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.

What I’m Watching This Week – 28 September 2020

The Markets (as of market close September 25, 2020)

The major market indexes continued their slide to begin last week. With last Monday’s losses, the S&P 500 endured its longest losing streak since February, the Dow fell 1.8%, and the Nasdaq dropped for the fifth consecutive trading session. Among market sectors, commodity, industrial, and financial shares plunged. Sobering news that the COVID-19 virus could accelerate in the fall and winter raised the prospect of further shutdowns here and abroad. On the subject of shutdowns, the government faces one following the Republicans’ rejection of a Democrat-proposed funding bill. Treasury yields sank as bond prices rose. Crude oil fell while the dollar soared to an almost six-week high.

Tech stocks and mega-cap growth shares led the market rebound last Tuesday. Each of the benchmark indexes listed here posted solid gains, with the Nasdaq leading the way after advancing 1.7%, followed by the S&P 500 (1.1%), the Russell 2000 (0.8%), the Dow (0.5%), and the Global Dow (0.0%). Crude oil prices and the dollar rose while Treasury yields sank. The market surge could be the result of investors trying to clip some bargains following the selloff. Federal Reserve Chair Jerome Powell said the economy is a long way from where it needs to be and predicted that growth would be a slow ordeal. Congress still hasn’t agreed on a stimulus package. However the House overwhelmingly passed a temporary funding bill, now headed to the Senate, which would avoid a government shutdown. British Prime Minister Boris Johnson imposed new business restrictions and recommended continuing a work-from-home policy to counter a second wave of COVID-19 in the United Kingdom.

Despite promising reports on the development of a COVID-19 vaccine, stocks slid dramatically by the close of trading last Wednesday. Among the sectors, tech stocks, energy shares, communication stocks, and mega-caps took a collective nosedive, pulling the rest of the market down as well. The Dow lost 1.9%, the small caps of the Russell 2000 gave back 3.0%, and the Global Dow sank 1.3%. The Nasdaq and the S&P 500 were closing in on correction territory after dropping 3.0% and 2.4%, respectively. Crude oil prices declined, the dollar climbed, and 10-year Treasury yields rose.

Stocks moved in the opposite direction last Thursday, posting moderate gains by the end of the day’s trading. The Nasdaq gained 0.4%, followed by the S&P 500 (0.3%) and the Dow (0.2%). The Russell 2000 was flat and the Global Dow fell 0.6%. Treasury prices climbed, pulling bond yields lower. Crude oil prices climbed above $40.20 per barrel, and the dollar fell.

The close of last week saw stocks continue to rally. Tech stocks, real estate, and mega-caps advanced. The Nasdaq climbed 2.3%, its biggest one-day jump in two weeks. Crude oil prices and Treasury yields dipped, while the dollar gained against a basket of currencies.

Equity gains at the end of the week weren’t enough to push the benchmark indexes ahead of the prior week’s closing values. Only the Nasdaq posted a weekly gain. The S&P 500, the Dow, the Russell 2000, and the Global Dow each fell. The end-of-the-week push may have been driven by dip buyers, looking for stocks with depressed values. Otherwise, there wasn’t much positive news to spur investors. After continued haggling, it doesn’t appear that Congress and the White House can agree on a stimulus package, leading some to speculate that nothing of substance will happen until after the November election. An uptick in worldwide COVID-19 cases, coupled with a lack of government aid is not an encouraging combination for investors.

Crude oil prices dipped last week, closing at $40.12 per barrel by late Friday afternoon, down from the prior week’s price of $40.84. The price of gold (COMEX) plunged last week, closing at $1,866.10, down from the prior week’s price of $1,958.10. The national average retail price for regular gasoline was $2.168 per gallon on September 21, $0.015 lower than the prior week’s price and $0.486 less than a year ago.

Stock Market Indexes

Market/Index 2019 Close Prior Week As of 9/25 Weekly Change YTD Change
DJIA 28,538.44 27,657.42 27,173.96 -1.75% -4.78%
Nasdaq 8,972.60 10,793.28 10,913.56 1.11% 21.63%
S&P 500 3,230.78 3,319.47 3,298.46 -0.63% 2.09%
Russell 2000 1,668.47 1,536.78 1,474.91 -4.03% -11.60%
Global Dow 3,251.24 3,041.96 2,916.01 -4.14% -10.31%
Fed. Funds target rate 1.50%-1.75% 0.00%-0.25% 0.00%-0.25% 0 bps -150 bps
10-year Treasuries 1.91% 0.69% 0.65% -4 bps -126 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

  • Existing home sales continued to soar in August, marking the third consecutive month of advancing sales gains. Total existing-home sales rose 2.4% in August from July. Total sales are ahead of last year’s pace by 10.5%. Single-family home sales climbed 1.7% in August. The median existing-home price was $310,600 in August ($304,100 in July), which is 11.4% above the August 2019 median price of $278,800. The median price for existing single-family home sales was $315,000 last month ($307,800 in July). Total housing inventory fell 0.7% in August from July and sits at a 3.0-month supply.
  • Sales of new single-family homes also climbed last month. According to the Census Bureau, new single-family home sales rose 4.8% in August over July and are 43.2% above the August 2019 estimate. The median sales price of new houses sold in August 2020 was $312,800 ($327,800 in July). The average sales price was $369,000 ($371,900 in July). The estimate of new houses for sale at the end of August was 282,000, representing a 3.3-month supply at the current sales rate.
  • Orders for durable goods increased for the fourth consecutive month in August, according to the latest information from the Census Bureau. New orders for durable goods advanced 0.4% last month. Although new orders are rising, they’re still 11.3% lower than a year ago. Excluding transportation, new orders also rose 0.4%. Excluding defense orders, new orders climbed 0.7%. Machinery led the increase in August, surging 1.5%. With the increase in new orders, it isn’t surprising that shipments (-0.3%), unfilled orders (-0.6%), and inventories (-0.1%) decreased. Nondefense new orders for capital goods in August increased 7.8%.
  • For the week ended September 19, there were 870,000 new claims for unemployment insurance, an increase of 4,000 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 8.6% for the week ended September 12, a decrease of 0.1 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 12 was 12,580,000, a decrease of 167,000 from the prior week’s level, which was revised up by 119,000.

Eye on the Week Ahead

The final report on gross domestic product for the second quarter is out this week and should have the economy retracting at a rate of nearly 32%. The other important economic report out this week focuses on personal income, consumer spending, and consumer prices for August. The prior month saw personal income rise 0.4%, consumer spending jump 1.9%, and prices advance 0.3%.

What I’m Watching This Week – 21 September 2020

The Markets (as of market close September 18, 2020)

Stocks rebounded to begin last week on a positive note, as each of the benchmark indexes listed here posted notable gains by the close of trading last Monday. Tech stocks surged, pushing the Nasdaq up 1.9%. Hopes for a COVID-19 vaccine moved pharmaceutical shares higher. Energy shares fell as crude oil prices dropped. The dollar declined, while Treasury yields moved slightly higher.

Last Tuesday saw stocks post their second consecutive session of gains. Tech stocks and mega-caps continued to rebound. Other than the Dow, which was flat, each of the benchmark indexes listed here posted gains, led by the Nasdaq (1.2%), followed by the S&P 500 (0.5%), the Russell 2000, and the Global Dow, each of which gained 0.8%. Crude oil prices and Treasury yields rose, and the dollar was mixed against a basket of currencies.

Stocks were mixed last Wednesday, with the Dow, the Russell 2000, and the Global Dow posting modest gains, while the S&P 500 and the Nasdaq fell. Mega-caps and tech stocks reversed course from the prior few days and sank. Energy shares rose, boosted by advancing oil prices. Value stocks performed better along with financial shares. Treasury yields, the dollar, and crude oil prices each rose.

Last Thursday, each of the benchmark indexes gave back any gains from earlier in the week. Word that Congress and the president may be nearing an accord on a new round of stimulus wasn’t enough to keep money from flowing out of the market. Investors may have been perplexed by the confusing government rhetoric on when a COVID-19 vaccine would be available. Tech stocks and mega-caps took a big hit, pulling stock indexes lower. The Nasdaq lost 1.3%, the S&P 500 fell 0.8%, both the Russell 2000 and the Global Dow dropped 0.6%, and the Dow declined 0.5%. Treasury yields and the dollar fell, while crude oil prices rose.

Tech stocks and mega-caps continued to slide last Friday. Each of the benchmark indexes listed here lost value by the end of the day, with the S&P 500 and the Nasdaq each falling 1.1%, closely followed by the Dow (-0.9%), the Global Dow (-0.7%), and the Russell 2000 (-0.4%). Treasury yields advanced, crude oil prices fell, and the dollar rose.

Overall, stocks lost value for the week. Mixed signals from the federal government as to whether and when a virus vaccine would be available, coupled with the Federal Reserve’s somber assessment of the state of the economy, prompted investors to pull away from equities. Only the small caps of the Russell 2000 gained value last week. The S&P 500, the Nasdaq, the Dow, and the Global Dow each fell behind. Despite the past few weeks of downturns, the Nasdaq remains solidly ahead of its year-end value. The S&P 500 is marginally ahead, while the other indexes listed here remain below their respective 2019 closing marks.

Crude oil prices rebounded last week, closing at $40.84 per barrel by late Friday afternoon, up from the prior week’s price of $37.76. The price of gold (COMEX) advanced last week, closing at $1,958.10, up from the prior week’s price of $1,950.00. The national average retail price for regular gasoline was $2.183 per gallon on September 14, $0.028 lower than the prior week’s price but $0.369 less than a year ago.

Stock Market Indexes

Market/Index 2019 Close Prior Week As of 9/18 Weekly Change YTD Change
DJIA 28,538.44 27,665.64 27,657.42 -0.03% -3.09%
Nasdaq 8,972.60 10,853.54 10,793.28 -0.56% 20.29%
S&P 500 3,230.78 3,340.97 3,319.47 -0.64% 2.75%
Russell 2000 1,668.47 1,497.27 1,536.78 2.64% -7.89%
Global Dow 3,251.24 3,042.09 3,041.96 -0.01% -6.44%
Fed. Funds target rate 1.50%-1.75% 0.00%-0.25% 0.00%-0.25% 0 bps -150 bps
10-year Treasuries 1.91% 0.66% 0.69% 3 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

  • Following its meeting held last week, the Federal Open Market Committee decided to keep the target range for the federal funds rate at 0.00%-0.25% and 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% for some time. The Committee noted that economic activity and employment have picked up in recent months but remain well below their levels at the beginning of the year. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. Nevertheless, the Committee noted 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.
  • U.S. import prices rose 0.9% in August, following advances of 1.2% in July and 1.4% in June. Higher prices for both fuel (+3.3%) and nonfuel (+0.7%) imports contributed to the August increase. The increase in nonfuel prices was the largest since April 2011. Driving the nonfuel price increase was a 3.6% jump in industrial supplies and materials prices. Prices for U.S. exports also advanced in August, rising 0.5% after increasing 0.9% the previous month.
  • According to the Federal Reserve, industrial production rose 0.4% in August for its fourth consecutive monthly increase. However, even after the recent gains, industrial production in August was 7.3% below its February pre-pandemic level. Manufacturing output continued to improve in August, rising 1.0%, but the gains for most manufacturing industries 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%. The level of total industrial production was 7.7% lower in August than it was a year earlier.
  • Sales at the retail level advanced 0.6% in August from the previous month and 2.6% above their August 2019 pace. Retail trade sales inched ahead 0.1% in August. Nonstore (online) retail sales were flat last month but are 22.4% ahead of August 2019. Retailers that had a favorable August include furniture and home furnishing stores (2.1%); building material and garden equipment and supplies dealers (2.0%); clothing and clothing accessories stores (2.9%); and food services and drinking places (4.7%). Retailers that slumped last month include sporting goods, hobby, musical instrument, and book stores (-5.7%); department stores (-2.3%); grocery stores (-1.6%); and food and beverage stores (-1.2%).
  • Overall, housing starts and building permits fell in August, although the market for new single-family residential construction excelled. The number of building permits issued in August was 0.9% below the July total. However, single-family building permits were 6.0% higher than July. Housing starts also fell in August, dropping 5.1% below the prior month’s figure. Single-family housing starts rose by 4.1% last month. Housing completions fell 7.5% in August from July. Single-family housing completions were 4.4% below the July rate.
  • For the week ended September 12, there were 860,000 new claims for unemployment insurance, a decrease of 33,000 from the previous week’s level, which was revised up by 9,000. According to the Department of Labor, the advance rate for insured unemployment claims was 8.6% for the week ended September 5, a decrease of 0.7 percentage point from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended September 5 was 12,628,000, a decrease of 916,000 from the prior week’s level, which was revised up by 159,000.

Eye on the Week Ahead

Two important reports in the housing sector are available this week. August data for both new and existing home sales should reveal continued growth, following July’s robust sales report. Orders for durable goods are also out this week for August. July saw new orders jump more than 11.0% as the economy continues to slowly pick up steam.

What I’m Watching This Week – 14 September 2020

The Markets (as of market close September 11, 2020)

Stocks continued to slide last Tuesday as falling tech shares pulled the Nasdaq down 4.1%. Crude oil prices plunged 7.5%, and Treasury yields sank 5.1% as money poured into bonds, driving prices higher. Investors, leery of overvaluations, continued to sell off shares. The relationship between the United States and China continued to sour as President Trump threatened recourse against American companies that create jobs overseas or that do business with China. By the close of trading, the S&P 500 lost 2.8%, the Dow fell 2.3%, the Russell 2000 lost 2.0%, and the Global Dow sank 1.6%.

After three days of sell-offs, tech shares reversed course last Wednesday. Lower stock prices were too tempting for some investors to pass up. The Nasdaq jumped 2.7%, the S&P 500 gained 2.0%, and the Dow climbed 1.6%. Crude oil prices and Treasury yields rose while the dollar declined.

Investors were clearly trying to scoop up some bargains last Wednesday as the sell-off resumed the following day. Tech and growth stocks plunged, pulling down the Nasdaq (-2.0%) and the S&P 500 (-1.8%). The Dow (-1.5%), the Russell 2000 (-1.2%), and the Global Dow (-1.0%) also lost value last Thursday. Crude oil prices and Treasury yields sank while the dollar was generally higher. Investors were also hit by a disappointing jobless claims report and the rejection by Senate Democrats of the Republican stimulus bill.

Stocks were mixed last Friday with the Dow, the S&P 500, and the Global Dow posting modest gains, while the Nasdaq and the Russell 2000 fell. Mega-caps and growth shares performed poorly and were outperformed by financials, industrials, and materials.

Overall, the major indexes fell for the second week in a row as each of the benchmarks listed here lost value. Tech stocks continued to fall, ending a five-month rally. The Nasdaq had its worst week since March. Global shares also plunged for the second consecutive week. Treasury prices rose sending yields lower, crude oil prices continued to sink, and the dollar dropped against most major currencies. Year to date, the Nasdaq and the S&P 500 remain ahead of last year’s pace, while the gap widened for the Russell 2000, the Dow, and the Global Dow.

Crude oil prices fell again last week, closing at $37.76 per barrel by late Friday afternoon, down from the prior week’s price of $39.59. The price of gold (COMEX) also rose last week, closing at $1,950.00, up from the prior week’s price of $1,940.60. The national average retail price for regular gasoline was $2.211 per gallon on September 7, $0.011 lower than the prior week’s price but $0.339 less than a year ago.

Stock Market Indexes

Market/Index 2019 Close Prior Week As of 9/11 Weekly Change YTD Change
DJIA 28,538.44 28,133.31 27,665.64 -1.66% -3.06%
Nasdaq 8,972.60 11,313.13 10,853.54 -4.06% 20.96%
S&P 500 3,230.78 3,426.96 3,340.97 -2.51% 3.41%
Russell 2000 1,668.47 1,535.30 1,497.27 -2.48% -10.26%
Global Dow 3,251.24 3,058.68 3,042.09 -0.54% -6.43%
Fed. Funds target rate 1.50%-1.75% 0.00%-0.25% 0.00%-0.25% 0 bps -150 bps
10-year Treasuries 1.91% 0.72% 0.66% -6 bps -125 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 government deficit was $200 billion in August, relatively equal to the August 2019 monthly deficit. Through 11 months of the fiscal year, the deficit is $3.007 trillion, a 182% increase over the same period in fiscal year 2019. Government outlays for the current fiscal year are roughly 46% higher than the expenditures for the prior fiscal year.
  • According to the latest Job Openings and Labor Turnover report, the number of job openings increased to 6.6 million in July (6.0 million in June). Hires decreased to 5.8 million (7.0 million in June), and separations were little changed at 5.0 million (4.9 million in June). Industries with the largest increase in hires include retail trade (172,000), health care and social assistance (146,000), and construction (90,000). Industries with the largest reduction in hires include accommodation and food services (599,000), followed by other services (143,000) and health care and social assistance (137,000). Over the 12 months ended in July, hires totaled 70.2 million and separations totaled 78.5 million, yielding a net employment loss of 8.2 million.
  • Consumer prices are slowly rising. According to the latest Consumer Price Index, prices for goods and services rose 0.4% in August after advancing 0.6% in July. Over the last 12 months ended in August, the Consumer Price Index increased 1.3%. Consumer prices less food and energy rose 0.4% in August. Items experiencing notable price increases were used cars and trucks (5.4%) and fuel oil (3.9%). Food prices increased 0.1%, energy rose 0.9%, and apparel climbed 0.6%.
  • Prices at the producer level rose 0.3% in August following a 0.6% jump in July. Producer prices have declined 0.2% over the last 12 months. A 0.5% spike in prices for services drove the climb in producer prices. Goods prices inched up 0.1%. Producer prices less foods, energy, and trade services moved up 0.3% in August, the same as in both July and June. For the 12 months ended in August, prices less food, energy, and trade services increased 0.3%.
  • For the week ended September 5, there were 884,000 new claims for unemployment insurance, unchanged from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims was 9.2% for the week ended August 29, an increase of 0.1 percentage point from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 29 was 13,385,000, an increase of 93,000 from the prior week’s level, which was revised up by 38,000.

Eye on the Week Ahead

The Federal Open Market Committee meets this week, the first such meeting since July. It is expected that the Fed will maintain its present stance and maintain the target interest rate range at its current 0.00%-0.25%.

What I’m Watching This Week – 8 September 2020

The Markets (as of market close September 4, 2020)

Stocks sagged last Monday, but not enough to dampen a banner month of returns in August. Only the Nasdaq pushed ahead to start the week as the remaining benchmark indexes lost value. Crude oil prices, Treasury yields, and the dollar all declined.

Last Tuesday marked the first day of September and the start of another strong market performance. Each of the benchmark indexes listed here posted solid gains, led by the Nasdaq (1.4%), the Russell 2000 (1.1%), the Dow (0.8%), the S&P 500 (0.8%), and the Global Dow (0.1%). Rising bond prices drove Treasury yields lower. Crude oil prices and the dollar rose. Surging mega-caps gave the market a boost, as did materials, technology, and communications.

Wednesday saw both the S&P 500 and the Nasdaq soar to fresh record highs. Utilities and financials led the way while technology shares lagged. The dollar rose while crude oil and Treasury yields dropped. Global stocks also surged last Wednesday as investors anticipated further stimulus (and liquidity) from central banks.

Last Thursday, in a complete reversal, stocks suffered their worst day since June. The Nasdaq plunged 5.0%, the S&P 500 dropped 3.5%, the Russell 2000 gave back 3.0%, the Dow fell 2.8%, and the Global Dow lost 1.7%. Money moved to Treasuries sending bond prices higher and yields plummeting. Crude oil prices fell and the dollar rose. Mega-caps and technology stocks sank, pulling the major market indexes lower. Analysts have been pointing to overvaluations in some sectors, particularly technology, and investors may be taking heed.

Tech shares continued to tumble last Friday, pulling the Nasdaq down to its worst week since March. The selloff that began last Thursday continued into Friday as each of the benchmark indexes listed here lost value on the last day of the week. Treasury yields climbed, the dollar fell, and crude oil prices fell below $40 per barrel. Mega-caps tumbled again last Friday as investors continue to show concern that the market may be overvalued.

For the week, early gains weren’t enough to overcome losses later, as each of the indexes listed here lost value. The Nasdaq fell 3.3%, followed by the Russell 2000 (-2.7%), the S&P 500 (-2.1%), the Dow (-1.8%), and the Global Dow (-1.8%). Even favorable employment data wasn’t enough to halt the selloff. An additional 1.4 million new jobs were added in August, and the latest unemployment figures showed the total number of claimants dipped below 1 million.

Stock Market Indexes

Market/Index 2019 Close Prior Week As of 9/4 Weekly Change YTD Change
DJIA 28,538.44 28,653.87 28,133.31 -1.82% -1.42%
Nasdaq 8,972.60 11,695.63 11,313.13 -3.27% 26.09%
S&P 500 3,230.78 3,508.01 3,426.96 -2.31% 6.07%
Russell 2000 1,668.47 1,578.34 1,535.30 -2.73% -7.98%
Global Dow 3,251.24 3,113.05 3,058.68 -1.75% -5.93%
Fed. Funds target rate 1.50%-1.75% 0.00%-0.25% 0.00%-0.25% 0 bps -150 bps
10-year Treasuries 1.91% 0.72% 0.72% 0 bps -119 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

  • There were 1.4 million new jobs added in August, below the February level by 11.5 million, or 7.6%. The unemployment rate fell 1.8 percentage points to 8.4%, and the number of unemployed persons decreased by 2.8 million to 13.6 million. Nevertheless, both the unemployment rate and the number of unemployed persons remain much higher than their pre-pandemic February figures of 4.9% and 7.8 million, respectively. The labor force participation rate increased by 0.3 percentage point to 61.7% in August but is 1.7 percentage points below its February level. The employment-population ratio rose by 1.4 percentage points to 56.5% but is 4.6 percentage points lower than in February. In August, 24.3% of employed persons teleworked because of the coronavirus pandemic, down from 26.4% in July. In August, 24.2 million persons reported that they were unable to work because their employer closed or lost business due to the pandemic — down from 31.3 million in July. Government employment rose in August, largely reflecting temporary hiring for the 2020 Census. Notable job gains also occurred in retail trade, professional and business services, leisure and hospitality, and education and health services. In August, average hourly earnings rose by $0.11 to $29.47. The average work week increased by 0.1 hour to 34.6 hours in August.
  • Manufacturing continues to recover from the slowdown brought about by the COVID-19 pandemic. According to the August Manufacturing ISM® Report On Business®, manufacturing expanded for the fourth consecutive month. New orders, production, employment, prices, exports, and imports all advanced in August over July. Inventories were lower, the result of an acceleration of shipments and deliveries.
  • The services sector grew in August, but at a slower place than July, according to the latest Services ISM® Report On Business®. Business activity and production fell in August, as did new orders and inventories. Employment, supplier deliveries, prices, backlog of orders, exports, and imports each increased last month.
  • The trade deficit increased by $10.1 billion in July, according to the latest report from the Bureau of Economic Analysis. July exports were $12.6 billion more than June exports. July imports were $22.7 billion 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%. The deficit with Mexico increased $2.5 billion in July, and the deficit with China increased $1.6 billion. The United States had a trade surplus with South America and Central America ($2.9 billion), OPEC ($1.5 billion), Hong Kong ($1.4 billion), and the United Kingdom ($0.6 billion).
  • For the week ended August 29, there were 881,000 new claims for unemployment insurance, a decrease of 130,000 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 9.1% for the week ended August 22, a decrease of 0.8 percentage point from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 22 was 13,254,000, a decrease of 1,238,000 from the prior week’s level, which was revised down by 43,000.

Eye on the Week Ahead

Economic reports during the Labor Day week focus on inflation, which has been muted at best. Both the Producer Price Index and the Consumer Price Index for August are out this week. Producer prices advanced 0.6% in July, but are down 0.4% over the last 12 months. Consumer prices also inched ahead by 0.6% in July and have increased a scant 1.0% for the year.

Monthly Market Review – August 2020

The Markets (as of market close August 31, 2020)

The positive run for stocks continued in August as the major market indexes regularly reached all-time highs. While investors remained bullish toward equities, it wasn’t always clear why.

Although the economy is gradually picking up steam, it has a ways to go to reach its pre-pandemic level. Gross domestic product for the second quarter showed that the economy receded at an annual rate of 31.7%. Job growth is ongoing, yet more than 14 million people are receiving unemployment benefits.

Personal income inched ahead by 0.4%, but consumer spending rose by 1.9%. 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.

The Federal Reserve has maintained accommodative measures to help spur the economy, yet additional stimulus relief from the federal government has reached a stalemate. Globally, tensions between the United States and China have risen, potentially putting the phase-one trade deal between the economic giants in jeopardy.

The COVID-19 pandemic continues to dominate nearly every aspect of life. States are struggling to settle on appropriate protocols for reopening schools. Testing for the virus has increased, and the numbers of COVID-related infections and deaths continue to mount. Throughout August, news of improved virus treatments and possible vaccines offered encouragement.

By the end of the month, each of the benchmark indexes listed here scored sizable gains, leading to the best August in decades. The technology sector continued to flourish last month, leading the Nasdaq to record highs. The Dow closed the month up 7.6%, followed by the S&P 500, the Global Dow, and the Russell 2000.

Year to date, the Nasdaq is 31.2% ahead of last year’s pace, followed by the S&P 500, which is up 8.3%. The Dow is nearly at its 2019 closing value, while the Global Dow and the Russell 2000 continued to gain ground.

By the close of trading on August 31, the price of crude oil (CL=F) was $42.81 per barrel, ahead of its July 31 price of $40.41 per barrel. The national average retail regular gasoline price was $2.182 per gallon on August 24, $0.007 higher than the July 27 selling price of $2.175, but $0.392 less than a year ago. The price of gold remained steady through August, closing at $1,974.90 on August 31, down slightly from its July 31 closing price of $1,989.90.

Stock Market Indexes

Market/Index 2019 Close Prior Month As of August 31 Month Change YTD Change
DJIA 28,538.44 26,428.32 28,430.05 7.57% -0.38%
Nasdaq 8,972.60 10,745.27 11,775.46 9.59% 31.24%
S&P 500 3,230.78 3,271.12 3,500.31 7.01% 8.34%
Russell 2000 1,668.47 1,480.43 1,561.88 5.50% -6.39%
Global Dow 3,251.24 2,920.53 3,094.33 5.95% -4.83%
Fed. Funds 1.50%-1.75% 0.00%-0.25% 0.00%-0.25% 0 bps -150 bps
10-year Treasuries 1.91% 0.53% 0.69% 16 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.

Latest Economic Reports

  • Employment: Employment increased by 1.8 million in July after adding 4.8 million jobs in June. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it. In July, notable job gains occurred in leisure and hospitality, government, retail trade, professional and business services, other services, and health care. The unemployment rate dropped 0.9 percentage point to 10.2% for the month as the number of unemployed persons dropped by 1.4 million to 16.3 million (17.8 million in June). Despite declines over the past three months, these measures are up by 6.7 percentage points and 10.6 million, respectively, since February. In July, average hourly earnings rose by $0.07 to $29.39. Average hourly earnings increased by 4.8% over the last 12 months ended in July. The average work week decreased by 0.2 hour to 34.5 hours in June. The labor participation rate, at 61.4%, changed little in July following increases in May and June. The employment-population ratio rose by 0.5 percentage point to 55.1%.
  • Claims for unemployment insurance mostly leveled off in August. According to the latest weekly totals, as of August 15 there were nearly 14.5 million workers still receiving unemployment insurance. The insured unemployment rate was 9.9% (11.6% as of July 18). The highest insured unemployment rates in the week ended August 8 were in Hawaii (19.8%), Puerto Rico (19.2%), Nevada (17.3%), California (16.1%), New York (15.4%), Connecticut (13.6%), Louisiana (13.5%), the Virgin Islands (12.8%), Georgia (12.6%), and Massachusetts (12.2%). During the week ended August 8, 49 states reported 10,972,770 individuals claiming Pandemic Unemployment Assistance benefits and 49 states reported 1,407,802 individuals claiming Pandemic Emergency Unemployment Compensation benefits.
  • FOMC/interest rates: The Federal Open Market Committee did not meet in August. The FOMC is scheduled to next meet in September.
  • GDP/budget: According to the second estimate for second-quarter gross domestic product, the economy decelerated at an annualized rate of 31.7%. 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 34.1%, reeling from the initial effects of the pandemic. Fixed investment fell 28.9% in the second quarter (-1.4% in the first quarter), and nonresidential fixed investment dropped 26.0% in the second quarter, compared to a 6.7% decline in the prior quarter. Exports were down 63.2%, and imports sank 54.0%. Nondefense government expenditures increased 40.1% due to stimulus spending programs initiated in response to the pandemic.
  • The Treasury budget deficit may have come in smaller than expected in May, but it surged in June. The deficit was $864.1 billion, exceeding the June 2019 budget deficit by nearly $855 billion. Government spending reached $1.1 trillion in June. Through the first nine months of fiscal year 2020, the deficit is $2.74 trillion. Over the same period in the previous fiscal year, the budget deficit was $744.1 billion.
  • Inflation/consumer spending: According to the Personal Income and Outlays report for July, personal income increased 0.4%, and disposable (after-tax) personal income advanced 0.2% after falling 1.1% and 1.4%, respectively, in June. Consumer spending slowed in July but still increased 1.9% for the month, well short of June’s 6.2% advance. Inflation remained muted as consumer prices inched ahead by 0.3% in July. Prices have increased by a mere 1.0% over the last 12 months.
  • Following three consecutive monthly declines, consumer prices rose 0.6% in June, according to the Consumer Price Index. Year to date, consumer prices are up 0.6%. Gasoline prices surged in June, climbing 12.3%. Excluding food and energy, consumer prices increased 0.2% in June and 1.2% over the last 12 months.
  • Prices that producers receive for goods and services declined 0.2% in June after climbing 0.4% in May. Year to date, producer prices are down 0.8%. In June, the decrease in overall producer prices was driven by a 0.3% decline in prices for services. Producer prices for goods rose 0.2%.
  • Housing: The housing sector continued to post strong sales numbers in July. Sales of existing homes jumped 24.7% last month after climbing 20.7% in June. Over the 12 months ended in July, existing home sales are up 8.7% (-11.3% for the 12 months ended in June). The median existing-home price in July was $304,100 ($295,300 in June). Unsold inventory of existing homes represents a 3.1-month supply at the current sales pace, down from 3.9 months in June. Sales of existing single-family homes soared 23.9% in July following a 19.9% surge in June. Over the last 12 months, sales of existing single-family homes are up 9.8%.
  • After climbing 13.8% in June, sales of new single-family homes surged again in July, increasing 13.9% for the month. The median sales price of new houses sold in July was $330,600 ($329,200 in June). The average sales price was $391,300 ($384,700 in June). July’s inventory of new single-family homes for sale represents a supply of 4.0 months at the current sales pace, down from June’s estimate of 4.7 months.
  • Manufacturing: Total industrial production rose 3.0% in July after increasing 5.7% in June; even so, industrial production remained 8.4% below its pre-pandemic February level. Manufacturing output continued to improve in July, rising 3.4%. Most major industries posted increases, though they were much smaller in magnitude than the advances recorded in June. The largest gain in July — 28.3% — was registered by motor vehicles and parts; factory production elsewhere advanced 1.6%. Mining production rose 0.8% after five consecutive monthly decreases. The output of utilities increased 3.3%. Total industrial production was 8.2% lower in July than it was a year earlier.
  • For the third consecutive month, new orders for durable goods increased, climbing 11.2% in July following June’s 7.7% increase. Transportation equipment, also up for three consecutive months, again drove the July increase, surging ahead by 35.6%. Excluding transportation, new orders increased by 2.4%. Excluding defense, new orders increased by 9.9%.
  • Imports and exports: The price index for U.S. imports rose 0.7% in July, following a 1.4% jump in June. Both the June and July advances were driven by rising fuel prices. U.S. export prices increased 0.8% in July, after advancing 1.2% the previous month. Year to date, import prices are down 3.3%, while export prices have fallen 4.4%.
  • The international trade in goods deficit was $79.3 billion in July, up $8.3 billion, or 11.7% from June. Exports of goods for July were $12.2 billion, or 11.8% more than June exports. Imports of goods for July were $20.5 billion, or 11.8% more than June imports. Exports of motor vehicles increased 44.6% in July. Imports of motor vehicles climbed 41.3% in July.
  • The latest information on international trade in goods and services, out August 5, is for June and shows that the goods and services trade deficit was $50.7 billion, down $4.1 billion, or 7.5% less than the May deficit. June exports were $13.6 billion, or 9.4% more than May exports. June imports were $9.5 billion, or 4.7% more than May imports. Year to date, the goods and services deficit sits at $274.3 billion, a decrease of $23.1 billion, or 7.8%, from the same period in 2019.
  • International markets: Shinzo Abe, Japanese Prime Minister since 2012, announced that he will resign due to poor health. A new leader is expected to be chosen by the Liberal Democratic Party, of which Abe was the leader, and approved by parliament until national elections are held in October of 2021. The Nikkei fell following Abe’s announcement. Elsewhere, Andrew Bailey, Bank of England Governor, pronounced more stimulus is available, if needed, to support the U.K. economy. German bond prices plunged, sending yields to their highest level since early June, a sign that inflation and interest rates will remain low. In China, industrial production fell in July, although it remains 4.8% ahead of last year’s pace.
  • Consumer confidence: The Conference Board Consumer Confidence Index® decreased in August after declining in July. The index stands at 84.8, down from 91.7 in July. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, decreased sharply from 95.9 to 84.2. The Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, declined from 88.9 in July to 85.2 in August.

Eye on the Month Ahead

Most economic indicators in July were positive as the economy continued to reopen. However, the pandemic still rages and new issues may develop as schools reopen. The trade dilemma with China will likely continue to impact the economies of both countries. New developments in the treatment of the pandemic should bring hope that the end is in sight and spur further economic growth.

What I’m Watching This Week – 31 August 2020

The Markets (as of market close August 28, 2020)

Last week began with a bang. The Dow climbed 1.4% to reach 28,300 for the first time since February. Investors were encouraged by word that the Trump administration may push the Food and Drug Administration to approve vaccines and treatments for the COVID-19 virus. While the rhetoric may be more bark than bite, it was enough to push market indexes to record highs. The Nasdaq advanced 0.6%, and the S&P 500 rose 1.0%, each reaching all-time highs. The Russell 2000 gained 1.0%, and the Global Dow picked up 1.5%. The dollar, Treasury yields, and crude oil prices all rose. Sectors that enjoyed a strong start to the week were energy, financials, and industrials. Technology and health care also posted modest advances.

Last Tuesday saw stocks advance despite weakening consumer confidence. Word that the United States and China intend to honor their commitment to the phase-one trade deal offered some encouragement for investors. The Nasdaq and the S&P 500 reached new highs, while the Global Dow (0.2%) and the Russell 2000 (0.2%) posted modest gains. Of the indexes listed here, only the Dow lost value. Crude oil prices and the dollar fell, while Treasury prices dropped, pushing yields higher.

Stocks continued to reach record highs last Wednesday on the expectations that the Federal Reserve will continue its supportive monetary policy and keep interest rates low. A strong durable goods report also helped boost investor confidence. Mega-cap stocks and technology shares drove the market higher. The dollar weakened; gold, crude oil, and Treasury yields rose.

Stocks were mixed last Thursday with the Dow, the S&P 500, and the Russell 2000 posting gains, while the Nasdaq and the Global Dow fell. Crude oil prices fell, the dollar was mixed, and Treasury yields surged. As expected, Federal Reserve Chair Jerome Powell indicated that the Fed would continue its accommodative measures and allow the economy to expand essentially without reins until it nears the Fed’s 2.0% target rate for inflation. Financials, real estate, and health care performed well on the day, while communications, tech, and energy lagged.

Last week ended on a high note for stock indexes. The Dow and the Nasdaq advanced 0.6%, respectively last Friday. The S&P 500 gained 0.7% to reach an all-time high for the sixth consecutive trading session. The Russell 2000 climbed 0.9% on the day, and the Global Dow climbed 0.7%. Crude oil prices declined on the day, and the dollar fell to its lowest level in nearly two years.

For the week, each of the benchmark indexes posted solid gains, led by the Nasdaq, and followed by the S&P 500, the Global Dow, the Dow, and the Russell 2000. Investors were buoyed by optimism about COVID-19 treatments and vaccines, assurances that the Federal Reserve will continue its accommodative stance, low-interest rates, and muted inflation. Year to date, the Dow finally passed its 2019 closing value, joining the Nasdaq and the S&P 500.

Crude oil prices ended the week at $42.97 per barrel by late Friday afternoon, up from the prior week’s price of $42.29. The price of gold (COMEX) increased last week, closing at $1,972.80, up from the prior week’s price of $1,946.20. The national average retail price for regular gasoline was $2.182 per gallon on August 24, $0.016 higher than the prior week’s price but $0.392 less than a year ago.

Stock Market Indexes

Market/Index 2019 Close Prior Week As of 8/28 Weekly Change YTD Change
DJIA 28,538.44 27,930.33 28,653.87 2.59% 0.40%
Nasdaq 8,972.60 11,311.80 11,695.63 3.39% 30.35%
S&P 500 3,230.78 3,397.16 3,508.01 3.26% 8.58%
Russell 2000 1,668.47 1,552.48 1,578.34 1.67% -5.40%
Global Dow 3,251.24 3,028.45 3,113.05 2.79% -4.25%
Fed. Funds target rate 1.50%-1.75% 0.00%-0.25% 0.00%-0.25% 0 bps -150 bps
10-year Treasuries 1.91% 0.64% 0.72% 8 bps -119 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 second estimate of gross domestic product for the second quarter decreased at an annual rate of 31.7%, according to the second estimate released by the Bureau of Economic Analysis. GDP decreased 5.0% in the first quarter. The second estimate is slightly better than the advance estimate (-32.9%). The decrease in GDP reflected decreases in personal consumption expenditures, 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 prices fell 1.8% in the second quarter. Corporate profits decreased by $227 billion in the second quarter, compared with a decrease of $276 billion in the first quarter.
  • Inflation, as measured by prices for consumer goods and services, advanced 0.3%, in July and is up only 1.0% over the last 12 months. Personal income grew by 0.4% in July, and disposable (after-tax) income climbed 0.2%. Consumer spending rose by 1.9% in July following a 6.2% surge in June as businesses continue to reopen from the shutdown resulting from the pandemic.
  • Sales of new single-family homes followed a strong June with an equally strong July, advancing 13.9% for the month. New home sales are 36.3% above the July 2019 estimate. The median sales price of new houses sold in July 2020 was $330,600. The average sales price was $391,300. There was a four-month supply of inventory in July based on the current sales pace.
  • New orders for durable goods surged in July, advancing 11.2% following June’s 7.7% increase. Excluding transportation, new orders increased 2.4%. Excluding defense, new orders increased 9.9%. Transportation equipment, up for three consecutive months, led the increase, gaining 35.6%. Nondefense new orders for capital goods in July increased 10.2%. New orders for defense aircraft and parts vaulted 77.1% in July.
  • The international trade in goods deficit expanded by $8.3 billion, or 11.7%, in July from June. In July, exports increased by $12.2 billion, or 11.8%. Imports exceeded June’s total by $20.5 billion, or 11.8%.
  • For the week ended August 22, there were 1,006,000 new claims for unemployment insurance, a decrease of 98,000 from the previous week’s level, which was revised down by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims was 9.9% for the week ended August 15, a decrease of 0.2 percentage point from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 15 was 14,535,000, a decrease of 223,000 from the prior week’s level, which was revised down by 86,000.

Eye on the Week Ahead

Important economic reports focusing on manufacturing, trade, and employment are out this week. Purchasing managers reported that manufacturing advanced in July for the first time in several months. August should show continued progress. The goods and services trade deficit was smaller in June than in the prior months. The July trade deficit is expected to expand further. There were nearly 1.8 million new jobs added in July. August’s figures may not be as robust.