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June 15, 2020

Weekly Market Commentary June 8th to June 12th 2020


Equity markets continued their strong rally straight into the new trading week. Remarkably, the S&P 500 temporarily moved back into positive territory for the calendar year. The NASDAQ moved to all-time highs breaking through the 10,000 mark for the first time. Concerns about a resurgence in virus cases later shifted sentiment to risk-off and stocks sold off on Thursday with a volatile one-day pullback, the likes of which we haven’t seen since March. A recovery in the final trading session was not enough to move the major averages into the black for the week, breaking a three-week winning streak. The S&P 500 closed the week off by -4.8% at 3,041. The NASDAQ declined by -2.3%.

The 10-Year U.S. Treasury Yield traded in a wide range of 0.92 – 0.65% with sentiment swings, including a reaffirmation by the Fed that short-term rates would remain low for the foreseeable future. The bellwether UST ended the week at 0.71%.

The Federal Open Market Committee (FOMC) met this week and, as expected, made no change to interest rate policy. The Fed Funds Rate was held near zero and projected to stay there through at least 2022. The Fed’s appetite for continuing to buy bonds and grow the balance sheet at the current pace remains firmly intact.

The Weekly Jobless Claims report show that an additional 1.5 million workers filed for first time unemployment benefits last week. The weekly trend continues to show a slowing in new claims. Continuing Claims resumed a similar trend and pulled back modestly, now at 20.9 million as workers start to return to re-opening businesses.

Inflation measures also declined again in May. The Core Consumer Price Index (CPI excluding food and energy) fell to 1.2% on a year-on-year basis from the prior reading of 1.4%. A pullback in transportation services (particularly airfares) and apparel were key elements to the deflationary wind that has blown in. Core Producer Prices, as measured by PPI, pulled back similarly as anticipated to a 0.3% year-on-year level, but the Headline PPI increased modestly in May based on a 6% rise in food costs and 4.5% increase in energy. Rising labor costs and supply chain issues are however, not yet flowing through to prices the end consumer has been paying.

Key economic data to be released next week includes Retail Sales and Industrial Production.