July 13, 2020

Weekly Market Commentary July 6th to July 10th 2020

COVID-19 cases on the rise in southern states sparked investor concern of a second wave of lock downs but positive news regarding a drug treatment for the virus helped propel stocks into positive territory for the week. The S&P 500 finished the week at 3,185, up 0.7%; while the DJIA and Nasdaq were up 1.8% and 4%, respectively. The 10-year Treasury yield dropped to 0.64%.

It was a lighter week for economic releases. June’s ISM Non-Manufacturing index (services and construction) rose from 45.4 to 57.1, much better than expected. The PMI Services Index also came in better than expected although still in contractionary territory (below 50) at 47.9 vs last month’s reading of 37.5. While it is encouraging to see both reports moving in the right direction, there is still much to be done on the path back to normal.

Producer Prices (PPI) unexpectedly dropped -0.2% in June vs the consensus of a 0.4% increase. Ex food, energy, and trade services, the PPI rose 0.3% in June and fell -0.1% year-on-year. While global demand has suffered due to COVID-19, corresponding supply disruptions have had a momentary inflationary effect.

In terms of employment, 1.3 million people filed initial jobless claims last week, less than expected. Continuing claims fell more than expected, as well, from 18.76 million to 18.05 million. The trend for both initial claims and continuing claims is encouraging, suggesting the economy is reopening faster than it is reclosing.

Next week we will continue to closely monitor states’ retrenchment to restrictive safety practices. Key economic releases include Consumer Prices, Retail Sales and Housing data.