U.S. and World News
President Trump signed a pair of executive orders targeting TikTok and WeChat. The action references national security concerns and (starting in 45 days) bars any transactions with the apps’ China-based owners – ByteDance and Tencent Holdings. While TikTok said it will pursue all remedies available, including American courts, it also faces a Sept. 15 deadline before its services are banned in the U.S.- Talks broke down between Democrats and the White house over a new stimulus deal, after closed door talks between Republicans and Democrats came to a stand still. Democrats offered to cut their previously $3.4 trillion deal down to $2.4 trillion, asking republicans to come up from their $1 Trillion dollar package. Republicans refused, and Secretary Mnuchin called the $2.4 trillion price tag a “non-starter”.
Markets
- Markets were higher this week. The S&P 500 surged 2.49% and closed at 3,351. The Dow Jones gained 3.88% and closed at 27,433. Year-to-date, the S&P 500 is up 4.92% and the Dow Jones is down -2.5%.
- Interests rates rose slightly this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.23% and 0.56%, respectively.
- The spot price of WTI Crude oil rose this week. Prices rose 2.3% and closed at $41.22 per barrel. Year to date, Oil prices are down -32.49%.
- The spot price of Gold rose 3.02% and closed at $2,035.55 per ounce. Year to date, Gold prices are up 34.16%.
Economic Data
- Factory orders increased 6.2% in June, above expectations.
- Initial jobless fell by 249k to 1.186 million, versus median forcast of 1.4 million.
- Nonfarm payrolls rose 1.8 million, well above the expected 1.5 million.
- Average hourly earnings increase 0.2% in July, better than the expectation for a continued decline.
Fact of the Week
- Patrick Mahomes made headlines last week the Kansas City Royals announced he had become a part owner in an undisclosed deal. Mahomes, aged 24, had just signed a record setting contract with the Kansas City Chiefs for $503 million. However, Mahomes is not the youngest team owner in the nation. That title belongs to Serena Williams 2 year old daughter Alexis, who was listed as part of a 30 person ownership group for LA’s new National Women’s Soccer League Team (Source: Yahoo Sports)
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New cases of the coronavirus were reported in China this week, with the mainland reporting 105 new cases on Thursday and 123 new cases on Friday. Hong Kong’s chief executive Carrie Lam announced yesterday that fall elections originally scheduled for September 6th would be postponed as the third wave is resulting in record new daily case figures. United Kingdom’s Prime Minister Boris Johnson ordered an extension of the partial lockdown throughout northern Great Britain for at least two weeks as Europe continues to see rising daily cases. The remainder of the MLB season has been called into question after nearly 20 Miami Marlins players and staff, at least two Phillies staff, and a number of Cardinals players tested positive for coronavirus, resulting in numerous cancelations.
The Sun Belt region of the United States continues to battle a high number of daily new cases of COVID-19, contributing largely to the country’s third straight day of over 1,000 deaths. The approximate daily currently hospitalized figure of about 60,000 has now reached levels last seen in late April. The state of Florida, particularly the Miami-Dade area, remains the most severely affected, with a 19.2% positivity rate versus the state positivity rate of 13.3%. President Trump announced yesterday that the Republican convention scheduled to be held in Jacksonville Florida next month will be canceled, citing the coronavirus “flare up”. During a House committee hearing this week, Moderna, Pfizer, Johnson & Johnson, and Merck all pointed out their plans to have a vaccine by 2021, with AstraZeneca stating that they would have an emergency based vaccine available by the end of this year.
Due to the uptick in coronavirus cases, a growing number of U.S. states and localities have mandated the use of masks and face coverings while in public. Georgia Governor Brian Kemp is suing Atlanta Mayor Keisha Lance Bottoms over the city’s mask mandate – which is punishable by a fine or up to six months in jail – claiming the measure is more restrictive than a state order that “strongly encourages face coverings” but does not require them. On the corporate side of things, Walmart, Kroger and Target announced Wednesday that they would will require customers to put on a mask or face covering inside stores.
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.
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.
During this Thursday’s stress test of the banking industry, it was discovered that several banks could reach minimum capital requirement levels, prompting the Fed to take action. The Federal Reserve placed new restrictions on the banking industry that requires big banks to cease share repurchases and cap dividends at their current levels for the next quarter. Additionally, banks will need to prove a specified level of net income from the previous four quarters in order to qualify to pay a dividend going forward. Banks are expected to reveal their plans with regards to dividends on Monday, June 29th.
For the first time in about 50 years, a border clash between India and China broke out after weeks of rising tensions along the disputed and undefined Line of Actual Control (LAC) that separates China and India in Ladakh and the Tibet region. The high altitude and sub-zero temperatures in the mountainous region led to the death of 20 wounded Indian troops. China has not confirmed the death of any of its troops and has accused the Indian army of provoking and attacking Chinese personnel. Both sides have held talks over the phone, agreeing to cool down tensions, expressing that they do not seek escalation to war. Despite the agreed de-escalation, China and India have sent additional military personnel to the region.
On Thursday, the FOMC announced that it will leave the fed funds target rate range unchanged at 0-0.25%. The Fed expects no change in the rate through 2022. The statement’s characterization of the current economic situation was mostly unchanged from the April FOMC meeting, and continued to acknowledge the “tremendous human and economic hardship” caused by the virus outbreak. The statement once again noted “sharp” declines in economic activity, “a surge” in job losses, and that weaker demand and lower oil prices are “holding down” inflation. The FOMC outlined its economic projections for the next 3 years, expecting GDP growth of -6.5% for 2020, +5% for 2021, and +3.5% for 2022. They also noted that they will increae holdings of UST as well as residental and commercial MBS in order to “sustain smooth market functioning”.
On Memorial Day in Minneapolis, George Floyd, an unarmed black man died while being restrained by a police officer with three officers nearby, all of which have been charged with his death. The tragedy was captured in a cell phone video that went viral and sparked nationwide demonstrations last weekend, some of which escalated to violence and looting. The demonstrations have continued throughout the week and are expected to continue during the weekend resulting in curfews being put in place by major U.S. cities. The National Guard has been called in by nearly half of the country to help police protect communities in the event of violence. A memorial was held yesterday in Minneapolis for George Floyd that was broadcast on networks nationwide.