October 5, 2020

Weekly Market Commentary September 28th to October 2nd 2020

The week was dominated by political news including stimulus discussions, a Supreme Court vacancy, a contentious first presidential debate, and ultimately, a positive COVID-19 test for President Trump on Friday. Expect stock market volatility to increase as uncertainty about the election persists.

The monthly jobs report was released Friday and showed a mixed picture. Unemployment dropped to 7.9%, but that was largely due to people dropping out of the labor force altogether. On the bright side, private-sector payrolls beat estimates and job gains for the past two months were revised upward. Manufacturers added 66,000 jobs, which beat estimates and was up from last month. The total jobs gain for the month was 661k compared to estimates of 859k. Weekly Jobless Claims came in lower than expected at 837k, and Continuing Jobless Claims were down by 700k from last week. Labor markets continue a slow grind to improvement.

The ISM Manufacturing Survey came in at 55.4, slightly below estimates and down from last month. New Orders were not as strong as expected. Several other manufacturing surveys and hard data releases painted a similar picture – industry is rebounding from a dreadful 1st half, but the pace of growth may slow without further fiscal stimulus.

Volatility was high this week, but stocks were able to finish on higher ground. The S&P 500 rose by 1.5% to finish at 3,348. The NASDAQ also rose 1.5% to 11,075.

U.S. Treasury yields did not change much despite the headlines. The 10-year US Treasury yield rose a little over 3 bps to 0.69%. The 30-Year yield rose 8 bps to 1.48% perhaps reflecting decent economic data.

We also received our final reading of 2nd quarter GDP. This came in better than estimates, but still registered a staggering -31.4% decline.

Next week will be quieter on the economic front. Key releases include Markit Services PMI, Weekly Jobless Claims, and the JOLTS Job Openings survey.