Month: June 2020

Stocks rallied this week, led by a 3.74-percent advance by the Nasdaq. The S&P 500 Index increased 1.88 percent and the Dow Jones Industrial Average rose 1.06 percent. SPDR Healthcare (XLV) gained 3.23 percent, SPDR Technology (XLK) 2.88 percent and SPDR Communication Services (XLC) 2.61 percent.

Strong retail sales data boosted the market. May sales rose 17.7 percent, more than double the consensus forecast. Clothing sales jumped 188 percent. Other retail outlets such as furniture, book and sporting goods stores saw sales climb nearly triple digits. Auto sales increased 44 percent. The New York Fed’s Nowcast model hiked its second-quarter GDP forecast to negative 19 percent following the report.

Housing starts and building permits missed forecasts in May, but both increased from April. Housing starts were slower than expected because builders couldn’t restart as quickly under lockdown policies.

Initial claims for unemployment were 1.51 million for the week ending June 13, down from 1.57 million the week prior. Continuing claims fell to 20.5 million.  The Department of Labor, which reports weekly claims data, estimates unemployment is down to 12.8 percent.

China agreed to buy more U.S. agricultural exports after a meeting in Hawaii on Wednesday. China committed to buying huge increases of exports such as soybeans earlier this year. The two sides also discussed Hong Kong and the situation in China’s Xinjiang region, where human rights activists claim the government is detaining millions of Uighurs. President Trump signed a law allowing for sanctions of Chinese officials involved with this policy.

The 10-year Treasury yield was flat. It closed at 0.70 percent. iShares iBoxx Investment Grade Corporate Bond (LQD) and Fidelity Corporate Bond (FCOR) were two of the better performing funds. They gained 1.22 percent and 1.16 percent, respectively. The Federal Reserve announced it would buy individual corporate bonds, boosting the entire sector.

Crude oil closed at $39.75 per barrel. SDPR Energy (XLE) fell 0.65 percent on the week. First Trust ISE Revere Natural Gas (FCG) slid 2.74 percent.

The Federal Reserve boosted stock and bond markets again on Monday, announcing a plan to buy individual corporate bonds. The S&P 500 Index increased 0.83 percent.

SPDR Communication Services (XLC) led with an increase of 1.61 percent, followed by the largest issuers of debt securities, financials and real estate. SPDR Financials (XLF) rallied 1.38 percent and SPDR Real Estate (XLRE) climbed 1.27 percent. Biotechnology was a strong subsector, with SPDR S&P Biotech (XBI) advancing 2.82 percent. High beta stocks also outperformed. Invesco S&P 500 High Beta (SPHB) climbed 1.19 percent. Low volatility also held up well considering the environment though. iShares Edge MSCI Minimum Volatility USA (USMV) rose 0.72 percent.

The Federal Reserve will start buying individual corporate bonds along with the corporate bond ETFs it is already buying. This is part of the Fed’s efforts to keep markets functioning and ease funding for corporations. In March, the Fed gave itself the authorization to buy up to $750 billion in corporate bonds through its Secondary Market Corporate Credit Facility.

May retail sales will be out today. Analysts expect “make up” consumption took place. They see sales rising 8.5 percent on the month and 6.5 percent ex-autos. Industrial production is also expected to rebound from April lows and rise 2.8 percent.

Housing sales and building permits for May will be released on Wednesday. Economists forecast large rebounds for both reports.

Federal Reserve Chairman Jerome Powell will testify before the Senate on Tuesday and the House on Wednesday.

Initial claims for unemployment will be closely watched on Thursday. Claims have been falling steadily week after week. Analysts predict claims will fall from 1.54 million to 1.35 million.

Crude oil climbed above $27 per barrel on Monday. SPDR Energy (XLE) gained 0.30 percent.

The U.S. Dollar Index tumbled 0.42 percent on the Fed’s decision to buy individual corporate bonds.

Investment grade corporate bond funds did not move significantly due to the Fed’s announcement, but high yield caught a bounce. Fidelity Corporate Bond (FCOR) added 0.29 percent. iShares iBoxx High Yield Corporate Bond (HYG) climbed 0.97 percent.

Equities consolidated recent gains this week after the Federal Reserve held interest rates steady. The Nasdaq declined 2.31 percent, the S&P 500 Index 4.81 percent and the Dow Jones Industrial Average 5.57 percent.

SPDR Technology (XLK) slid 2.03 percent this week, SPDR Communication Services (XLC) 2.52 percent and SPDR Consumer Staples (XLP) 3.81 percent.

The Federal Reserve held policy level this week. It did not announce a “yield curve control” policy. Some economists predicted the Fed might start a YCC policy to limit increases in long-term bond yields. Longer-term bond yields fell in the wake of the Fed’s meeting anyway. The 10-year bond fell to 0.70 percent on Friday, down from near 1.00 percent last Friday.

The National Federation of Independent Business released its small business confidence index for May. It climbed to 94.4, up from 90.9 in April.

Initial claims for unemployment fell to 1.54 million in the week ended June 6. This was down from 1.90 million the week prior. The Department of Labor estimates unemployment was 14.4 percent for the week ending May 30.

Consumer prices fell 0.1 percent in May. Both the headline and core CPI dipped by 0.1 percent. Producer price inflation was far stronger with an increase of 0.4 percent. That was a large reversal from the 1.3 percent drop in April.

Job openings fell to 5.0 million in April, down from 6.0 million in March as business curtailed hiring amid widespread state lockdowns.

Consumer sentiment was much stronger than expected in early June. Analysts expected an increased from 72.3 in May to 75, but sentiment popped to 78.9 as consumers are becoming increasingly optimistic.

Crude oil touched the $40 level this week but settled on Friday to $36.42 per barrel. SPDR Energy (XLE) fell 11.20 percent for the week.

The U.S. dollar saw its first rally in over two weeks. The U.S. Dollar Index gained 0.21 percent for the week. iShares MSCI Emerging Markets (EEM) declined 2.54 percent and iShares MSCI EAFE (EFA) 3.98 percent.