July 20, 2020

Weekly Market Commentary July 13th to July 17th 2020

After beginning the week with increased volatility and declines, markets reversed course to end the week on hopes of a coronavirus vaccine and a potential second stimulus package. For the week, the S&P 500 closed at 3,225, up 1.2%. The 10-year Treasury yield was almost unchanged, declining .01% to 0.63%.

Inflation data was the first of several important economic indicators for the week. Overall, the data was mostly in-line with forecast, with “core” CPI (ex food and energy) increasing 1.2% year-over year and flat from the prior month. Headline inflation came in at 0.6%, up from 0.1% in the prior month. Both are well-below the Federal Reserve’s long-term target of 2%.

Retail Sales was the most awaited economic data for the week (contributing close to 70% of U.S. economic output) and surprised to the upside. The Retail Sales Control Group, used in the GDP calculation, increased by 5.6%, down from 10.1% in the prior month, but well-ahead of the 4.0% estimate and the second consecutive month of strong advances.

Rounding out the week was some mixed housing data mostly focused on new construction. Housing starts increased by 17.3%, below the estimate, but still strong and offset by an upward revision form the prior month of almost 4% to 8.2%. Building permits increased by 2.1%, below the estimate of 6.3% at 1.24 million units, while the prior months reading was revised downward by 0.3% to 14.4%.

Next week we will continue to closely monitor states’ retrenchment to restrictive safety practices. Key economic releases include new and existing home sales and several service and manufacturing output readings.