Month: August 2020

The Dow Jones Industrial Average gained 1.79 percent last week, the S&P 500 Index 0.63 percent, the Russell 2000 Index 0.55 percent and the Nasdaq 0.06 percent.

SPDR Industrial (XLI) advanced 3.19 percent, SPDR Energy (XLE) 2.77 percent and SPDR Consumer Discretionary (XLY) 2.29 percent.

Data continues to show an improving economy. The June Job Openings & Labor Turnover Survey (JOLTS) showed 5.9 million job openings, up 10 percent from May’s level. The University of Michigan’s consumer sentiment survey climbed to 72.8 in July, beating expectations.

Inflation increased in July with both the producer and consumer indexes seeing sharp one-month gains. The producer price index climbed 0.6 percent, doubling analyst expectations. The headline CPI also rose 0.6 percent, exceeding forecasts. Most ominous was the core CPI that strips out food and energy. It also spiked 0.6 percent, triple what economists expected. The high inflation numbers contributed to falling bond prices this week.

Initial claims for unemployment fell to 963,000, the first number below 1 million since the start of the pandemic. Continuing claims fell 600,000 to 15.5 million.

Retail sales climbed 1.2 percent in July, missing forecasts of 2.0 percent. Retail sales ex-autos grew 1.9 percent.

Bonds declined this week, led by a weak 30-year Treasury auction. iShares 20+ Year Treasury (TLT) fell 3.94 percent. iShares iBoxx Investment Grade Corporate Bond (LQD) slid 2.41 percent and iShares iBoxx High Yield Corporate Bond (HYG) 1.30 percent. Invesco Senior Loan (BKLN) gained 0.74 percent on the week.

Value stocks extended their gains on Monday. The Dow Jones Industrial Average gained 1.30 percent. The S&P 500 Index rose 0.27 percent, while the Nasdaq fell 0.39 percent.

SPDR Energy (XLE) popped 3.09 percent to start the week. SPDR Industrials (XLI) rose 2.46 percent and SPDR Consumer Discretionary (XLY) 1.20 percent.

President Trump signed an executive order on coronavirus relief over the weekend. The federal government will pay $300 per week in extra unemployment benefits. States will have to contribute $100 if they choose. Trump’s order taps unspent disaster relief funds from the current budget. There were also three memoranda extending foreclosure protection, student loan deferrals and deferred payroll taxes.

The National Federation of Independent Business release its small-business confidence index tomorrow. Producer prices will also be out. Economists anticipate prices increased 0.3 percent in July.

Consumer prices are forecast to rise 0.4 percent, with the core CPI up 0.2 percent.

Economists see initial jobless claims sliding to 1.10 million for the week ended August 8.

Analysts project July retail sales climbed 2.0 percent, with sales ex-autos up 1.1 percent. The University of Michigan’s advance reading of August consumer sentiment is expected to dip slightly from July’s number.

Shares of Royal Caribbean (RCL) climbed 10 percent on Monday, despite reporting a second-quarter loss. While the company missed earnings estimates by a wide margin, investors were focused on revenue. Analysts expected $43.5 million in sales, but Royal Caribbean saw $175.6 million, a sign the cruise industry could bounce back faster than expected.

On Tuesday, investors will hear from Sysco (SYY), Lumentum (LITE) and Broadridge Financial (BR).

Cisco (CSCO) headlines Wednesday earnings reports. Macy’s (M) also kicks off the heart of retail earnings season.

Applied Materials (AMAT), Baidu (BIDU), NetEase (NTES) and Tapestry (TPR) report on Thursday.

The week closes out with Draft Kings (DKNG) and Remark Holdings (MARK).

Positive economic news lifted equities this week. The Russell 2000 Index gained 5.80 percent, the Dow Jones Industrial Average 3.82 percent, the Nasdaq 2.46 percent and the S&P 500 Index 2.45 percent.

SPDR Industrial (XLI) advanced 4.75 percent, while SPDR Financial (XLF) added 3.29 percent and SPDR Energy (XLE) 3.16 percent.

Manufacturing PMIs rose around the world in July. The U.S., China and Germany all had PMIs signaling expansion. The ISM Service PMI climbed to 58.1 percent, the highest reading since early 2019.

Initial jobless claims were lower than forecasted. Economists expected 1.40 million new claims, but there were only 1.19 million. Continuing claims almost fell by 1 million, to 16.1 million.

The economy created 1.76 million new jobs in July, beating the 1.68 million estimate. The unemployment rate slid to 10.2 percent. Average hourly earnings gained 0.2 percent, far ahead of a forecasted 0.5-percent decline. The two employment reports show hiring picked up again at the end of July.

Crude oil held steady this week and closed with a $41 handle. Natural gas climbed more than 20 percent and cleared $2 per mmBTU. First Trust ISE Revere Natural Gas (FCG) climbed 8.33 percent on the week.

The U.S. government moved forward with banning Chinese tech companies suspected of spying on American citizens. The Presidential Working Group on Financial Markets also recommended the SEC begin cracking down on companies skirting U.S. audit rules. The Chinese government declared financial data a state secret and does not allow U.S. regulator access. Companies have until January 1, 2022 to comply or face delisting. Shares of many Chinese companies fell between 2 and 5 percent on Friday.

Technology companies kept producing strong earnings reports. Etsy (ETSY) earned 75 cents per share, smashing estimates of 39 cents. Revenue rose 137 percent. Square (SQ) earned 18 cents versus a predicted 5 cent loss. Shares of Etsy and Square rose 14.13 percent and13.38 percent, respectively.