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).
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).
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 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%.
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)