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.