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.

What I’m Watching This Week – 24 August 2020

The Markets (as of market close August 21, 2020)

Tech stocks rallied last Monday, and the S&P 500 once again spent some of the day above its record high, only to tail off by the end of trading. The Nasdaq jumped 1.0%, thrust higher by a surge in mega-tech stocks. The Dow fell 0.3%, the S&P 500 gained 0.3%, the Russell 2000 climbed 0.5%, and the Global Dow inched ahead 0.1%. Industrials fell, pulled lower by falling airline, aerospace, and defense stocks. Energy shares also dropped, despite a bump higher in crude oil prices. The dollar and Treasury yields declined by the close of trading last Monday.

The market was another mixed bag of results last Tuesday as the Nasdaq, the S&P 500, and the Global Dow posted modest gains, while the Dow and the Russell 2000 lost value. Treasury yields, crude oil, and the dollar fell, but gold prices rebounded to close the day higher. Mega-stocks and technology led the advance, while cyclical stocks dropped. A strong housing starts report drove the S&P 500 to a record high earlier in the day, but the index fell back as investors sold to capture gains.

Only the small caps of the Russell 2000 finished last Wednesday ahead, as the remaining benchmark indexes listed here fell. The Dow fell 0.3%, the S&P 500 dropped 0.4%, and the Nasdaq tumbled 0.6%. The dollar and Treasury yields rose, while crude oil prices sank.

Despite a spike in weekly jobless claims, stocks rebounded last Thursday. Market sectors fairing well included technology and communications, while financials, materials, industrials, and energy fell. The Dow rose 0.2%, the S&P 500 climbed 0.3%, and the Nasdaq surged 1.1% (reaching a new record). The Russell 2000 and the Global Dow fell 0.5% and 0.8%, respectively. Treasury yields, crude oil prices, and the dollar all lost value.

Last Friday saw tech stocks soar, pushing the Nasdaq to a record high. The Dow and the S&P 500 also advanced, gaining 0.7% and 0.3%, respectively. The Russell 2000 fell for the second consecutive day, dropping 0.8%. Crude oil prices and Treasury yields fell while the dollar rose.

For the week, the Nasdaq advanced 2.7%, followed by the S&P 500, which gained 0.7%. After reaching a record high last Tuesday, the S&P 500 recorded the fastest recovery from a bear market in history, as determined by Barron’s and Dow Jones Market Data. For the week, tech stocks and communication shares performed well, while energy and financials underperformed.

Crude oil prices ended the week at $42.29 per barrel by late Friday afternoon, up from the prior week’s price of $42.18. The price of gold (COMEX) fell for the second consecutive week, closing at $1,946.20, down from the prior week’s price of $1,954.10. The national average retail price for regular gasoline was $2.166 per gallon on August 17, unchanged from the prior week’s price and $0.432 less than a year ago.

Stock Market Indexes

Market/Index 2019 Close Prior Week As of 8/21 Weekly Change YTD Change
DJIA 28,538.44 27,931.02 27,930.33 0.00% -2.13%
Nasdaq 8,972.60 11,019.30 11,311.80 2.65% 26.07%
S&P 500 3,230.78 3,372.85 3,397.16 0.72% 5.15%
Russell 2000 1,668.47 1,577.88 1,552.48 -1.61% -6.95%
Global Dow 3,251.24 3,049.45 3,028.45 -0.69% -6.85%
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% 0.70% 0.64% -6 bps -127 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

  • July saw housing starts jump by 22.6%, the largest monthly increase since 2016. Housing starts are 23.4% above the July 2019 rate. Single-family housing starts in July were 8.2% above the June total. Building permits also soared in July, climbing 18.8% above the June total and 9.4% higher than the July 2019 mark. Building permits for single-family homes increased by 17.0% in July. Housing completions rose by 3.6% last month and are 1.7% ahead of the July 2019 pace. Single-family home completions increased by 1.8% for the month.
  • Existing home sales followed a robust June with a strong July. Total home sales jumped 24.7% over June’s totals, setting a new record for monthly home sales. Total home sales are 8.7% ahead of last year’s pace. Single-family home sales increased 23.9% in July. The median existing-home price for all housing types in July was $304,100 ($295,300 in June), up 8.5% from July 2019. The median existing single-family home price was $307,800 in July. Total housing inventory sits at a 3.1-month supply at the current sales pace, down from 3.9 months in June.
  • For the week ended August 15, there were 1,106,000 new claims for unemployment insurance, an increase of 135,000 from the previous week’s level, which was revised up by 8,000. According to the Department of Labor, the advance rate for insured unemployment claims was 10.2% for the week ended August 8, a decrease of 0.4 percentage point from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 8 was 14,844,000, a decrease of 636,000 from the prior week’s level, which was revised down by 6,000.

Eye on the Week Ahead

The last week of the month brings with it some important economic reports. The second estimate of the gross domestic product for the second quarter is available this week. According to the advance estimate, the economy slumped at a rate of nearly 33.0% in the second quarter. July’s report on personal income and outlays should show that consumer income increased last month, as did the cost of consumer goods and services. While inflation is inching upward, it is still well below 2.0%.

What I’m Watching This Week – 17 August 2020

The Markets (as of market close August 14, 2020)

Stocks started the week mostly higher as investors anticipated additional virus stimulus relief. Value stocks, industrials, and energy shares outperformed mega-cap tech stocks last Monday. Of the benchmark indexes listed here, only the Nasdaq lost value. The S&P 500 closed the day 0.3% higher, marking the seventh consecutive day of positive returns. The Dow vaulted 1.3%, followed by the Russell 2000, which gained 1.0%. Treasury yields, crude oil, gold, and the dollar all climbed by the end of trading last Monday.

Tech stocks lost value again last Tuesday, dragging the major indexes down. Sectors including travel, automakers, financials, industrials, and energy posted solid gains. The Nasdaq fell the hardest, losing 1.7% on the day, followed by the S&P 500 (-0.8%), the Russell 2000 (-0.6%), and the Dow (-0.4%). The Global Dow (0.8%) advanced as did the dollar and Treasury yields. Crude oil prices fell by nearly 1.0%.

The S&P 500 continued to push higher last Wednesday, reaching a record high at one point, only to drop back by the end of the day. Nevertheless, large caps fared well as the S&P 500 closed up 1.4% while the Dow finished ahead 1.1%. Tech stocks rebounded, driving the Nasdaq up 2.1%. The small caps of the Russell 2000 closed 0.5% higher, and the Global Dow rose 1.1%.

For the first time in quite a while, weekly unemployment claims were below 1 million. That news wasn’t enough to motivate investors, as stocks tumbled last Thursday. Only the Nasdaq pushed slightly higher, gaining 0.3% on the day. The Dow dropped 0.3%, both the S&P 500 and the Russell 2000 fell 0.2%, and the Global Dow dipped 0.5%. Treasury yields spiked; crude oil and the dollar retreated. Energy, financials, real estate, and industrials had a rough day, while mega-cap and technology stocks fared well.

Equities closed last Friday on a sour note, tainting what was otherwise a solid week in the market. The S&P 500 fell less than 0.1% after nearing a record high during the day. The Dow inched ahead 0.1%, while the Nasdaq, the Russell 2000, and the Global Dow lost value. Utilities and health care led the decline while energy shares advanced. Several European nations and New Zealand have reported spikes in the number of reported virus cases. Investors are getting fewer positive vibes about a new round of virus-related stimulus coming before the end of the month. It appears that any financial help from Congress will have to wait until September.

Despite last Friday’s downturn, the market enjoyed another positive week of growth. Each of the benchmark indexes listed here posted gains, with the Dow and the Global Dow leading the way. Value stocks and industrials outperformed mega-techs for the week. Treasury yields surged as prices plunged, as consumer prices continued to climb following July gains in the Consumer Price Index, retail sales, and producer prices.

Crude oil prices ended the week at $42.18 per barrel by late Friday afternoon, up from the prior week’s price of $41.45. The price of gold (COMEX) dipped last week after nearly two months of weekly gains. Last Friday saw the price of gold close at $1,954.10, down from the prior week’s price of $2,041.30. The national average retail price for regular gasoline was $2.166 per gallon on August 17, $0.010 lower than the prior week’s price, and $0.458 less than a year ago.

Stock Market Indexes

Market/Index 2019 Close Prior Week As of 8/14 Weekly Change YTD Change
DJIA 28,538.44 27,433.48 27,931.02 1.81% -2.13%
Nasdaq 8,972.60 11,010.98 11,019.30 0.08% 22.81%
S&P 500 3,230.78 3,351.28 3,372.85 0.64% 4.40%
Russell 2000 1,668.47 1,569.18 1,577.88 0.55% -5.43%
Global Dow 3,251.24 2,992.30 3,049.45 1.91% -6.21%
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% 0.56% 0.70% 14 bps -121 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

  • As more businesses reopen and the economy picks up steam, inflation is beginning to advance. Prices consumers pay for goods and services, as measured by the Consumer Price Index, increased 0.6% in July, the same rate seen in June. For the 12 months ended in July, the CPI is up 1.0%. Gas prices continued to rise in July following June’s sharp increase, climbing 5.6% for the month. However, gas prices are down 20.3% for the 12 months ended in July. Other areas seeing a price increase in July include used cars and trucks (2.3%), apparel (1.1%), and transportation services (3.6%). Food prices fell 0.4% last month, with food prices at home dropping 1.1%. The index less food and energy rose 0.6% in July, its largest increase since January 1991.
  • According to the latest report from the Federal Reserve, industrial production advanced 3.0% in July after increasing 5.7% the previous month. Despite the summer increases, industrial production is 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 decreasing for five consecutive months. The output of utilities increased 3.3%, as unusually warm temperatures increased the demand for air conditioning. The level of total industrial production was 8.2% lower in July than it was a year earlier.
  • July saw producer prices jump 0.6% following a 0.2% decline in June. The July increase is the largest rise since a 0.7% advance in October 2018. Prices for both services (0.5%) and goods (0.8%) rose higher last month. For the 12 months ended in July, producer prices are down 0.4%. A 5.3% jump in energy prices led the July increase in goods prices. Gasoline prices, in particular, surged 10.1% for the month. The index for goods less foods and energy moved up 0.3%. Pushing prices for services higher was a 0.8% increase in trade prices.
  • Retail sales increased 1.2% in July after advancing 8.4% in June. Retail sales are 2.7% ahead of the July 2019 rate. Businesses enjoying an uptick in sales last month were electronics and appliance stores (22.9%), gasoline stations (6.2%), bars and restaurants (5.0%), and clothing stores (5.7%). Internet sales advanced marginally, up 0.7%.
  • The Treasury budget for July came in at $63 billion, lower than expected. The budget deficit for June was a whopping $864 billion. Government expenditures in July were $626 billion, the bulk of which came from Health and Human Services expenditures ($170 billion). Nevertheless, the total deficit through the first 10 months of the fiscal year is $2.81 trillion — an increase of 224% from the same period in fiscal year 2019. Year-over-year, government spending has increased 51%, while receipts have remained relatively unchanged.
  • S. import prices increased 0.7% in July following a 1.4% increase in June. Higher fuel prices led the monthly advances in import prices for both June and July. Despite the recent increases, import prices have declined 3.3% over the past year. Export prices advanced 0.8% in July after climbing 1.2% the previous month.
  • According to the latest Job Openings and Labor Turnover report, June saw the number of job openings increase by 518,000 to 5.9 million. Job openings rose in a number of industries, with the largest increases in accommodation and food services (198,000); other services (69,000); and arts, entertainment, and recreation (34,000). Hires decreased to 6.7 million in June, still the second highest level in the history of the survey, second only to May’s tally. Total separations increased to 4.8 million. Over the 12 months ended in June, hires totaled 70.2 million and separations totaled 79.1 million, yielding a net employment loss of 8.9 million.
  • For the week ended August 8, there were 963,000 new claims for unemployment insurance, a decrease of 228,000 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 10.6% for the week ended August 1, a decrease of 0.4 percentage point from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 1 was 15,486,000, a decrease of 604,000 from the prior week’s level, which was revised down by 17,000.

Eye on the Week Ahead

This week’s economic data focuses on the housing market for July. Existing home sales surged in June, climbing over 20% from May’s totals. July’s figures may not be so robust but should continue the positive trend in home sales.

What I’m Watching This Week – 10 August 2020

The Markets (as of market close August 7, 2020)

Last week began with stocks vaulting higher for the tenth Monday in a row. The Nasdaq reached a record high as tech stocks surged. The dollar gained value following a poor July while prices for Treasuries dipped pushing yields higher. Investors were encouraged by news of progress made toward another round of financial stimulus to further help offset the financial and economic toll resulting from the pandemic. Of the indexes listed here, the Russell 2000 led the way, climbing 1.8%, followed by the Nasdaq, the Dow, the Global Dow, and the S&P 500, which advanced 0.7% by the end of last Monday’s trading.

Stocks closed higher last Tuesday, led by the energy and communications sectors. For most of the day, equities were surging. However, the latest stalemate in negotiations over new COVID-19 stimulus worried investors, putting a halt on the market gains. Nevertheless, each of the benchmark indexes listed here closed the day ahead, led by the Global Dow, followed by the Russell 2000 and the Dow. Both the S&P 500 and Nasdaq inched up 0.4%.

Last Wednesday, investors pushed stocks higher on renewed hopes for a quick passage of pandemic stimulus relief and progress on a COVID-19 vaccine. Cyclical, energy, and value stocks posted notable gains. Each of the indexes enjoyed positive returns, led by the Russell 2000, which gained 1.9%, followed by the Dow (1.4%), the Global Dow (1.0%), the S&P 500 (0.6%), and the Nasdaq (0.5%). Crude oil and gold prices pushed ahead. Treasury prices fell, lifting yields higher.

Large-cap and tech stocks pushed higher last Thursday while the rest of the market sagged. The S&P 500 climbed for the fifth straight day, gaining 0.6%, while the Dow jumped 0.7% and the Nasdaq gained 1.0%. The Russell 2000 and the Global Dow each dipped 0.1%. Crude oil prices, the dollar, and Treasury yields all fell.

Stocks were a mixed bag last Friday as the Dow, the S&P 500, and the Russell 2000 posted end-of-day gains, while the Nasdaq and the Global Dow lost value. Investors showed some concern following President Trump’s order banning U.S. citizens from using TikTok or WeChat. Tech stocks lagged as did communications stocks.

Overall, stocks rose higher week-over-week. Each of the indexes listed here enjoyed notable gains. The Russell 2000 was the week’s big winner, ratcheting up 6.0%, followed by the Dow, the Global Dow, the Nasdaq, and the S&P 500. Year to date, the Nasdaq is nearly 23.0% ahead of its 2019 closing value. The S&P 500 has added 4.0% since last year’s close, while the Rusell 2000 and the Dow are close to recouping pandemic-related losses.

Crude oil prices ended the week at $41.45 per barrel by late Friday afternoon, up from the prior week’s price of $40.41. The price of gold (COMEX) advanced for the eighth consecutive week, closing at $2,041.30, up from the prior week’s price of $1,989.90. The national average retail price for regular gasoline was $2.176 per gallon on August 3, $0.001 higher than the prior week’s price but $0.512 less than a year ago.

Stock Market Indexes

Market/Index 2019 Close Prior Week As of 8/7 Weekly Change YTD Change
DJIA 28,538.44 26,428.32 27,433.48 3.80% -3.87%
Nasdaq 8,972.60 10,745.27 11,010.98 2.47% 22.72%
S&P 500 3,230.78 3,271.12 3,351.28 2.45% 3.73%
Russell 2000 1,668.47 1,480.43 1,569.18 5.99% -5.95%
Global Dow 3,251.24 2,920.53 2,992.30 2.46% -7.96%
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% 0.53% 0.56% 3 bps -135 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 continues to rebound as more businesses reopen after being curtailed due to the COVID-19 pandemic. There were 1.8 million new jobs added in July, well below the 4.8 million employment increase in June and the 2.7 million new jobs added in May. The unemployment rate fell to 10.2%, and the number of unemployed persons fell 1.4 million to 16.3 million. Despite declines over the past three months, these measures are up by 6.7 percentage points and 10.6 million, respectively, since February. The largest employment increases in July occurred in leisure and hospitality, government, retail trade, professional and business services, other services, and health care. The labor force 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% but remains lower than in February (61.1%). In July, average hourly earnings rose by $0.07 to $29.39. The average workweek decreased by 0.1 hour to 34.5 hours in July.
  • The manufacturing sector expanded in July for the third month in a row, according to the latest Manufacturing ISM® Report On Business®. The July purchasing managers’ index registered 54.2%, up 1.6 percentage points from the June index. New orders, production, backlog of orders, prices, and employment also increased in July. Supplier deliveries and inventories each dropped off slightly, likely due to the increase in demand. Overall, survey respondents were generally optimistic that the manufacturing sector would continue its recovery after the disruption caused by the pandemic.
  • The services sector expanded in July for the second consecutive month, according to the latest Services ISM® Report On Business®. Supplier deliveries fell in July as demand ratcheted up following the gradual reopening of the economy. Prices for services also dropped in July compared to the previous month. Survey respondents remain concerned about the pandemic; however, they are mostly optimistic about business conditions and the economy as businesses continue to reopen.
  • The trade deficit narrowed by $4.1 billion in June to $50.7 billion. Exports and imports increased in June following monthly declines since March that were, in part, due to the impact of COVID-19. June exports were $158.3 billion, $13.6 billion more than May exports. June imports were $208.9 billion, $9.5 billion more than May imports. The decrease in the trade deficit is a reflection of a greater monthly improvement in exports, up 9.4%, over imports, which increased 4.7%. Year to date, the goods and services deficit decreased $23.1 billion, or 7.8%, from the same period in 2019. Exports decreased $199.1 billion, or 15.7%. Imports decreased $222.3 billion, or 14.2%.
  • For the week ended August 1, there were 1,186,000 new claims for unemployment insurance, a decrease of 249,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims was 11.0% for the week ended July 25, a decrease of 0.6 percentage point from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 25 was 16,107,000, a decrease of 844,000 from the prior week’s level, which was revised down by 67,000.

Eye on the Week Ahead

July reports focusing on inflation, the federal budget, import and export prices, and industrial production are on tap this week. Prices for consumer goods and services have been muted for much of the year, having risen less than 1.0% from last July.

Monthly Market Review – July 2020

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

Stocks posted gains in July in spite of gloomy news on the economic and pandemic fronts. Investors continued to trust equities despite the gross domestic product falling nearly 33.0% in the second quarter, mixed quarterly corporate earnings results, emerging pandemic hot spots, growing unemployment claims, and ongoing turmoil between the United States and China.

On the positive side, 4.8 million new jobs were added in June, the housing sector surged, and industrial production continued to rebound. Investors also may be hoping that more financial stimulus is in the offing. Energy stocks, which had plunged in May, rebounded in June and continued to keep pace in July.

The COVID-19 pandemic continues to dominate nearly every aspect of life. Some states are seeing the number of reported cases soar and have considered (and, in a few cases, enacted) partial lockdowns. Throughout July, several companies made announcements of progress toward either treatment or a vaccine. States and local communities struggle with plans to get students back to school.

Through it all, investors stayed with stocks, pushing them to their fourth consecutive month-over-month gain. The big winners in July were the Nasdaq and the S&P 500. The Global Dow advanced 3.5%, followed by the Russell 2000 and the Dow.

Year to date, the Nasdaq and the S&P 500 are ahead of their respective 2019 closing values. The next closest is the Dow, which remains more than 7.0% behind last year’s pace.

By the close of trading on July 31, the price of crude oil (CL=F) rose to $40.41 per barrel, slightly ahead of its June 30 price of $39.35 per barrel. The national average retail regular gasoline price was $2.175 per gallon on July 27, $0.001 higher than the June 29 selling price of $2.174 but $0.540 less than a year ago. The price of gold soared, climbing to $1,989.90 by close of business on July 31, up from its June closing price of $1,798.80.

Stock Market Indexes

Market/Index 2019 Close Prior Month As of July 31 Month Change YTD Change
DJIA 28,538.44 25,812.88 26,428.32 2.38% -7.39%
Nasdaq 8,972.60 10,058.77 10,745.27 6.82% 19.76%
S&P 500 3,230.78 3,100.29 3,271.12 5.51% 1.25%
Russell 2000 1,668.47 1,441.37 1,480.43 2.71% -11.27%
Global Dow 3,251.24 2,821.05 2,920.53 3.53% -10.17%
Fed. Funds 1.50%-1.75% 0.00%-0.25% 0.00%-0.25% 0 bps -150 bps
10-year Treasuries 1.91% 0.66% 0.53% -13 bps -138 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 4.8 million in June after adding 2.5 million jobs in May. Notable job gains occurred in leisure and hospitality, education and health services, retail trade, manufacturing, and professional and business services. The unemployment rate dropped 2.2 percentage points to 11.1% for the month as the number of unemployed persons dropped by 3.2 million to 17.8 million. Although unemployment fell in May and June, the jobless rate and the number of unemployed are up by 7.6 percentage points and 12.0 million, respectively, since February. In June, average hourly earnings fell for the second consecutive month, decreasing by $0.35 to $29.37, primarily due to job gains among lower-paid workers. Average hourly earnings increased by 5.0% over the last 12 months ended in June. The average workweek decreased by 0.2 hour to 34.5 hours in June. The labor participation rate for June increased 0.7 percentage point to 61.5%. The employment-population ratio rose by 1.8 percentage points to 54.6% last month.
  • Claims for unemployment insurance began to drop in June and July following May’s historic levels. Nevertheless, as of July 18, there were over 17 million workers still receiving unemployment insurance. The insured unemployment rate was 11.6% as of July 18. The largest increases in initial claims for the week ended July 18 were in Louisiana (+5,728), Virginia (+5,654), California (+4,680), Tennessee (+3,713), and Alabama (+3,113). During the week ending July 11, 46 states reported 12,413,322 individuals claiming Pandemic Unemployment Assistance benefits, and 46 states reported 1,055,098 individuals claiming Pandemic Emergency Unemployment Compensation benefits.
  • FOMC/interest rates: The Federal Open Market Committee held its regularly scheduled meeting at the end of July and unanimously voted to hold the target range for the federal funds rate at its current 0.00%-0.25%. Although the FOMC noted that economic activity and employment have picked up somewhat in recent months, they remain well below their levels at the beginning of the year. It was also noted that the ongoing public health crisis caused by the COVID-19 pandemic will weigh heavily on economic activity, employment, and inflation in the near term. The FOMC expects to maintain this rate until it is confident the economy has weathered the recent events. The FOMC isn’t scheduled to meet again until September.
  • GDP/budget: According to the advance estimate for the second-quarter gross domestic product, the economy decelerated at an annualized rate of 32.9%. The 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 34.6%, reeling from the initial effects of the COVID-19 pandemic. Fixed investment fell 29.9% in the second quarter (-1.4% in the first quarter), and nonresidential fixed investment dropped 27.0% in the second quarter, compared to a 6.4% decline in the prior quarter. Exports were down 64.1%, and imports sank 53.74%. Nondefense government expenditures increased 39.7% 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 2020, the deficit is $2.74 trillion. Over the same period for the previous fiscal year, the budget deficit was $744.1 billion.
  • Inflation/consumer spending: According to the Personal Income and Outlays report for June, personal income and disposable (after-tax) personal income fell 1.1% and 1.4%, respectively. This followed May’s decreases of 4.4% (personal income) and 5.1% (disposable personal income). The decrease in personal income last month is largely attributable to a reduction in federal government payments from recovery programs initiated due to the pandemic. Consumers ramped up their spending in June, as personal consumption expenditures increased 5.6% after climbing 8.5% in May. Inflation remains muted as prices for consumer goods and services rose a scant 0.8% in June after creeping ahead 0.1% the previous month. For the past 12 months, consumer prices are up a mere 0.8%.
  • 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% for 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 posted strong sales numbers in June. Sales of existing homes jumped 20.7% last month after plunging in May and April. Over the 12 months ended in June, existing-home sales are down 11.3% (-26.6% for the 12 months ended in May). The median existing-home price in June was $295,300 ($284,600 in May). Unsold inventory of existing homes represents a 4.0-month supply at the current sales pace, down from 4.8 months in May. Sales of existing single-family homes vaulted 19.9% in June over the previous month, but are off 9.9% from a year ago. After climbing 16.6% in May, sales of new single-family homes surged again in June, increasing 13.8% for the month. The median sales price of new houses sold in June was $329,200 ($317,900 in May). The average sales price was $384,700 ($368,800 in May). June’s inventory of new single-family homes for sale represents a supply of 4.7 months at the current sales pace.
  • Manufacturing: Total industrial production rose 5.4% in June after increasing 1.4% in May; even so, it remained 10.9% below its pre-pandemic February level. For the second quarter as a whole, the index fell at an annual rate of 42.6%, its largest quarterly decrease since the industrial sector retrenched after World War II. Manufacturing output climbed 7.2% in June, as all major industries posted increases. The largest gain, 105.0%, was registered by motor vehicles and parts, while factory production elsewhere rose 3.9%. Mining production fell 2.9%, and the output of utilities increased 4.2%. Total industrial production was 10.8% lower in June than it was a year earlier.
  • New orders for durable goods followed May’s 15.1% increase by climbing 7.3% in June. Transportation equipment, up for two consecutive months, again drove the June increase, surging ahead by 20.0%. Excluding transportation, new orders increased 3.3%. Excluding defense, new orders increased 9.2%.
  • Imports and exports: The price index for U.S. imports rose 1.4% in June, following a 0.8% increase in May. Both the June and May advances were driven by rising fuel prices. U.S. export prices also increased 1.4% in June, after advancing 0.4% the previous month. Year to date, import prices are down 3.8%, while export prices have fallen 4.4%.
  • The international trade in goods deficit was $70.6 billion in June, down $4.6 billion from $75.3 billion in May. Exports of goods for June were $102.6 billion, $12.5 billion more than May exports. Imports of goods for June were $173.2 billion, $7.9 billion more than May imports. Exports of motor vehicles increased 144% in June over May. Imports of motor vehicles climbed 108% in June.
  • The latest information on international trade in goods and services, out July 2, is for May and shows that the goods and services trade deficit was $54.6 billion, an increase of $4.8 billion, or 9.7% over the April deficit. May exports were $6.6 billion, or 4.4% less than April exports. May imports were $1.8 billion, or 0.9% less than April imports. Year to date, the goods and services deficit sits at $223.4 billion, a decrease of $23.3 billion, or 9.1%, from the same period in 2019.
  • International markets: After much haggling, European Union leaders agreed to a historic $858 billion recovery fund to help rebuild EU economies decimated by the pandemic. The stimulus is much needed, particularly after eurozone gross domestic product fell 40.3% in the second quarter, pushing Europe into recession territory. British stocks fell in July as the FTSE 100 lost roughly 3.0%. The Hang Seng Index declined nearly 1.7% for the month. China’s gross domestic product rebounded from the initial impact of the COVID-19 virus, expanding 11.5% in the second quarter after falling 9.8% in the first quarter.
  • Consumer confidence: The Conference Board Consumer Confidence Index® decreased in July after increasing in June. The index stands at 92.6, down from 98.3 in June. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — improved from 86.7 to 94.2. However, the Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, decreased from 106.1 in June to 91.5 last month.

Eye on the Month Ahead

June’s economic data was a mixed bag. Nearly 5 million jobs were added to the labor force, the housing sector picked up steam, and industrial production rose. On the other hand, the federal budget deficit neared $900 billion, the international trade deficit increased, and producer prices sank. As more data for July is released, it will likely offer a mixed bag of good and bad as the economy slowly pushed toward recovery. Entering August, most eyes will focus on Congress and the president as they try to hammer out another financial stimulus package.