What I’m Watching This Week – 23 November 2020

The Markets (as of market close November 20, 2020)

Last week began with more good news on another COVID-19 vaccine, sparking a rally in domestic and global stocks. The Dow set a record as it neared the 30,000 mark, with cyclicals and small caps advancing on hopes of a speedier economic recovery. The Russell 2000 and the Global Dow each gained more than 2.0%, while both the Dow and the S&P 500 added more than 1.0%. The Nasdaq advanced 0.8%. Among the market sectors, energy, financials, and industrials surged. Crude oil prices and Treasury yields climbed, while the dollar slipped.

Stocks closed lower last Tuesday, paring record-high gains from the previous day. Only the Russell 2000 (0.4%) and the Global Dow (0.1%) advanced. The Dow (-0.6%), the S&P 500 (-0.5%), and the Nasdaq (-0.2%) lost value. Treasury bond prices climbed, sending yields lower. Crude oil prices rose, while the dollar fell. A surge in COVID-19 cases and hospitalizations overshadowed encouraging vaccine developments. In response to elevated virus numbers, several states imposed new restrictions on gatherings. Federal Reserve Chair Jerome Powell said last Tuesday that the rising number of COVID-19 cases is a big concern, and the economy will need additional fiscal and monetary policy support. Among the major market sectors, only energy and real estate posted gains.

Last Wednesday, new COVID-19-related restrictions aimed at slowing the spread of the virus eclipsed news that progress is speeding up on a vaccine. The Russell 2000 fell 1.3%, followed by the Dow and the S&P 500, each of which dropped 1.2%. The Nasdaq lost 0.8% and the Global Dow dipped 0.5%. Treasury yields and crude oil prices climbed, while the dollar approached its lowest level in nearly two years. Each of the major market sectors lost value, with energy, consumer staples, health care, real estate, and utilities the hardest hit.

Mega-caps and tech shares pushed stocks higher last Thursday, despite rising COVID-19 virus cases here and around the world. Several states and countries have tightened restrictions in response. A report that fiscal stimulus talks would resume may have helped the market as well. Of the indexes listed here, only the Global Dow lost value. The Nasdaq (0.9%), the Russell 2000 (0.8%), the S&P 500 (0.4%), and the Dow (0.2%) each edged higher. Crude oil prices rose, while the dollar and Treasury yields declined.

Stocks were mixed last Friday, with the Global Dow and the Russell 2000 essentially breaking even, while the Dow, the S&P 500, and the Nasdaq lost value. Investors weighed reports of an application for emergency approval of a COVID-19 vaccine against the possibility of further restrictions, shutdowns, and layoffs. Of the major market sectors, only utilities inched ahead. Information technology, financials, and industrials lost the most by the end of the day. Crude oil prices rose, Treasury yields fell, and the dollar was mixed.

By the end of last week, the small caps of the Russell 2000 and the Global Dow posted notable gains, the Nasdaq inched ahead, while the Dow and the S&P 500 each fell nearly 0.8%. However, following last week’s performance, the Global Dow has joined the other benchmark indexes listed here in surpassing their respective 2019 closing values.

Crude oil prices advanced, closing at $42.17 per barrel by late Friday afternoon, up from the prior week’s price of $40.20 per barrel. The price of gold (COMEX) slipped again last week, closing at $1,869.40, down from the prior week’s price of $1,886.70. The national average retail price for regular gasoline was $2.111 per gallon on November 16, $0.015 greater than the prior week’s price but $0.481 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 11/20Weekly ChangeYTD Change
DJIA28,538.4429,479.8129,263.48-0.73%2.54%
Nasdaq8,972.6011,829.2911,854.970.22%32.12%
S&P 5003,230.783,585.153,557.54-0.77%10.11%
Russell 20001,668.471,744.041,785.342.37%7.00%
Global Dow3,251.243,249.333,293.161.35%1.29%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.89%0.82%-7 bps-109 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

  • Sales of existing homes grew for the fifth consecutive month in October, climbing 4.3% from September. For the last 12 months ended in October, sales of existing homes are up 26.6%. These increases have occurred despite high unemployment relative to pre-pandemic levels. The median existing home price in October was $313,000, up from the September price of $311,800 and well ahead of the October 2019 median sales price of $271,100. Total housing inventory fell 2.7% in October from September and sits at an all-time low supply of 2.5 months at the current sales pace. Sales of single-family homes also increased by 4.1% last month and 26.7% over the last 12 months. The median existing single-family home price in October was $317,700, higher than the September price of $316,200.
  • Sales at the retail level increased 0.3% in October from the previous month and 5.7% above October 2019. Retail trade sales also rose 0.3% in October. Retailers that enjoyed a surge in sales include nonstore (online) retail sellers (+29.1%), building material and garden equipment and supplies dealers (+13.2%), and food and beverage stores (+12.0%). Retail businesses that saw sales curtailed last month include electronics and appliance stores (-14.6%), gasoline stations (-16.1%), clothing and clothing accessories stores (-30.0%), and food services and drinking places (-19.3%).
  • Import prices fell 0.1% in October, the first decline since April. Despite the October decline, import prices are up 1.0% for the 12 months ended in October. Fuel imports continued to decrease, dropping 1.9% in October after a 5.2% decline in September. Prices for fuel imports fell 27.4% for the year ended in October. Import prices excluding fuel rose 0.1% last month after a 0.5% increase in September. Export prices increased 0.2% in October, the fourth consecutive month of increases. Higher agricultural export prices drove the increase as nonagricultural exports were unchanged. Even with the increase, export prices declined 1.6% for the year ended in October.
  • According to the latest report from the Federal Reserve, industrial production rose 1.1% in October, recovering much of its 16.5% decline from February to April. After edging up 0.1% in September, manufacturing output advanced 1.0% last month, although it remains 5.6% below its February level. Utilities output rose 3.9%, while the output for mines fell 0.6%. Total industrial production was 5.3% lower in October than it was a year earlier.
  • The housing sector continued to show strength in October. Housing starts rose 4.9% last month, and single-family housing starts increased 6.4%. Housing completions slowed in October, dropping 4.5% from September’s rate, while the number of building permits issued was virtually unchanged.
  • For the week ended November 14, there were 742,000 new claims for unemployment insurance, an increase of 31,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims was 4.3% for the week ended November 7, a decrease of 0.3 percentage point from the prior week’s rate. For comparison, during the same period last year, there were 232,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended November 7 was 6,372,000, a decrease of 429,000 from the prior week’s level, which was revised up by 15,000. The highest insured unemployment rates in the week ended October 31 were in Hawaii (8.3%), California (8.3%), New Mexico (8.0%), and Nevada (7.6%). The largest increases in initial claims for the week ended November 7 were in Washington (+7,683), California (+5,293), Massachusetts (+3,383), Alabama (+1,704), and Louisiana (+1,626). States with the largest decreases were in Georgia (-13,426), Illinois (-6,357), Kentucky (-4,830), and Texas (-3,934).

Eye on the Week Ahead

Thanksgiving week is filled with important reports, which will give a final picture of the state of the economy in October. The second iteration of the third-quarter gross domestic product is out this week. The first estimate showed the economy flipped from a second-quarter estimate of -31.4% to a 33.1% growth rate in the third quarter. Orders for durable goods have risen for five consecutive months through September and are expected to advance again in October. Sales of new, single-family homes slowed in September, while existing home sales continued to soar. The October numbers are expected to reverse course for new home sales and come in higher than in September. Finally, an important indicator of inflation, the personal income and outlays report, revealed that inflation at the consumer level has been muted for much of the year, advancing at a rate of 1.4% through September. October’s estimate is expected to remain at that same level.

What I’m Watching This Week – 16 November 2020

The Markets (as of market close November 13, 2020)

Stocks soared to record highs last Monday following an announcement from a major pharmaceutical company of positive data on a COVID-19 vaccine. That news, coupled with President-elect Joe Biden’s win, helped buoy investor optimism. Cyclicals and bio-tech stocks led a powerful rally, which drove the Dow up 3.0%. The S&P 500 added 1.2%, the Russell 2000 climbed a robust 3.7%, and the Global Dow shot up 4.2%. The Nasdaq lost value as money moved from tech stocks to value shares. Energy shares jumped more than 14%, while financials advanced more than 8.0%. Crude oil prices, the dollar, and Treasury yields all rose.

Market returns were mixed last Tuesday with the Nasdaq and the S&P 500 losing value, while the Dow, the Russell 2000, and the Global Dow continued to surge. Bond prices fell, sending Treasury yields higher. Crude oil prices and the dollar each rose for the second consecutive day. Weakness in mega-caps and tech stocks offset strength in cyclicals and value stocks. Among the market sectors, utilities, industrials, energy, and consumer staples pushed higher.

By the end of trading last Wednesday, the Nasdaq posted a gain for the first time in the last three sessions. The tech-heavy index climbed 2.0%, followed by the S&P 500 (0.8%), and the Global Dow (0.2%). The Dow and the Russell 2000 moved little. Crude oil prices and the dollar rose, while Treasury yields fell. Technology led the sectors, followed by consumer discretionary. Energy, industrials, and financials fell.

Surging COVID-19 cases prompted a sell-off last Thursday as each of the benchmark indexes listed here lost value. Treasury yields plunged and crude oil prices sank, while the dollar rose. All of the market sectors lost value, with energy and materials tumbling the most. Along with news of advancing virus cases, investors were hit with the prospects of tighter pandemic-related restrictions, continued wrangling over fiscal stimulus, and worsening relations between the United States and China.

Stocks closed the week on a high note as cyclicals and value stocks prevailed over tech shares. The Dow and the S&P 500 each gained 1.4%, the Global Dow rose 1.1%, and the Nasdaq gained 1.0%. The big winner last Friday was the Russell 2000, which vaulted 2.1% on the day. Crude oil prices and the dollar declined, while Treasury yields gained nearly 1.0%. While each of the major market sectors advanced, the market was led by energy, real estate, and industrials. Tech shares gained less than 1.0%.

The indexes posted notable gains for the second consecutive week as both the S&P 500 and the Russell 2000 rallied to all-time highs. The Dow advanced to its pre-pandemic level. The Nasdaq, which had been a consistent gainer through much of the year, was the only major benchmark to lose value, as investors pulled away from tech stocks and moved to shares influenced by changes in the overall economy. News that caccine test results were in the 90% efficacy range outweighed mounting COVID-19 cases. For the first time since late January, all but one of the indexes listed here were ahead of their respective 2019 year-end closing values, and the Russell 2000 was only 0.06 percentage point away.

Crude oil prices advanced for the second consecutive week, closing at $40.20 per barrel by late Friday afternoon, up from the prior week’s price of $37.39 per barrel. The price of gold (COMEX) closed the week at $1,886.70, down from the prior week’s price of $1,953.10. The national average retail price for regular gasoline was $2.096 per gallon on November 9, $0.016 lower than the prior week’s price and $0.519 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 11/13Weekly ChangeYTD Change
DJIA28,538.4428,323.4029,479.814.08%3.30%
Nasdaq8,972.6011,895.2311,829.29-0.55%31.84%
S&P 5003,230.783,509.443,585.152.16%10.97%
Russell 20001,668.471,644.161,744.046.07%4.53%
Global Dow3,251.243,073.023,249.335.74%-0.06%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.86%0.89%3 bps-102 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 was unchanged in October after advancing 0.2% in September. Over the past 12 months, the CPI has increased 1.2%. Within the index, food (0.2%), energy (0.1%), and shelter (0.1%) inched up. Offsetting those gains were declines in used cars and trucks (-0.1%), apparel (-1.2%), medical care commodities (-0.8%), and medical care services (-0.3%).
  • Prices at the producer level advanced 0.3% in October after climbing 0.4% in September. For the last 12 months ended in October, producer prices are up 0.5%, the largest advance since moving up 1.1% for the 12 months ended in February. However, when excluding food and energy, producer prices are up 1.1% year over year. In October, nearly 60% of the rise in producer prices can be traced to a 0.5% increase in prices for goods. The prices for services moved up 0.2%. Food prices vaulted 2.4% last month, and energy prices increased 0.8%. Trade services rose 0.2%, while transportation and warehousing services advanced 1.1%.
  • October, the first month of the federal government’s fiscal year 2021, saw a deficit of $284.1 billion. By comparison, the deficit in October 2019, at $134.5 billion, was 111% lower. Government receipts for the month totaled $237.7 billion, or 3% lower than receipts this time last year. Government outlays were $521.8 billion, 37% greater than last October.
  • According to the Job Openings and Labor Turnover report for September, the number of job openings increased by 84,000, the number of hires decreased by 81,000, and the number of total separations fell by 25,000. The job openings rate was unchanged at 4.3%. The number of job openings decreased over the year to 6.6 million (-566,000), reflecting the continued impact of the COVID-19 pandemic on the labor market. Over the 12 months ended in September, hires totaled 70.4 million and separations totaled 76.4 million, yielding a net employment loss of 6.0 million.
  • For the week ended November 7, there were 709,000 new claims for unemployment insurance, a decrease of 48,000 from the previous week’s level, which was revised up by 6,000. According to the Department of Labor, the advance rate for insured unemployment claims was 4.6% for the week ended October 31, a decrease of 0.3 percentage point from the prior week’s rate. For comparison, during the same period last year, there were 222,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended October 31 was 6,786,000, a decrease of 436,000 from the prior week’s level, which was revised down by 63,000. The highest insured unemployment rates in the week ended October 24 were in Hawaii (9.9%), California (8.9%), New Mexico (8.5%), and Nevada (8.2%). The largest increases in initial claims for the week ended October 31 were in Illinois (+20,377), Kentucky (+3,868), Pennsylvania (+3,768), Ohio (+3,766), and Kansas (+2,711), while the largest decreases were in Massachusetts (-8,470), Georgia (-6,442), New York (-5,883), Michigan (-3,067), and New Jersey (-2,500).

Eye on the Week Ahead

Housing, retail, and industrial production are economic sectors in the news this week. October reports on housing starts and existing home sales are expected to reveal continued strength in the housing sector. Industrial production scaled back a bit in September following a robust August. October’s figures should show continued growth, but at a slower pace. The October retail sales report is out this week. Sales at the retail level advanced nearly 2.0% in September and could continue to climb as more businesses reopen following pandemic-related shutdowns.

What I’m Watching This Week – 9 November 2020

The Markets (as of market close November 6, 2020)

Stocks rebounded last Monday with each of the benchmark indexes gaining value, led by the Russell 2000, which added 2.0%, followed by the Global Dow, the Dow, the S&P 500, and the Nasdaq. Treasury yields fell while the dollar and crude oil prices advanced. It is unclear what drove the market uptick. Some analysts suggest investors may see fiscal relief coming shortly after the election, while others proffer that the market gains were nothing more than dip-buying following last week’s selloff. Each of the major market sectors ended the day in the black, with energy and materials each advancing more than 3.0%.

Equities continued to rally last Tuesday. Election day saw the small caps of the Russell 2000 jump over 3.0% while each of the other benchmark indexes gained at least 1.8%. Treasury yields climbed nearly 4.0% as banks and financials posted solid gains. Crude oil prices advanced 2.9%, but remain below $40 per barrel. The dollar weakened. Although crude oil prices rose, overall energy was the only major sector to lose value last Tuesday. In addition to financials, consumer discretionary and industrials each gained more than 2.0% on the day.

Communication services, technology, health care, and consumer discretionary sectors posted robust gains, pushing market indexes higher last Wednesday. Although the election had yet to be officially decided, investors may be anticipating a fiscal stimulus package, which would provide more resources for investment. The Nasdaq was the big winner, gaining 3.9% on the day, followed by the S&P 500 (2.2%), the Dow (1.6%), the Global Dow (0.6%), and the Russell 2000 (0.05%). Treasury yields and the dollar dropped, while crude oil prices advanced for the third consecutive day.

The market continued to rally last Thursday. The S&P 500 climbed 2.0% and was on track for its best week since April. Tech stocks surged, pushing the Nasdaq ahead 2.6% on the day and more than 9.0% for the week. The Russell 2000 led the pack, advancing 2.8% by the end of trading. Globally, stocks also posted notable gains, driving the Global Dow up 2.1%. Treasury prices fell, moving yields higher. Crude oil prices sank and the dollar fell to its lowest level in more than two years. Among the market sectors, only energy lost, while technology and materials gained 3.1% and 4.1%, respectively.

Stocks were flat to close out the week, with the Global Dow and the Nasdaq posting modest gains, while the remaining benchmark indexes listed here lost value. Among the market sectors, information technology, consumer staples, health care, industrials, and materials advanced marginally. Energy dropped 2.1%. Crude oil and the dollar fell, while Treasury yields advanced.

Despite last Friday’s tepid returns, stocks enjoyed their best week since April. Investors may have been anticipating that former Vice President Joe Biden would win the presidential election and Republicans would maintain control of the Senate. This scenario might lead to additional fiscal stimulus but marginal tax increases, if any. While this is purely speculation, it could have been enough to drive investors to stocks last week. The tech-heavy Nasdaq gained 9.0%, followed by the S&P 500, the Dow, the Russell 2000, and the Global Dow. Year to date, The Nasdaq is more than 32.0% above last year’s closing value, while the S&P 500 is more than 8.6% ahead. The Dow has again come within 1.0 percentage point of hitting its 2019 closing mark as the indexes continue to push ahead following the COVID-19 downturn.

Crude oil prices advanced last week, closing at $37.39 per barrel by late Friday afternoon, up from the prior week’s price of $35.61 per barrel. The price of gold (COMEX) closed the week at $1,953.10, up from the prior week’s price of $1,878.00. The national average retail price for regular gasoline was $2.112 per gallon on November 2, $0.031 lower than the prior week’s price and $0.493 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 11/06Weekly ChangeYTD Change
DJIA28,538.4426,501.6028,323.406.87%-0.75%
Nasdaq8,972.6010,911.5911,895.239.01%32.57%
S&P 5003,230.783,269.963,509.447.32%8.63%
Russell 20001,668.471,538.481,644.166.87%-1.46%
Global Dow3,251.242,886.593,073.026.46%-5.48%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.84%0.86%2 bps-105 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

  • October saw 638,000 new jobs added and the unemployment rate drop to 6.9%. While the number of new jobs added has decreased each month since August, the unemployment rate and the number of unemployed persons (11.1 million in October) have declined for six consecutive months. Nevertheless, both the unemployment rate and the number of unemployed persons are nearly twice their February levels, indicative of the impact of the COVID-19 virus. Notable job gains last month occurred in leisure and hospitality; food services and drinking places; arts, entertainment, and recreation; and accommodation. In October, 15.1 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic, down from 19.4 million in September. In October, 21.2% of employed persons teleworked because of the pandemic, down from 22.7% in September. The labor force participation rate increased by 0.3 percentage point to 61.7% in October, 1.7 percentage points below the February level. The employment-population ratio increased by 0.8 percentage point to 57.4% in October, 3.7 percentage points lower than in February. In October, average hourly earnings increased by $0.04 to $29.50. Average hourly earnings have increased 4.5% over the past 12 months ended in October. The average work week was unchanged at 34.8 hours in October.
  • Following its meeting last week, the Federal Open Market Committee decided to leave the target range for the federal funds rate at its current 0%-0.25%. According to the Committee, although economic activity and employment have continued to recover, they remain well below their levels prior to the beginning of the year. Weaker demand and earlier declines in oil prices have been holding down consumer price inflation. The course of the COVID-19 virus will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In addition to maintaining the federal funds target range, the Committee also indicated that it would increase its holdings of Treasury securities and agency mortgage-back securities at the current pace to sustain smooth market functioning and help foster accommodative financial conditions in an effort to support the flow of credit to households and businesses.
  • According to the latest Manufacturing ISM® Report On Business®, manufacturing registered 59.3%, up 3.9 percentage points over the September reading and the highest since September 2018, when the index was 59.3%. Survey respondents reported an increase in new orders, production, employment, deliveries, inventories, and prices. Both import and export orders also increased in October over the prior month’s totals.
  • Economic activity in the services sector increased in October but at a slower rate, according to the latest Services ISM® Report On Business®. The services purchasing managers’ index registered 56.6% last month, 1.2 percentage points lower than the September reading. A reading above 50% indicates growth. Supplier deliveries, prices, and new export and import orders each increased. Business activity/production, new orders, and employment slowed in October from September.
  • According to the Bureau of Economic Analysis, the international trade in goods and services deficit was $63.9 billion in September, 4.7% lower than the August trade deficit. September exports were $176.4 billion, $4.4 billion, or 2.6%, more than August exports. September imports were $240.2 billion, $1.2 billion, or 0.5%, more than August imports. Year to date, the goods and services deficit increased $38.5 billion, or 8.6%, from the same period in 2019. Exports decreased $329.0 billion, or 17.4%. Imports decreased $290.4 billion, or 12.4%.
  • For the week ended October 31, there were 751,000 new claims for unemployment insurance, a decrease of 7,000 from the previous week’s level, which was revised up by 7,000. According to the Department of Labor, the advance rate for insured unemployment claims was 5.0% for the week ended October 24, a decrease of 0.3 percentage point from the prior week’s rate. For comparison, during the same period last year, there were 212,00 new jobs added and the insured unemployment claims rate was 1.2%> The advance number of those receiving unemployment insurance benefits during the week ended October 24 was 7,285,000, a decrease of 538,000 from the prior week’s level, which was revised up by 67,000. The highest insured unemployment rates in the week ended October 17 were in Hawaii (11.3%), the Virgin Islands (9.6%), California (9.5%), Nevada (9.2%), and New Mexico (9.0%). The largest increases in initial claims for the week ended October 24 were in Illinois (+6,190), Michigan (+5,442), Massachusetts (+2,483), Minnesota (+1,848), and Connecticut (+1,621), while the largest decreases were in Texas (-10,113), California (-7,700), Florida (-6,528), New York (-3,291), and Louisiana (-3,096).

Eye on the Week Ahead

The predominant question this week continues to focus on the impact that the election will have on the economy in general, and on the market in particular. Economic reports available this month focus on October, so it will take a few months at the very least before we may get a clearer picture of where the economy and market are headed. In any case, economic reports this week focus on consumer and producer prices in October. Also, the Treasury statement is available for October, the first month of fiscal year 2021.

Monthly Market Review – October 2020

The Markets (as of market close October 30, 2020)

Stocks fell for the second consecutive month in October as rising COVID-19 cases and related deaths shunted signs of an economic rebound. The month began on an upswing with both the Nasdaq and S&P 500 posting their best weekly gains since July, and the Dow finally pushed ahead of its 2019 year-end value.

Unfortunately, reported virus cases began to soar by mid-month, both here and in Europe. Word that Great Britain may impose stricter lockdowns hit stocks there and eventually in the United States.

Nevertheless, there are signs that the economy is gradually picking up steam. Gross domestic product rebounded in the third quarter and job growth continued in September, albeit far below its August pace. Several companies reported strong earnings in the third quarter.

Personal income inched ahead by 0.9% and consumer spending rose 1.0%. Inflation remained well below the Federal Reserve’s target of 2.0%, keeping prices for consumer goods and services down. Interest rates for loans and mortgages remain low, helping the housing sector to surge.

Another reason for investor trepidation was the ongoing debate over whether and when another round of fiscal stimulus would be in the offing. Throughout the month, there were indications that some aid would be forthcoming before the November election. However, that does not appear to be in the cards.

By the end of the month, only the small caps of the Russell 2000 were able to forge ahead in value. The remaining indexes suffered monthly losses, led by the Dow, followed by the S&P 500, the Nasdaq, and the Global Dow.

Year to date, the Nasdaq is 21.6% ahead of last year’s pace, followed by the S&P 500, which is up 1.2%. The remaining indexes are at least 7.0% off their respective 2019 closing values.

By the close of trading on October 30, the price of crude oil (CL=F) was $35.61 per barrel, well below its September 30 price of $39.64 per barrel. The national average retail regular gasoline price was $2.143 on October 26, $0.026 lower than the September 28 selling price and $0.453 less than a year ago. The price of gold remained steady through the month, closing at $1,878.00 on October 30, down slightly from its September 30 closing price of $1,891.80.

Stock Market Indexes

Market/Index2019 ClosePrior MonthAs of October 30Month ChangeYTD Change
DJIA28,538.4427,781.7026,501.60-4.61%-7.14%
Nasdaq8,972.6011,167.5110,911.59-2.29%21.61%
S&P 5003,230.783,363.003,269.96-2.77%1.21%
Russell 20001,668.471,507.691,538.482.04%-7.79%
Global Dow3,251.242,960.932,886.59-2.51%-11.22%
Fed. Funds1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.67%0.86%19 bps-105 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 661,000 in September after adding 1.4 million jobs in August. 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. 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. The unemployment rate declined 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 were higher than in February by 4.4 percentage points and 6.8 million, respectively. The number of persons not in the labor force who currently want a job, at 7.2 million in September, is 2.3 million higher than in February. In September, 22.7% of employed persons teleworked because of the COVID-19 pandemic, down from 24.3% in August. Also, 19.4 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. This figure is down from 24.2 million in August. In September, average hourly earnings rose by $0.02 to $29.47. Average hourly earnings increased by 4.7% over the last 12 months ended in September. The average workweek increased by 0.1 hour to 34.7 hours in September. The labor participation rate decreased 0.3 percentage point to 61.4%. The employment-population ratio changed little at 56.6%, but is 4.5 percentage points lower than in February.
  • Claims for unemployment insurance continue to drop in October. According to the latest weekly totals, as of October 17, there were 7,756,000 workers still receiving unemployment insurance. The insured unemployment rate was 5.3% (8.1% a month earlier). The highest insured unemployment rates in the week ended October 10 were in Hawaii (12.6%), California (10.5%), Nevada (10.0%), Georgia (8.3%), District of Columbia (7.9%), Louisiana (7.8%), Puerto Rico (7.4%), Massachusetts (7.1%), New Mexico (7.1%), and Illinois (6.8%).
  • FOMC/interest rates: The Federal Open Market Committee (FOMC) did not meet in October. The federal funds rate range has remained at 0.00%-0.25%. The FOMC expects to maintain this target range through 2022.
  • GDP/budget: In contrast to the second-quarter gross domestic product, which fell 31.4%, the initial estimate for the third quarter shows the economy advanced at an annual rate of 33.1%. While this estimate is based on incomplete information, it does reflect the ongoing efforts to reopen businesses and resume activities that were postponed or restricted due to the COVID-19 pandemic. Consumer spending, as measured by personal consumption expenditures, increased 40.7% in the third quarter in contrast to a 33.2% decline in the second quarter. Nonresidential (business) investment vaulted 20.3% (-27.2% in the second quarter), residential investment soared up 59.3% after falling 35.6% in the prior quarter. Exports advanced 59.7% (-64.4% in the second quarter), and imports increased 91.1% (-54.1% in the second quarter). Federal nondefense government expenditures decreased 18.1% in the third quarter as federal stimulus payments and aid lessened.
  • September marked the final month of fiscal year 2020. The monthly Treasury budget deficit for September was $125 billion. There was an $83 billion surplus in September 2019. For the fiscal year, the government deficit was a record-setting $3.132 trillion, a 218% increase from the previous fiscal year. The second half of fiscal year 2020 saw government expenditures soar, primarily for COVID-19 relief. Compared to fiscal year 2019, government expenditures rose by $2.0 trillion. Expenditures for income security increased by 145%, commerce and housing credit outlays increased by nearly $600 billion, and expenditures for general government rose by 808%. On the other side of the ledger, individual income tax receipts fell 6.4% while corporate income tax receipts dropped 8.0%.
  • Inflation/consumer spending: According to the Personal Income and Outlays report for September, personal income and disposable personal income each increased 0.9% after decreasing 2.5% and 2.9%, respectively, in August. Consumer spending increased in September, climbing 1.4% for the month following a 1.0% advance in August. Inflation remained somewhat muted as consumer prices inched ahead by 0.2% in September after increasing 0.3% in August. Consumer prices have increased by a mere 1.4% over the last 12 months.
  • The Consumer Price Index rose 0.2% in September after climbing 0.4% in August. Over the last 12 months ended in September, consumer prices are up 1.4%. Contributing to the September increase in consumer prices was a sharp rise in prices for used cars and trucks, which climbed 6.7%. Also increasing were prices for utility gas services (4.2%) and energy services (1.6%). Prices for food were unchanged in September from August. Gas prices inched up 0.1%,
  • Prices that producers receive for goods and services, as measured by the Producer Price Index, rose 0.4% in September after climbing 0.3% in August. Producer prices increased 0.4% for the 12 months ended in September, the first advance since moving up 0.3% for the 12 months ended in March. In September, nearly two-thirds of the rise in prices were attributable to a 0.4% increase in services. Prices for goods also moved up 0.4%. Prices less foods, energy, and trade services advanced 0.4% in September, the largest increase since rising 0.4% in April 2019.
  • Housing: The housing sector returned mixed results in September. Sales of existing homes jumped 9.4% after climbing 2.4% in August. Over the 12 months ended in September, existing home sales are up nearly 21%. The median existing-home price in September was $311,800 ($310,600 in August). Unsold inventory of existing homes represents a 2.7-month supply at the current sales pace, a record low. Sales of existing single-family homes increased 9.7% in September following a 1.7% jump in August. Over the last 12 months, sales of existing single-family homes are up 21.8%. The median existing single-family home price was $316,200 in September, up from $315,000 in August.
  • While existing home sales continued to increase, new home sales slowed in September for the first time in five months. After climbing 4.5% in August, sales of new single-family homes fell in September, decreasing 3.5% for the month. The median sales price of new houses sold in September was $326,800 ($312,800 in August). The September average sales price was $405,400 ($369,000 in August). The inventory of new single-family homes for sale in September represents a supply of 3.6 months at the current sales pace, up from the August estimate of 3.3 months.
  • Manufacturing: Total industrial production fell 0.6% in September after four consecutive months of gains. Although industrial 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 slowed in September, decreasing 0.3% after advancing 1.0% in August. Manufacturing output is 6.4% below February’s level. The output of utilities dropped 5.6%, as demand for air conditioning fell by more than usual in September. Mining production increased 1.7% in September; even so, it was 14.8% below a year earlier. Most major industries posted decreases in September. Consumer goods fell 1.6%. Production of business equipment dropped 1.2%. The output of utilities moved down 0.4%. Overall, the level of total industrial production was 7.3% lower in September than it was a year earlier.
  • For the fifth consecutive month, new orders for durable goods increased in September, climbing 1.9% following a 0.4% jump in August. Despite the trend of monthly increases, new orders for manufactured durable goods are 10.1% lower than a year ago. Excluding transportation, new orders increased 0.8% in September. Excluding defense, new orders increased 3.4%. Transportation equipment, up four of the last five months, led the September increase in new orders, advancing 4.1%. Nondefense new orders for capital goods in September increased 10.4%.
  • Imports and exports: Prices for U.S. imports rose 0.3% in September, following a 1.0% jump 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. In contrast, natural gas prices advanced 26.2% in September, the largest increase since the prices advanced 44.3% in November 2019. Prices for nonfuel imports advanced 0.6% in September, following a 0.7% rise in August. Rising prices for nonfuel industrial supplies and materials; foods, feeds, and beverages; automotive vehicles; consumer goods; and capital goods contributed to the September advance in nonfuel import prices. Prices for U.S. exports rose 0.6% in September, after advancing 0.5% in August. In September, higher prices for both agricultural and nonagricultural exports contributed to the overall rise. Despite the recent upward trend, prices for U.S. exports fell 1.8% over the past year.
  • The international trade in goods deficit was $79.4 billion in September, down $3.7 billion, or 4.5% from August. Exports of goods for August were $122.0 billion, $3.2 billion, or 2.7% more than August exports. Imports of goods for August were $201.4 billion, $0.5 billion, or 0.2% less than August imports. Exports of industrial supplies increased 13.6% in September after advancing 10.5% in August. Imports of consumer goods climbed 7.1% in September, roughly the same advance as in August.
  • The latest information on international trade in goods and services, out October 6, is for August and shows that the goods and services trade deficit was $67.1 billion, an increase of nearly $4.0 billion, or 5.9%, over the July deficit. August exports were $171.9 billion, or 2.2% more than July exports. August imports were $239.0 billion, or 3.2% more than July imports. 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%.
  • International markets: Global markets saw stocks sink as COVID-19 cases surged and lockdowns loomed. The pandemic resurgence is also having a negative impact on the European economy. Eurozone purchasing managers’ service index sank from 48.0 in September to 46.2 in October indicating a significant decline in the services sector. However, on a positive note, retail sales in the United Kingdom rose 1.5% in September. China seems to be on the road to recovery. China’s third-quarter gross domestic product was up 4.9% from a year earlier. In the market, the UK’s FTSE 100 dropped 3.3% in October, while China’s SZSE Component index advanced 4.0%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® declined in October after gaining traction in September. The index stands at 100.9, down from 101.3 in September. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased from 98.9 to 104.6. The Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, decreased from 102.9 in September to 98.4 this month.

Eye on the Month Ahead

November is sure to bring with it plenty of developments, particularly in light of the presidential election. Economic growth has been mixed, with some indicators, such as housing and industrial production, picking up steam, while others, like consumer prices and employment, have been slower to respond. The economy should continue to grow this month, but how the election impacts that growth remains to be seen.

What I’m Watching This Week – 2 November 2020

The Markets (as of market close October 30, 2020)

Concern over a surge in COVID-19 cases drove equities lower last Monday. Each of the major indexes listed here fell, with the Dow plunging -2.3% and the S&P 500 (-1.9%) suffering its biggest one-day decline in a month. The losses could have been much worse had it not been for some encouraging words from House Speaker Nancy Pelosi on a fiscal stimulus deal. Nevertheless, an acceleration in COVID-19 cases coupled with the delay in fiscal stimulus was not a favorable combination of events for stocks. China’s plan to sanction major companies over arms sales to Taiwan added to the market’s slide. Each of the major market sectors took a hit with energy, communication services, financials, industrials, and information technology each sinking more than 2.0%. The dollar and Treasury yields rose, while crude oil prices sank.

The Dow fell for the third straight trading day last Tuesday. The Nasdaq was the only benchmark listed here that gained value. Among market sectors, financials and industrials took the brunt of the day’s losses. Gains in communication services, information technology, and consumer discretionary weren’t enough to stem the tide. The dollar and Treasury yields fell, while crude oil prices gained as oil producers shut down production ahead of Tropical Storm Zeta.

What was a minor tumble in stocks last Tuesday morphed into a thumping by the end of trading the following day. Each of the benchmark indexes plunged at least 3.0% last Wednesday in what turned out to be the worst day in the market in four months. Rising COVID-19 cases in the U.S. and Europe increased the prospect of tougher lockdowns, which sent equities, both here and abroad, plummeting. Adding to investor concerns is the possibility that the results of the upcoming presidential election may be contested. Treasury bond yields and the dollar each rose, while crude oil prices sank below $38 per barrel. Each of the market sectors plunged with energy, information technology, and communication services falling more than 4.0%, respectively.

Equities reversed course last Thursday and posted moderate to impressive gains. Mega-caps provided a big push as investors took advantage of lower stock prices resulting from days of declines. Favorable earnings reports and a solid third-quarter gross domestic product report also helped drive stocks higher. The Nasdaq was the big winner, gaining 1.6%, followed by both the Russell 2000 and S&P 500 (1.2%), the Dow (0.5%), and the Global Dow (0.3%). Treasury yields climbed nearly 7.0% as bond prices plunged. Crude oil prices continued to fall, while the dollar rose.

Last Friday saw stocks finish the day and week in the red. Each of the benchmark indexes listed here lost value at the close of trading, with the Nasdaq (-2.5%) suffering the largest drop, followed by the Russell 2000 (-1.5), the S&P 500 (-1.2), the Dow (-0.6%), and the Global Dow (-0.3%). Investors sold off on worsening pandemic fears. The mega-caps led the decline with many of the major market sectors following suit. Only energy and financials inched ahead last Friday. Crude oil prices declined, Treasury yields grew by 3.0%, and the dollar was mixed.

For the week, each of the major indexes fell by at least 5.5%. The Dow led the weekly tumble, followed by the Russell 2000, the Global Dow, the S&P 500, and the Nasdaq. Year to date, the Nasdaq is still well in front of last year’s closing value, while the S&P 500 is barely ahead. The remaining indexes are well off their respective 2019 marks.

Crude oil prices plunged lower last week, closing at $35.61 per barrel by late Friday afternoon, down from the prior week’s price of $39.75 per barrel. The price of gold (COMEX) closed the week at $1,878.00, down from the prior week’s price of $1,904.90. The national average retail price for regular gasoline was $2.143 per gallon on October 26, $0.007 lower than the prior week’s price and $0.453 less than a year ago.

Stock Market Indexes

Market/Index2019 ClosePrior WeekAs of 10/30Weekly ChangeYTD Change
DJIA28,538.4428,335.5726,501.60-6.47%-7.14%
Nasdaq8,972.6011,548.2810,911.59-5.51%21.61%
S&P 5003,230.783,465.393,269.96-5.64%1.21%
Russell 20001,668.471,640.501,538.48-6.22%-7.79%
Global Dow3,251.243,071.742,886.59-6.03%-11.22%
Fed. Funds target rate1.50%-1.75%0.00%-0.25%0.00%-0.25%0 bps-150 bps
10-year Treasuries1.91%0.84%0.86%2 bps-105 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 economy picked up steam in the third quarter according to the initial, or advance, estimate of the gross domestic product report. The GDP increased at an annual rate of 33.1% after falling 31.4% in the second quarter. The increase in third-quarter GDP reflected continued efforts to reopen businesses and resume activities that were postponed or restricted due to COVID-19. The increase in real GDP reflected increases in personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. The personal consumption expenditures price index increased 3.7%, in contrast to a decrease of 1.6% in the second quarter. Excluding food and energy prices, the PCE price index increased 3.5%, in contrast to a second quarter decrease of 0.8%.
  • Consumer prices rose by 0.2% in September and are up 1.4% over the last 12 months. Personal income and disposable personal income each increased 0.9%. The gain in personal income was driven by proprietors’ income, which increased 5.1% in September over the prior month. Consumer spending ramped up 1.4% in September after advancing 1.0% the prior month.
  • Sales of new single-family homes dipped in September from August. According to the latest information from the Census Bureau, new home sales fell 3.5% in September from the previous month. This marks the first decline in new home sales since March of this year. Nevertheless, sales are 32.1% above the September 2019 estimate. The median sales price of new houses sold in September 2020 was $326,800. The average sales price was $405,400. The estimate of new houses for sale at the end of September was 284,000, representing a supply of 3.6 months at the current sales rate.
  • New orders for manufactured durable goods increased by 1.9% in September. This increase, up five consecutive months, followed a 0.4% August increase. Excluding transportation, new orders increased 0.8%. Excluding defense, new orders increased 3.4%. Transportation equipment, up four of the last five months, led the increase, climbing 4.1%. Shipment of durable goods increased 0.3% last month following a 0.3% August decrease. Unfilled orders fell 0.2% while inventories increased 0.4% following three consecutive monthly decreases. Nondefense new orders for capital goods in September increased 10.4%. Defense new orders for capital goods in September decreased 22.3%.
  • The international trade in goods deficit was $79.4 billion in September, 4.5% below the August deficit. Exports of goods were $122.0 billion, 2.7% higher than exports in August. Imports of goods were $201.4 billion, 0.2% less than August imports.
  • For the week ended October 24, there were 751,000 new claims for unemployment insurance, a decrease of 40,000 from the previous week’s level, which was revised up by 4,000. According to the Department of Labor, the advance rate for insured unemployment claims was 5.3% for the week ended October 17, a decrease of 0.5 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 October 17 was 7,756,000, a decrease of 709,000 from the prior week’s level, which was revised up by 92,000. For perspective, a year ago there were 217,000 initial claims for unemployment insurance, the rate for insured unemployment claims was 1.2%, and 1,700,000 people were receiving unemployment insurance benefits.

Eye on the Week Ahead Election week will have plenty of news that will keep investors quite busy. Aside from the presidential election, a couple of reports are out that can move the market. The employment numbers for October are available this Friday. September saw 661,000 new jobs added and the unemployment rate dip to 7.9%. It is likely that hirings in October may not be quite as robust, but the unemployment rate should continue to drop. The Federal Open Market Committee meets this week. No change in the target interest rate is expected. However, it will be interesting to see what the Committee thinks about the economy currently and in the future.

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%.

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.