June 22, 2020

Weekly Market Commentary June 15th to June 19th 2020

This week began the fourth month since President Trump declared a national emergency in the wake of the Coronavirus pandemic. While there are many signs that the economy is getting back on track, second quarter economic data has yet to be released and economists are warning that this is where the real pain lies. May and first-half June numbers fared far better than March and April, but the unprecedentedly steep declines shown early in the quarter will be difficult to overcome in the short run. Despite news of up to 18 states showing daily increases in COVID-19 cases, the volatility of the previous week dissipated as the country continues to reopen at a cautious pace.

In economic news this week, two manufacturing surveys (Empire State and Philly Fed) blew away May forecasts to the positive side showing that while yes, the reopening has been cautious, factories are ramping up and regional production is occurring. However, on a national level, the picture isn’t as rosy. Industrial production, while positive, underwhelmed at 1.4% vs. 2.9% expectations. Manufacturing scored a 3.8%, slightly beating estimates. The win for this week in manufacturing, however, is the fact that both numbers were positive after taking a beating for the past few months.

That said, the biggest news of the week came on Tuesday with the release of May Retail Sales. Topping out at 17.7% vs. 7.5% consensus, even the staunchest of economists were scratching their heads at such a miss. This figure even beat the top of the range by over 5%! Continued positive consumption stats like this will go a long way towards aiding the recovery, but don’t look for this trend to continue. Misses like this are rare indeed and Americans in general are prioritizing saving as the uncertainty of reopening continues.

Housing starts and building permits rounded out a rather light week of economic data, with both coming in marginally lower than expectations. Weekly jobless claims continued the trend of decreasing each week, but the numbers are still staggering. Over one and half million new claims were filed for unemployment help. While yes, this number marks the 11th straight declining week of claims, one and a half million is still approximately SEVEN times the 2019 average.

Equity markets rallied on the week after last week’s return of volatility. Dow Jones Industrials finished up by 1.0%; the S&P 500 and NASDAQ followed suit by finishing up 1.9% and 3.7%, respectively. On the fixed income side, the 10-Year U.S. Treasury Yield ended the week flat at 0.70%.

Next week, look for new and existing home sales, Markit manufacturing and services indices, Q1 GDP revision, durable goods, weekly jobless claims, personal income, and consumer spending.