Despite early polling pointing to a decisive victory for Joe Biden and the Democrats gaining control of the Senate in what would be a Blue Wave, the actual votes indicate a much different result than was anticipated, creating somewhat of a Purple Haze. The race for President remains undecided this morning with several states still counting ballots, including record numbers of mail-in and absentee ballots, and the process could last for days. Control of the Senate also remains unresolved but appears to be leaning toward a retention of the majority by Republicans. This is not a terribly surprising scenario. We saw in 2016 the inherent flaws in polling data that skew toward Democratic candidates and thought these races would be much closer than the polls indicated and positioned our portfolios accordingly.
Despite the election uncertainty, and the Doomsday fears of many investors, stock market reaction has largely been positive with futures pointing toward a strong open and technology stocks leading. Bond yields have also dropped overnight as the complexion of the races have shifted. These market actions point to the anticipation of a divided government, under which expectations for the size of further stimulus are lowered.
This is clearly a fluid situation and we will continue to monitor closely as it develops over the coming hours and days. As always, please do not hesitate to reach out to your Relationship Manager or Investment Officer if you have any questions.
Hurricane Zeta made landfall in Louisiana late Wednesday afternoon as a strong Category 2, leaving over 2.6 million people without power across seven states. The hurricane quickly weakened to a Tropical Storm, but maintained that strength as it traveled northeast into the Carolinas. Zeta is the 11th named storm and 6th hurricane to make landfall in the United States this year, a seasonal record. As a result of the hurricane, at least six people died, power lines and trees were knocked down, houses were destroyed, and streets were flooded. Close to 2,000 National Guard personnel are assisting with the cleanup work in Louisiana.
Coronavirus cases and hospitalizations across the United States are at their highest levels since May, prompting some states to announce new restrictions on businesses. Global daily deaths came in at more than 7,000 twice this week, bringing the 7-day average higher. Europe continues to struggle with rapidly spreading infections as a full lockdown goes into effect today in France and will last until the end of November. France is working towards a plan that will limit the economic fallout from the lockdown, targeting a contraction in GDP of roughly half the 30% drop that was seen during the first one. Regeneron has stopped enrollment in its trial for its antibody therapy used by President Trump, for patients with serious cases, after a safety issue warning from a third party. Eli Lilly also ceased enrollments into its program after research indicated that patients were unlikely to recover from the treatment in the late stages of infection.
Markets slipped this week. The S&P 500 dropped -5.62% and closed at 3,270. The Dow Jones fell -6.47% and closed at 26,504. Year-to-date, the S&P 500 is up 2.77% and the Dow Jones is down -5.38%
Yields rose this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.38% and 0.87%, respectively.
The spot price of WTI Crude fell this week. Prices fell -10.61% and closed at $35.62 per barrel. Year to date, Oil prices are down -41.66%.
The spot price of Gold fell by -1.26% and closed at $1,878.10 per ounce. Year to date, Gold prices are up 23.78%.
Initial jobless claims fell to 751,000 and the four-week moving average of claims fell by 25,000 to 788,000. Claims fell by 12,000 in Texas, 9,000 in Florida, and by 8,000 in California. Claims rose by 10,000 in Michigan, 6,000 in Illinois, and by 3,000 in Virginia.
Real GDP rose by 33.1% versus expectations for an increase of 32.0%
Personal consumption rose by 40.7% versus expectations for an increase of 38.9%
The core PCE inflation index rose by 3.5% annually versus expectations for an increase of 4.0%
Sales of new single-family homes fell by -3.5% to a seasonally-adjusted annualized rate of 959,000 units versus expectations for an increase of 1.4%
Pending home sales fell by -2.2% versus expectations for an increase of 2.9%
The FHFA house price index rose by 1.5% versus expectations for an increase of 0.7%
New orders for durable goods rose by 1.9% versus expectations for an increase of 0.5%
Durable goods orders ex-transports rose by 0.8% versus expectations for an increase of 0.4%
Core capital goods orders rose by 1.0% versus expectations for an increase of 0.5%
Core capital good shipments rose by 0.3% versus expectations for an increase of 0.4%
The Conference Board index of consumer confidence fell by 0.4 points to 100.9 versus expectations for a reading of 102.0
The University of Michigan’s index of consumer sentiment rose by 0.6 points to 81.8 versus expectations for a reading of 81.2
Retail inventories rose by 1.6% versus expectations for an increase of 0.5%
Wholesale inventories fell by -0.1% versus expectations for an increase of 0.4%
Personal income rose by 0.9% versus expectations for an increase of 0.4%
Personal spending rose by 1.4% versus expectations for an increase of 1.0%
Fact of the Week
The price of lumber increased nearly 50% from 4/30/20 to 8/31/20, the largest 4-month increase ever in the cost of lumber based upon data maintained since 1949. The rally was driven by an acute supply shortage stemming from widespread production cuts due to pandemic-related demand concerns that proved to be short-lived and missed the positive catalysts for home construction and improvement that emerged. (source: Bureau of Labor Statistics, Bloomberg Intelligence).
Yesterday the S&P 500 traded off -3.5%, marking the third consecutive day of losses for a cumulative drop of -5.6% for the week. This most recent move leaves the S&P 500 -8.7% below the most recent high and roughly flat for the year. Since the March 23rd market bottom the market has increased an unprecedented 60% over the following five months. During that recovery, the market posted three consecutive down days only once. As the initial federal stimulus programs ended and uncertainty around further stimulus increased, we saw market complacency replaced by the volatility that often precedes Presidential elections.
With news of Coronavirus related shutdowns increasing at home and abroad, we must be careful to avoid a false narrative. Swift market moves such as this are best described as a market adjustment in search of a headline. Market pundits often fall hostage to the same behavioral biases that they warn investors against. Rather than properly assessing all available information and resulting market impact, these experts instead seek out one culprit for the current market movements. If only it were that easy! In the 39 trading days since the recent market high, the market has traded in negative territory 20 times and posted three consecutive down days five times in just over a month.
While we acknowledge a potential widespread shutdown to contain the Coronavirus would be economically devastating, we don’t believe this concern to be the primary driver behind current market conditions. On the election front, though Biden maintains a large lead in national polls, they have tightened recently and the probability of a Democratic sweep has dropped from over 70% to near 50%. As outcomes become less clear ahead of the elections, profit taking has accelerated and further pressured markets. Also, tightening of polls in battle ground states has increased odds of a contested election, further adding to market uncertainty.
As we move through this election cycle we must recognize that this is not unchartered territory. We have had elections where one party has gained control of the House, Senate and Presidency, in 2000 we had a contested election thanks to “hanging chads”, and earlier this year we managed through a pandemic driven shutdown. Though another shutdown would certainly hamper further recovery, many states seeing increased Covid cases have already taken a stance against shutdowns. In those states with more stringent pandemic protocols, business and citizens are challenging those protocols and are gaining judicial support. With an impending resolution for further Coronavirus relief being anticipated post-election and a strong possibility of increased infrastructure spending next year, the economic backdrop is very favorable. While we remain cautious during times of heightened volatility, we recognize these are also the times to be opportunistic and incrementally position portfolios toward their long-term objectives.
For over 100 years, Old Second Wealth Management has navigated our clients’ assets through a multitude of world events helping them meet their financial goals. As always, please do not hesitate to reach out to your Relationship Manager or Investment Officer should you have any questions or concerns.
The Midwest region of the United States is seeing record new daily cases of the coronavirus, however, the amount of daily deaths has not changed much. Hospitalizations in the United States are currently higher than levels seen in late July and some hospitals in the Midwest are at capacity. Chicago Mayor Lori Lightfoot responded to the new spike in daily cases by imposing a business curfew that would require businesses to close at 10P.M every night. Tighter coronavirus restrictions take effect today in four counties surrounding Chicago, which includes a ban on indoor service at bars and restaurants. Illinois Governor J.B Pritzker put the restrictions in place as a result of a sustained positivity rate of over 8%, and the situation will be evaluated again in two weeks. The Illinois Governor responded to restaurant owners threatening to flout his orders by stating that the state police would be issuing citations and owners could lose their liquor and video gambling licenses if they are in violation.
The United States Embassy in Turkey announced that it is immediately suspending all citizen and visa services as a result of a significant security alert. “U.S Mission Turkey has received credible reports of potential terrorist attacks and kidnappings against U.S. citizens and foreign nationals in Istanbul and potentially other locations” according to the State Department. No other details were given by the State Department, but the announcement comes as Turkey has been testing Russian S-400 air-defense missiles near the Black Sea, despite strong objection from the United States.
Markets moved lower this week. The S&P 500 fell -0.51% and closed at 3,466. The Dow Jones dropped -0.90% and closed at 28,337. Year-to-date, the S&P 500 is up 8.89% and the Dow Jones is up 1.17%
Yields rose this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.37% and 0.84%, respectively.
The spot price of WTI Crude fell this week. Prices fell -3.43% and closed at $39.71 per barrel. Year to date, Oil prices are down -34.97%.
The spot price of Gold rose by 0.23% and closed at $1,903.59 per ounce. Year to date, Gold prices are up 25.46%.
Initial jobless claims fell to 787,000 and the four-week moving average of claims fell by 22,000 to 811,000. Claims fell by 12,000 in Florida, 9,000 in Georgia, 9,000 in Michigan, and by 8,000 in New York. Claims increased by 7,000 in Texas, 5,000 in Massachusetts, and by 5,000 in Virginia.
The level of housing starts increased by 1.9% to a seasonally-adjusted-annualized-rate of 1.42 million units versus expectations for an increase of 3.5%
Existing home sales rose by 9.4% to a seasonally-adjusted-annualized-rate of 6.54 million units versus expectations for an increase of 5.0%
Fact of the Week
Americans have reduced their outstanding balances on their revolving debt, e.g., credit card debt and home equity loans, for 6 months in a row, i.e., March 2020 through and including August 2020 (source: Federal Reserve).
President Trump walked back statements made earlier in the week about holding off on stimulus until after the election. The President said last night that talks on an aid package had resumed, and Speaker Pelosi and Treasury Secretary Mnuchin are expected to talk speak again.
Regeneron Pharmaceuticals has asked the FDA to provide emergency use authorization on its REGN-COV2 antibody combination for treatment of COVID-19. The company stated they have enough for about 50,000 patients, and expect to have about 300,000 doses within the next few months. The same drug was given to President Trump last Friday, and the President has spoken positively of the treatment on Twitter, saying that he would approve emergency use of the drug.
Speaker Pelosi and Treasury Secretary Mnuchin met on Wednesday to discuss a possible standalone relief package for airline companies, totaling as much as $25 Billion. The relief package is being considered a bipartisan stand-alone relief package, separate from a large scale economic relief package. Talks of the airline relief come after major airlines began to announce plans to begin furloughing thousands of workers if they did not receive government aid last week.
Markets rallied this week. The S&P 500 rose 3.89% and closed at 3,477. The Dow Jones jumped 3.31% and closed at 28,533. Year-to-date, the S&P 500 is up 9.2% and the Dow Jones is up 1.86%.
Interests rates rose this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.34% and 0.77%, respectively.
The spot price of WTI Crude oil rebounded this week. Prices fell 9.45% and closed at $40.55 per barrel. Year to date, Oil prices are down -33.59%.
The spot price of Gold rose 1.55% and closed at $1,929.32 per ounce. Year to date, Gold prices are up 27.16%.
Job openings decreased by 204k to 6,493k in August vs. an upwardly revised 6,697k in July. The slowdown is consistent with some slowdown in labor demand heading into fall months.
The ISM non-manufacturing index increased by 0.9 points to 57.8 in September, against expectations for a decline.
Initial jobless claims fell more than expected for the week ended October 3. The 4-week moving average declined by 13,000 to 857,000.
Nationwide continuing claims—the number of persons receiving benefits through standard programs—decreased 1,003k to 10,976k.
Fact of the Week
The US Money Market industry has grown from $3.63 Trillion on 1/1/2020 to $4.4 Trillion on 9/30/2020. Despite investors holding more cash, the S&P 500 is up over 9% year to date on a total return basis (Source: Investment Company Institute).
President Trump is reportedly experiencing “mild symptoms” after he and first lady Melania Trump tested positive for coronavirus late last night. One of the President’s closest advisors, Hope Hicks, tested positive for the coronavirus on Thursday evening which prompted immediate testing for everyone that has been in close contact with her. President Trump and the first lady will begin a quarantine process that involves the both of them remaining in the White House while he continues to handle his duties similar to the way Canada’s Prime Minister Justin Trudeau did when he contracted the virus in March. All of the White House officials who have been in contact with the President, some members of the House of Representatives, and Presidential Candidate Joe Biden have all tested negative for coronavirus today. Economic Advisor Larry Kudlow told reporters that the President would take at least 10 days off the campaign trail. The news certainly calls into question the debate scheduled for October 15th in Miami Florida, as it is likely he will remain isolated. The Vice Presidential debate, however, is scheduled to take place as planned on Wednesday in Salt Lake City Utah as Pence’s physician stated that per CDC guidelines, he doesn’t need to quarantine.
Congress remains far from reaching a deal as negotiations for another coronavirus related relief bill continued this week. Republicans have voiced opposition to the scale of aid proposed by the Democrats for state and local governments while the Democrats are pushing for an end to tax breaks. After accounting for the differences between the two sides, they remain apart by about $600 billion for a comprehensive relief package. House Democrats passed their $2.2 trillion HEROES Act late Thursday night, which lacks bipartisan support. There was a glimmer of hope early Friday after Pelosi announced that she is urging airlines to delay planned furloughs, as an agreement is “imminent” on government assistance, but Congress later adjourned with no deal.
Markets rebounded this week. The S&P 500 rose 1.54% and closed at 3,348. The Dow Jones jumped 1.88% and closed at 27,683. Year-to-date, the S&P 500 is up 5.12% and the Dow Jones is down -1.25%.
Interests rates rose this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.28% and 0.69%, respectively.
The spot price of WTI Crude oil fell significantly this week. Prices fell -8.10% and closed at $36.99 per barrel. Year to date, Oil prices are down -39.42%.
The spot price of Gold rose 2.15% and closed at $1,901.67 per ounce. Year to date, Gold prices are up 25.73%.
Initial jobless claims fell to 837,000 and the four-week moving average of claims fell by 12,000 to 867,000. Claims fell by 10,000 in Florida, 8,000 in Texas, and by 6,000 in Georgia. Claims rose by 3,000 in Maryland, 2,000 in New Jersey, and by 2,000 in Illinois.
Retail inventories rose by 0.8% versus expectations for an increase of 1.1%
Wholesale inventories rose by 0.5% versus expectations for a decline of -0.1%
The ISM manufacturing index fell by 0.6 points to 55.4 versus expectations for a reading of 56.5
Construction spending rose by 1.4% versus expectations for an increase of 0.7%
Factory orders rose by 0.7% versus expectations for an increase of 0.9%
The University of Michigan’s index of consumer sentiment rose by 1.5 points to 80.4 versus expectations for a reading of 79.0
The Conference Board index of consumer confidence rose by 15.5 points to 101.8 versus expectations for a reading of 90.0
Nonfarm payrolls rose by 661,000 versus expectations for an increase of 859,000
Average hourly earnings rose by 0.1% versus expectations for an increase of 0.2%
The unemployment rate came in at 7.9% versus expectations for a reading of 8.2%
Private sector employment in the ADP rose by 749,000 versus expectations for an increase of 649,000
The third estimate of second quarter GDP was revised higher by 0.3% to -31.4% versus expectations for a reading of -31.7%
The core PCE price index rose by 0.33%, in-line with expectations and the year-over-year rate rose by 1.59% versus expectations for an increase of 1.40%
Personal income fell by -2.7% versus expectations for a decline of -2.5%
Personal spending rose by 1.0% versus expectations for an increase of 0.8%
Pending home sales rose by 8.8% versus expectations for an increase of 3.1%
Fact of the Week
Over the last 30 years, the S&P 500 stock index has gained an average of +4.7% over the final 3 months of the year. 24 of the last 30 fourth quarters have produced a positive total return gain (Source: BTN Research)
Fears of another lockdown grips Great Britain amid record levels of new daily cases of coronavirus. Similar to March and April, the U.K. is seeing a run on supermarkets which led to large grocery chain Tesco to place limits on customers to 3 items each of flour, dried pasta, toilet paper, baby wipes, and anti-bacterial wipes. Surging new daily cases of coronavirus and hospitalizations are sweeping across Europe with Spain, France, and Poland all experiencing similar situations to the U.K. This morning, Madrid imposed a local lockdown of more than 1 million people following Marseille’s decision to close bars and restaurants earlier in the week. Poland is expected to announce new restrictions next week as a result of rising new daily cases and hospitalizations. New York City announced that health inspectors will enter private schools in Brooklyn and Queens to ensure that personnel are complying with mask and social distancing requirements after both areas have experienced outbreaks. Florida Governor Ron DeSantis announced today that Florida will move to “Phase 3”, which involves lifting all restrictions on bars and restaurants that were limited to 50% capacity. The new “Phase 3” stage also prevents local governments from closing businesses and enforcing social distancing without an economic and health justification.
In California, over 8,000 wildfires have burned over 3.6 million acres throughout the state so far this year and there are currently roughly 17,500 firefighters battling 25 major wildfires. Since August 15th, 26 people have died as a result of the wildfires and about 7,000 structures have been destroyed. Red flag warnings are in effect from Saturday through Monday as temperatures of over 100 degrees are expected in some areas along with gusty winds, increasing the risk of wildfires. Five of the wildfires currently burning in California are among the list of the largest wildfires in state history. The August Complex is the largest wildfire, and is about 45% contained and responsible for burning around 860,000 acres.
Markets continued trending lower this week. The S&P 500 fell -0.61% and closed at 3,298. The Dow Jones dropped -1.75% and closed at 27,175. Year-to-date, the S&P 500 is up 3.53% and the Dow Jones is down -3.07%.
Interests rates fell this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.26% and 0.65%, respectively.
The spot price of WTI Crude oil fell this week. Prices fell -2.98% and closed at $40.09 per barrel. Year to date, Oil prices are down -34.34%.
The spot price of Gold dropped -4.53% and closed at $1,862.56 per ounce. Year to date, Gold prices are up 22.76%.
Initial jobless claims rose by 4,000 to 870,000 and the four-week moving average of claims fell by 35,000 to 878,000. Claims fell by 6,000 in Michigan, 5,000 in Illinois, and by 4,000 in Florida. Claims rose by 9,000 in New York, 6,000 in Georgia, and by 4,000 in Massachusetts.
Existing home sales rose by 2.4% to a seasonally-adjusted-annualized rate of 6.0 million units, in-line with expectations
The FHFA house price index rose by 1.0% versus expectations for an increase of 0.5%
Sales of new single-family homes rose by 4.8% to a seasonally-adjusted-annualized rate of 1.01 million versus expectations for a decline of -1.2%
New orders for durable goods rose by 0.4% versus expectations for an increase of 1.5%
Durable goods ex-transports rose by 0.4% versus expectations for an increase of 1.0%
Core capital goods orders rose by 1.8% versus expectations for an increase of 1.0%
Core capital goods shipments rose by 1.5% versus expectations for an increase of 0.8%
Fact of the Week
After adjusting numerical data from the past for the impact of inflation, the median household income in 2019 ($68,703) is the highest ever recorded in the USA and is the 4th consecutive year (2016-2019) that produced an all-time inflation-adjusted record. Before 2016, the peak for median household income was $62,641 set in 1999 (source: Federal Reserve Bank of St. Louis).
This morning, a Reuters report confirmed that the U.S. Department of Commerce will take action to prevent future downloads of the popular application TikTok if a deal isn’t made by Sunday evening. Additionally, Chinese application WeChat will be shut down in the United States by Sunday if a deal is not made by then according to Commerce Secretary Wilbur Ross. Talks between TikTok and a number of U.S. companies have been ongoing, however, China has indicated that they do not want TikTok’s content-recommendation algorithm not be transferred to the United States as part of any deal. The Department of Commerce stated that “The Chinese Communist Party CCP has demonstrated the means and motives to use these apps to threaten the national security, foreign policy, and the economy of the U.S.”. The actions that have been threatened are only to prevent downloads and updates of the applications, and not an outright ban of use. The administration stated that TikTok would be banned in the United States if no deal is reached by November 12th, leaving more time for negotiations.
Federal Chairman Jerome Powell stated at this week’s FOMC meeting that “over coming months the Federal Reserve will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses.” The purchases of Treasuries and mortgage-backed securities by the Federal Reserve has been done at a pace of $80 billion and $40 billion a month respectively. Also, the Federal Reserve is forecasting the fed funds rate to remain at 0% through 2023.
Markets moved lower this week. The S&P 500 fell -0.61% and closed at 3,319. The Dow Jones inched lower by -0.01% and closed at 27,657. Year-to-date, the S&P 500 is up 4.16% and the Dow Jones is down -1.35%.
Interests rates rose slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.28% and 0.69%, respectively.
The spot price of WTI Crude oil fell surged week. Prices rose 9.64% and closed at $40.93 per barrel. Year to date, Oil prices are down -32.97%.
The spot price of Gold rose 0.65% and closed at $1,810.42 per ounce. Year to date, Gold prices are up 19.32%.
Initial jobless claims fell by slightly less than expected to 860,000 and the four-week moving average of claims fell by 61,000 to 912,000. Claims fell by 15,000 in Texas, 9,000 in Louisiana, and by 8,000 in Georgia. Claims rose by 3,000 in Indiana, 3,000 in Kansas, and by 3,000 in Nevada.
The level of housing starts fell by -5.1% to a seasonally-adjusted-annualized rate of 1,416,000 versus expectations for a decline of -0.6%
Building permits fell by -0.9% versus expectations for a 2.0% increase
The Philadelphia Fed manufacturing index fell by 2.2 points to 15.0, in-line with expectations
Import prices rose by 0.9% versus expectations for an increase of 0.5%
Import prices ex-petroleum rose by 0.7% versus expectations for an increase of 0.3%
Industrial production rose by 0.4% versus expectations for an increase of 1.0%
Retail sales rose by 0.6% versus expectations for an increase of 1.0%
Retail sales core/control fell -0.1% versus expectations for an increase of 0.3%
Business inventories rose by 0.1%, in-line with expectations
The current account balance came in at -$170.5 billion for the second quarter versus expectations for a reading of -160.0 billion
The University of Michigan’s index of consumer sentiment rose by 4.8 points to 78.9 in the preliminary report versus expectations for a reading of 75.0
Fact of the Week
The World Health Organization (WHO) declared the COVID-19 outbreak a pandemic on 3/11/20. In the 6 months from 3/11/20 through last Friday 9/11/20, the S&P 500 has gained +23.0% (total return) (source: BTN Research).
The NFL regular season kicked off last night, with the defending Super Bowl Champion Kansas City Chiefs beating the Houston Texans 34-20. About 17,000 fans attended the kickoff of the 2020 season at Arrowhead Stadium, which is one of only two venues that will be allowing any fans at all this week. The Jacksonville Jaguars will also be allowing some fans a chance to watch the opener live on Sunday, limiting capacity at 25%.
The EU and the U.K. are holding emergency talks after the latter published its Internal Market Bill, which would undercut parts of the Withdrawal Agreement agreed to in January. The news could also damage trade talks as both sides work to secure a new deal. Without an agreement, nearly $1T in trade could be thrown into chaos at the beginning of the year, but some say it may be part of the negotiating strategy. Adding to the turmoil, U.S. House Speaker Nancy Pelosi said any potential U.S.-U.K. trade deal would not pass Congress if Britain undermines the Good Friday peace agreement.
On Tuesday, drug maker Astrozeneca paused clinical trials of its experimental COVID-19 vaccine, with a participant in a U.K. study experiencing an unexplained illness. British health minister Matt Hancock explained that the procedure is “not necessarily” a setback and it “depends on what they find when they do the investigation.” AstraZeneca confirmed that the pause “is a routine action” and it was trying to expedite the review to “minimize any potential impact on the trial timeline.”
Markets stumbled this week. The S&P 500 fell -2.49% and closed at 3,340. The Dow Jones dropped -1.61% and closed at 27,665. Year-to-date, the S&P 500 is up 4.67% and the Dow Jones is down -1.35%.
Interests rates fell this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.25% and 0.67%, respectively.
The spot price of WTI Crude oil fell this week. Prices dropped -5.7% and closed at $37.50 per barrel. Year to date, Oil prices are down -38.6%.
The spot price of Gold rose 0.52% and closed at $1,933.56 per ounce. Year to date, Gold prices are up 28.0%.
The core consumer price index (CPI) rose 0.39% in August, well above consensus expectations for a two-tenths rise.
Wholesale inventories decreased by 0.3% in the final July report, below consensus expectations and the previously-reported 0.1% decline
The producer price index (PPI) increased by 0.3% in August, one tenth above consensus expectations.
Initial jobless claims were unchanged from an upwardly-revised level and above consensus expectations at 884k in the week ended September 5
The ISM non-manufacturing index fell by 1.2 points to 56.9 versus expectations for a reading of 57.0
Fact of the Week
Of the 130 FBS college football teams, 76 are playing a fall 2020 season while 54 are not currently scheduled to play at all. In 2019, college football generated over $4 billion in revenue. (Source: NCAA, ESPN)
As Congress is unable to come close to finding any common ground on another coronavirus related relief package, the CDC announced that they would suspend most rental evictions for people struggling to pay rent through the end of 2020. In order to receive protection, a renter must prove that they have taken “best efforts possible to seek government assistance to make their rental payments” and “declare that they are unable to pay rent due to COVID fiancial hardship” and must prove that they “will likely become homeless or move into congregate housing settings if they are evicted.” Originally, under the CARES act, rental evictions were suspended only for people living in federally-backed rental units and federally-backed single-family homes. The CDC has full authority to enact this policy as they have been tasked with using reasonable efforts to combat the spread of communicable diseases and if people are evicted, they may land in an overcrowded living facililty or homeless shelter, leading to further spread of the coronavirus.
Just as a deal seemed imminent for TikTok, China has required the parent company ByteDance to obtain a license before it can sell TikTok’s algorithm to another company. China did not comment on its motivation for the requirement, but one Wall Street analyst made a case that the Chinese company would likely not be sold until after the U.S. election as a result of lengthy regulatory procedures. Three weeks ago, President Trump signed an executive order that would require Apple and Google to remove TikTok from their app stores by September 15th. TikTok, among other Chinese apps, have already been banned in India.
Markets pared their gains this week. The S&P 500 fell -2.27% and closed at 3,427. The Dow Jones dropped -1.73% and closed at 28,133. Year-to-date, the S&P 500 is up 7.32% and the Dow Jones is up 0.27%.
Interests rates finished the week mostly unchanged. The 5 year and 10 year U.S. Treasury Notes are yielding 0.30% and 0.72%, respectively.
The spot price of WTI Crude oil fell this week. Prices dropped -8.05% and closed at $39.51 per barrel. Year to date, Oil prices are down -35.29%.
The spot price of Gold fell -1.59% and closed at $1,933.56 per ounce. Year to date, Gold prices are up 27.44%.
Initial jobless claims fell by 130,000 to 881,000 and the four-week moving average of claims fell by 17,000 to 994,000. Claims fell by 12,000 in Florida, 6,000 in Georgia, and by 5,000 in Michigan. Claims rose by 41,000 in California.
Nonfarm productivity rose by 10.1% versus expectations for an increase of 7.5%
Unit labor costs rose by 9.0% versus expectations for an increase of 12.0%
The ISM manufacturing index rose by 1.8 points to 56.0 versus expectations for a reading of 54.8
The ISM non-manufacturing index fell by 1.2 points to 56.9 versus expectations for a reading of 57.0
Factory orders rose by 6.4% versus expectations for an increase of 6.1%
Construction spending rose by 0.1% versus expectations for an increase of 1.0%
Private sector employment in the ADP rose by 428,000 versus expectations for an increase of 1 million
Nonfarm payrolls rose by 1.37 million versus expectations for an increase of 1.35 million
Average hourly earnings rose by 0.4% versus expectations for a flat reading
The unemployment rate fell to 8.4% versus expectations for a reading of 9.8%
Fact of the Week
The median sales price of existing homes sold in the United States was $304,100 in July 2020, the first time in US history that the median sales price has exceeded $300,000. The $304,100 median price is also a record on an inflation-adjusted basis, besting the inflation-ajusted $293,096 from July 2006. (source: Nat’l Association of Realtors).