Hurricane season in 2020 has started with the earliest 6th named storm on record set to make landfall in the Northeastern U.S. tonight. Tropical Storm Fay is sustaining winds around 50 mph as of this morning and is expected to bring 2 to 4 inches of rain with some isolated areas expecting to see 7 inches. Tropical Storm Warnings are currently in effect for New Jersey, New York, and Connecticut as the Northeast prepares for flash flooding throughout the night. The storm gained structure and transformed into a Tropical Storm this morning and the potential exists for it to become a Category 1 hurricane which is defined by sustained winds of at least 75 mph.
Tensions in Libya escalated further this week after Turkey announced that they will be holding large scale naval exercises off the Libyan coast in anticipation of war in the eastern Mediterranean. One day later, the Egyptian media announced that the Egyptian Army will host their own military drills near the western Libyan border. Turkey has been stepping up its military efforts in Libya recently in support of the government, which is currently battling a civil war. Egypt supports the opposing party in Libya, and this is the first show of force by the Egyptian Army since Turkey began intervening.
Markets rallied this week. The S&P 500 spiked 1.79% and closed at 3,185. The Dow Jones rose 0.98% and closed at 26,075. Year-to-date, the S&P 500 is down -0.38% and the Dow Jones is down -7.44%.
Interests rates were unchanged from last week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.30% and 0.63%, respectively.
The spot price of WTI Crude oil fell slightly this week. Prices fell -0.37% and closed at $40.50 per barrel. Year to date, Oil prices are down -33.67%.
The spot price of Gold rose 1.31% and closed at $1,799.18 per ounce. Year to date, Gold prices are up 18.58%.
Initial jobless claims fell by 99,000 to 1.3 million and the four-week moving average of claims fell by 63,000 to 1.4 million. Claims fell by 37,000 in New York, 23,000 in Florida, and by 12,000 in Oklahoma. Claims rose by 39,000 in Texas, 30,000 in California, and by 4,000 in Connecticut.
The ISM non-manufacturing index rose by 11.7 points to 57.1 versus expectations for a reading of 50.2
Wholesale inventories fell -1.2%, in-line with expectations
The producer price index (PPI) fell by -0.2% versus expectations for an increase of 0.4% and the year-over-year rate fell by -0.8%
PPI ex-food, energy and trade services rose by 0.3% versus expectations for an increase of 0.1% and the year-over-year rate was flat
Fact of the Week
The money used by the Federal Reserve in its lending programs and asset-buying programs was “digitally created” by the Fed, i.e., the Fed does not technically “print” money (it does not have a printing press) but rather it creates money with the press of a button on a keyboard. The Fed is forecasted to create$5 trillion of new money between March 2020 and December 2020 (source: Federal Reserve)
The United States is setting records for new confirmed daily coronavirus cases heading into Independence Day weekend as dozens of states have either delayed reopening plans or have taken steps back in the process. After reporting a record 509 new cases yesterday, Washington State Governor Jay Inslee announced that he would pause reopening in the state for 2 weeks and directed all businesses to require face coverings for employees and customers. The announcement from the Washington Governor comes after Texas issued a similar order requiring face coverings as Houston hospitals were forced to move ICU patients as far as 50 miles away as a result of overcapacity. The state of Arizona announced this morning that 91% of its ICU beds are occupied by COVID-19 patients and only 196 beds remain available as 4,433 new cases were reported yesterday in the state. The United Kingdom released travel guidelines easing restrictions on travelers from a handful of countries excluding the United States, continuing to require Americans to quarantine for 2 weeks upon arrival.
In the past two months, the United States has added back a shocking 7.5 million of the 20.7 million lost jobs in April. About 40% of the job gains were in the leisure and hospitality sector as most restaurants and bars have reopened. New jobs in the retail trade industry accounted for about 10% of the total job gains in the past two months as clothing stores and general merchandise stores also reopened. Education and health services jobs also increased substantially, as many dentists, physicians, and private educators went back to work. The rate of job growth in the past two months have smashed expectations as the unemployment rate was expected to rise to 19.1% in May but instead fell to 13.3% while the unemployment rate in June fell to 11.1% versus 12.5% expected.
Markets surged higher in the holiday shortened trading week. The S&P 500 jumped 4.07% and closed at 3,130. The Dow Jones spiked 3.29% and closed at 25,827. Year-to-date, the S&P 500 is down -2.13% and the Dow Jones is down -8.33%.
The yield curve steepened this week as the level of rates remained relatively unchanged. The 5 year and 10 year U.S. Treasury Notes are yielding 0.30% and 0.67%, respectively.
The spot price of WTI Crude oil rose this week. Prices rose 4.68% and closed at $40.29 per barrel. Year to date, Oil prices are down -34.01%.
The spot price of Gold rose 0.23% and closed at $1,775.35 per ounce. Year to date, Gold prices are up 17.01%.
Initial jobless claims fell by 55,000 to 1.4 million and the four-week moving average of claims fell by 1118,000 to 1.5 million. Claims fell by 47,000 in Oklahoma, 8,000 in New York, 3,000 in California, and by 3,000 in Florida. Claims increased by 6,000 in Wisconsin and by 5,000 in Texas.
Nonfarm payrolls rose by 4.8 million in June versus expectations for an increase of 3.2 million
Private sector employment in the ADP rose by 2.4 million versus expectations for an increase of 2.9 million
The unemployment rate fell to 11.1% versus expectations for a reading of 12.5%
Average hourly earnings fell -1.2% versus expectations for a decline of -0.8% and the year-over-year rate rose 5.0%
Factory orders increased by 8.0% versus expectations for an increase of 8.6%
Pending home sales rose by 44.3% versus expectations for an increase of 19.3%
The S&P/Case-Shiller home price index rose by 0.3% versus expectations for an increase of 0.5%
The Conference Board index of consumer confidence rose by 12.2 points to 98.1 versus expectations for a reading of 91.5
The ISM manufacturing index rose by 9.5 points to 52.6 versus expectations for a reading of 49.8
Construction spending fell by -2.1% versus expectations for an increase of 1.0%
Fact of the Week
In 2000, Bobby Bonilla was let go from the New York Mets. Instead of receiving the $5.9 million he was due in his contract, the two parties agreed to defer payment until 2011, when the Mets would begin paying Bonilla $1.19 million every July 1st, through 2035. To this day, he has received $11.9 million dollars from the Mets. If he had instead taken the $5.9 million and invested it into the S&P500 on January 1st 2000, he would have $12.5 million. (Source: ESPN, Bloomberg)