September 28, 2020

Weekly Market Commentary September 21st to September 25th 2020

New Home Sales were stellar in August at an annualized pace of 1,011k versus an estimated 875k, while available inventory hit multi-year lows. Existing Home Sales were higher than a year ago as well by 6.0mm homes. Mortgage rates remain near record lows and home price gains continue to accelerate. Median home prices are now 35% above the prior 2007 peak.

Durable Goods Orders rose by a modest 0.4% in August after a watershed spike of a revised 11.7% the previous month. A pullback in orders for motor vehicles and electrical equipment as well as ongoing cancellations of commercial aircraft orders weighed on the reading.

Weekly Jobless Claims rose last week to 870k, from an upwardly revised level the prior week of 866k. Continuing Claims were lower at 12.58 million but failed to reach the expected level of 12.28 million. The labor market continues to struggle to regain its footing.

Markit Manufacturing PMI met the consensus estimate at 53.5, the highest reading since January 2019. The Services PMI was modestly below consensus at 54.6, but well into what would be consider an expansion phase (>50). Business expectations from services companies have taken a modest downturn in the latest report.

A rally in the final trading session could not prevent the S&P 500 Index from declining for a fourth consecutive week, predominantly based on concerns of rising virus cases overseas and a possible return to lockdown measures. The S&P 500 was lower by -0.6% to 3,305. The NASDAQ was able to eke out a 1.1% gain on the week with a late session rally in some of the larger tech stocks.

U.S. Treasury yields have not reacted to the pullback in equities. The bellwether 10-year UST yield remains in a tight trading range, closing the week at 0.66%.

Key economic releases next week include Nonfarm Payrolls, Weekly Jobless Claims, revised Q2 GDP and Consumer Confidence readings.