, respectively. The Global Dow advanced 5.0% for the quarter, and the small caps of the Russell 2000 ended the quarter up 4.6%.

Year to date, the Nasdaq remains well ahead of its 2019 year-end closing value, while the S&P 500 is more than 4.0% over last year’s closing mark. The remaining benchmarks continue to gain ground, with the closest to its year-end value being the Dow, followed by the Global Dow and the Russell 2000. By the close of trading on September 30, the price of crude oil (CL=F) closed at $39.64 per barrel, below the August 31 price of $42.81 per barrel and slightly higher than the June 30 price of $39.35. The national average retail regular gasoline price was $2.169 per gallon on September 28, down from the August 31 price of $2.222 and lower than the June 28 selling price of $2.174. The price of gold finished September at $1,891.80 per ounce, lower than the August 31 price of $1,940.60 per ounce but higher than its June 30 closing value of $1,798.80 per ounce.

Stock Market Indexes

Market/Index2019 CloseAs of September 30Monthly ChangeQuarterly ChangeYTD Change
DJIA28,538.4427,781.70-2.28%7.63%-2.65%
Nasdaq8,972.6011,167.51-5.16%11.02%24.46%
S&P 5003,230.783,363.00-3.92%8.47%4.09%
Russell 20001,668.471,507.69-3.47%4.60%-9.64%
Global Dow3,251.242,960.93-4.31%4.96%-8.93%
Fed. Funds1.50%-1.75%0.00%-0.25%0 bps0 bps-150 bps
10-year Treasuries1.91%0.67%-2 bps1 bps-124 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Latest Economic Reports

  • Employment: Employment increased by 1.4 million in August after adding 1.8 million jobs in July. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed due to the COVID-19 pandemic and efforts to contain it. Nevertheless, the number of job gains in August is 7.6% below the pre-pandemic level of February, which saw 11.5 million new jobs added. In August, notable job gains occurred in leisure and hospitality, government, retail trade, professional and business services, and education and health services. The unemployment rate dropped 1.8 percentage points to 8.4% for August as the number of unemployed persons dropped by 2.8 million to 13.6 million. These measures remain well above their pre-pandemic February figures of 4.9% and 7.8 million, respectively. In August, average hourly earnings rose by $0.11 to $29.47. Average hourly earnings increased by 4.7% over the last 12 months ended in August. The average workweek increased by 0.1 hour to 34.6 hours in August. The labor participation rate increased 0.3 percentage point to 61.7%. The employment-population ratio rose by 1.4 percentage points to 56.5%.
  • Claims for unemployment insurance continue to drop in September. According to the latest weekly totals, as of September 19 there were nearly 11.8 million workers still receiving unemployment insurance. The insured unemployment rate was 8.1% (9.9% as of August 15). The highest insured unemployment rates in the week ended September 12 compared to their respective rates on August 8 were in Hawaii (21.3% vs 19.8%), California (16.1%, unchanged), Nevada (14.7% vs 17.3%), New York (13.7% vs 15.4%), Puerto Rico (12.8% vs 19.2%), Louisiana (12.6% vs 13.5%), Georgia (12.2% vs 12.6%), and the Virgin Islands (11.9% vs 12.8%). During the week ended September 12, 50 states reported 11.8 million individuals claiming Pandemic Unemployment Assistance benefits and 50 states reported 1.8 million individuals claiming Pandemic Emergency Unemployment Compensation benefits.
  • FOMC/interest rates: The Federal Open Market Committee (FOMC) voted to maintain the federal funds rate range at 0.00%-0.25% following the Committee’s September meeting. The FOMC expects to maintain this target range until labor market conditions have reached maximum employment and inflation has risen to at least 2.0%, or exceeds 2.0% for some time. The Committee noted that, although economic activity and employment have picked up in recent months, they remain well below their levels at the beginning of the year. The FOMC predicted that the path of the economy will depend on the course of COVID-19, which will continue to weigh on economic activity, employment, and inflation in the near term, while posing considerable risks to the economic outlook over the medium term.
  • GDP/budget: According to the third and final estimate for second-quarter gross domestic product, the economy decelerated at an annualized rate of 31.4%. GDP decreased 5.0% in the first quarter. Stay-at-home orders issued in March and April in response to the COVID-19 pandemic greatly impacted the economy. Consumer spending was a big drag, falling 33.2%, reeling from the initial effects of the pandemic. Fixed investment fell 29.2% in the second quarter (-1.4% in the first quarter), and nonresidential fixed investment dropped 27.2% in the second quarter, compared to a 6.7% decline in the prior quarter. Exports were down 64.4%, and imports sank 51.1%. Nondefense government expenditures increased 37.6% due to stimulus spending programs initiated in response to the pandemic.
  • The monthly Treasury budget deficit for August was $200 billion, essentially equal to the August 2019 monthly deficit. Through 11 months of the fiscal year, the government deficit sits at $3.007 trillion, a 182% increase over the same period from the previous fiscal year. Government outlays for the current fiscal year are 46% greater than expenditures for fiscal year 2019.
  • Inflation/consumer spending: According to the Personal Income and Outlays report for August, personal income decreased 2.7% and disposable (after-tax) personal income dropped 3.2% after advancing 0.4% and 0.2%, respectively, in July. Consumer spending increased in August, climbing 1.0% for the month, well short of July’s 6.2% advance. Inflation remained somewhat muted as consumer prices inched ahead by 0.3% in August after increasing 0.4% in July. Consumer prices have increased by a mere 1.4% over the last 12 months.
  • Consumer prices continued to slowly increase in August. Prices for goods and services rose 0.4% in August, marking the third consecutive monthly increase. Over the last 12 months ended in August, consumer prices are up 1.3%. Contributing to August’s increase in consumer prices was a sharp rise in prices for used cars and trucks, which climbed 5.4%. Also increasing were prices for fuel oil (3.9%), gasoline (2.0%), and energy (0.9%). Food prices rose 0.1%.
  • Prices that producers receive for goods and services rose 0.3% in August after climbing 0.6% in July. Producer prices are down 0.2% over the last 12 months ended in August. A 0.5% spike in prices for services pushed producer prices higher. Prices for goods inched up 0.1%.
  • Housing: The housing sector continued to post strong sales numbers in August. Sales of existing homes jumped 2.4% last month after climbing 24.7% in July. Over the 12 months ended in August, existing home sales are up 10.5%. The median existing-home price in August was $310,600 ($304,100 in July). Unsold inventory of existing homes represents a 3.0-month supply at the current sales pace, down slightly from 3.1 months in July. Sales of existing single-family homes increased 1.7% in August following a 23.9% jump in July. Over the last 12 months, sales of existing single-family homes are up 11.0%. The median existing single-family home price was $315,000 in August, up from $307,800 in July.
  • After climbing 13.9% in July, sales of new single-family homes surged again in August, increasing 4.8% for the month. The median sales price of new houses sold in August was $312,800 ($330,600 in July). The August average sales price was $369,000 ($391,300 in July). August’s inventory of new single-family homes for sale represents a supply of 3.3 months at the current sales pace, down from July’s estimate of 4.0 months.
  • Manufacturing: Total industrial production rose 0.4% in August after increasing 3.0% in July. Although industrial production has risen in each of the past four months, it has remained 7.3% below its pre-pandemic February level. Manufacturing output continued to improve in August, rising 1.0% (3.4% advance in July). Most major industries posted increases, but gains have gradually slowed since June. Mining production fell 2.5% in August, as Tropical Storm Marco and Hurricane Laura caused sharp but temporary drops in oil and gas extraction and well drilling. The output of utilities moved down 0.4%. Overall, the level of total industrial production was 7.7% lower in August than it was a year earlier.
  • For the fourth consecutive month, new orders for durable goods increased in August, climbing 0.4% following an 11.7% jump in July. Despite the trend of monthly increases, new orders for manufactured durable goods are 11.3% lower than a year ago. Excluding transportation, new orders increased 0.4% in August. Excluding defense, new orders increased 0.7%. Machinery, also up four consecutive months, led the August increase, advancing 1.5%. Nondefense new orders for capital goods in August increased 7.8%.
  • Imports and exports: The price index for U.S. imports rose 0.9% in August, following a 0.7% jump in July. Higher prices for both fuel (+3.3%) and nonfuel (+0.7%) imports contributed to the August increase. The rise in nonfuel prices was the largest since April 2011. Driving the nonfuel price increase was a 3.6% rise in prices for industrial supplies and materials. Prices for U.S. exports also rose in August, rising 0.5% after increasing 0.9% in July.
  • The international trade in goods deficit was $82.9 billion in August, up $2.8 billion, or 3.5% over July. Exports of goods for August were $118.3 billion, 2.8% more than July exports. Imports of goods for August were $201.3 billion, or 3.1% more than July imports. Exports of industrial supplies increased 10.6% in August. Imports of consumer goods climbed 7.0% in August.
  • The latest information on international trade in goods and services, out September 3, is for July and shows that the goods and services trade deficit was $63.6 billion, an increase of nearly $10.0 billion, or 18.9%, over the June deficit. July exports were $168.1 billion, or 8.1% more than June exports. July imports were $231.7 billion, or 10.9% more than June imports. Year to date, the goods and services deficit increased $6.4 billion, or 1.8%, from the same period in 2019. Exports decreased $257.8 billion, or 17.5%. Imports decreased $251.3 billion, or 13.8%.
  • International markets: Europe saw an increase in COVID-19 cases reported, likely impacting stocks. STOXX Europe 600 index lost value by the end of September, Germany’s DAX Performance index fell, while the UK’s FTSE 100 was flat. France, Spain, and the United Kingdom took steps to stem the latest wave of virus cases. Stocks in China fell as the Shanghai Composite index and CSI 300 lost value. On the economic front, Japan’s purchasing managers index remains in contraction territory as calls increase for new stimulus from the Bank of Japan.
  • Consumer confidence: The Conference Board Consumer Confidence Index® increased in September after declining in August. The index stands at 101.8, up from 86.3 in August. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased from 85.8 to 98.5. The Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, increased from 86.6 in August to 104.0 in September.

Eye on the Month Ahead The economy is expected to continue its slow, upward trend in October. The market took a hit in September but showed signs of recovering toward the end of the month. Certainly, the run for the presidency will garner increasing attention and influence the economy in general and the stock market in particular.