Month: October 2020

Positive news from several major corporations, such as Boeing and Pfizer, plus continued optimism for a deal on the coronavirus stimulus package negotiations boosted stocks. An uptick in consumer spending in the retail sector also helped drive stock values up.

The Nasdaq gained 0.79 percent for the week to mark its third consecutive positive week of trading. Slight dips in shares of Amazon, Apple and Netflix contributed to the relatively minor slip in the Nasdaq index on Friday. The Dow Jones Industrial Average closed up by 0.07 percent for the week, continuing a third consecutive week of gains.

The S&P 500 also concluded its third consecutive week of trading up by 0.19 percent. It closed up 0.01 percent on Friday. The Russell 2000 Index slipped 0.23 percent and the MSCI EAFE 2.08 percent for the week. iShares MSCI Emerging Markets (EEM) slipped 0.62 percent and iShares MSCI EAFE (EFA) dipped 1.40 percent.

Despite estimates that retail spending would rise 0.8 percent from August to September, the increase in consumer spending came in at an impressive 1.9 percent. This represented the fifth month in a row of spending increases for the retail sector. Clothing companies experienced the most drastic increase in consumer spending, with a bump of 11 percent in the last month. Department stores also posted a 9.7 percent increase in consumer spending.

The University of Michigan released October’s preliminary consumer sentiment reading with an unexpectedly high rating of 81.2. This was significantly higher than the 80.5 that was expected by economists. In general, a positive consumer outlook on the economy for the upcoming year seems to have offset any consumer concerns over the unemployment rate and lingering coronavirus complications.

An announcement from Boeing (BA) on the recent authorization for its 737 Max to begin flying again drove a major jump in its stock prices of 4 percent.

Likewise, Pfizer (PFE) shares rose nearly 4 percent following its announcement that it expects a major breakthrough in its COVID-19 vaccine development. Investors reacted positively to Pfizer’s plan to apply for Emergency Authorization Use from the FDA.

J.P. Morgan (JPM), Citigroup (C) and Wells Fargo (WFC) beat earnings by 24 percent, 39 percent and 19 percent. Bank of America (BAC) missed earnings estimates by 2 cents. SPDR S&P Bank (KBE) fell 0.64 percent on the week.

Other sectors saw similarly strong earnings results. Shares of Walgreen’s Boots Alliance (WBA), Charles Schwab (SCHW), Intuitive Surgical (ISRG) and UnitedHealth Group (UNH) all rallied. UNH also hiked its guidance for the year, citing strong growth in its pharmacy benefits division. iShares U.S. Healthcare Providers (IHF) climbed 1.19 percent on the week.

A recent spike in coronavirus cases in several European cities, including Paris and London, raised some concerns about the effect of potential lockdowns. However, news of progress by major pharmaceutical companies on the development of a vaccine helped offset the potential dip that additional coronavirus infections and the threat of international lockdowns could have caused.

On Thursday, Treasury Secretary Steven Mnuchin announced that the White House is willing to negotiate a larger coronavirus stimulus package than what President Trump had originally proposed. The president’s $1.8 billion proposal left a slight gap in the package promoted by House Speaker Nancy Pelosi of $2.2 billion. The president’s comments in an interview with Fox Business expressing a willingness to go higher on a relief package than what he initially proposed helped bolster the prospect of reaching an agreement.

Weekly initial claims for unemployment ticked up to 898,000 in the week ended October 10, but the number of continuing claims fell by more than 1 million to 10.02 million. It has now declined 60 percent from the peak of 25 million in May.

Retail sales jumped 1.9 percent in September, triple August’s figure and well ahead of estimates. Retail sales ex-autos were also five times larger than estimates at 1.5 percent. Clothing, sporting goods, music and books were all up strongly, while electronics dipped after doing well throughout the pandemic. Positive data points such as this one have pushed the Atlanta Fed’s GDP estimate up to 35.2 percent for this quarter.

The National Federation of Independent Business said its small-business confidence index hit 104.0 in September. The number is consistent with periods of economic booms.

The close of markets on Friday afternoon wrapped up an eventful week for stocks and emboldened investors with promising gains across the major indices.

The Dow gained 161 points on Friday, closing with a gain of 0.57 percent for the day. It has traded up for four out of the last five trading days. This was also the best week for the Dow since the week of August 7, 2020. It was up 3.27 percent for the week.

The S&P 500 posted a 0.88 percent gain on Friday. Like the Dow, Friday was the third day in a row of gains for the S&P 500 and the fourth positive trading day out of the last five. Overall, the S&P 500 closed its best trading week since the week of July 2, 2020. It was up 3.84 percent this week.

The Nasdaq Composite increased 1.39 percent for the day, the Nasdaq Composite had its third consecutive day of gains. For the week, the Nasdaq Composite was up 4.56 percent and posted its best week since July 2, 2020.

Lastly, the Russell 2000 Index added another nine points for a 0.55 percent gain on Friday.  It was also the seventh day of gains for the index over an eight-day spread. For the week, the Russell 2000 was up 6.38 percent, which was its best-performing week since June 5, 2020.

One of the biggest drivers of the market was the continued optimism over negotiations for another coronavirus stimulus package. Even though a deal has not yet been reached, the fact that the president has proposed a $1.8 trillion package as a counter-offer has been interpreted as significant movement on a final relief package. Previously, the president capped his offer at $1.6 trillion total for the stimulus package. President Trump’s increased counter-offer from Friday was well-received by investors as a step in the right direction towards agreement and leaves a delta of only $400 billion from the proposal that House Democrats put forward last week.

Markets have responded positively to President Trump’s continued recovery from COVID-19. One of the drugs that the president received during his treatment for COVID-19 was remdesivir, which is manufactured by Gilead Sciences. Gilead’s shares were trading up by 2 percent on Friday morning after an announcement regarding the ability of its anti-viral treatment to reduce recovery time for patients suffering from COVID-19 by five days when compared with a placebo group.

In addition, the release of a study published in the New England Journal of Medicine, which showed that remdesivir also reduced the fatality rate for COVID-19 patients who required low-flow oxygen, helped boost Gilead’s shares. The positive market reaction to developments on coronavirus treatment options bodes well for the future of pharmaceutical stocks as companies continue to innovate anti-viral treatments and other drugs for coronavirus patients.

News of Vice President Mike Pence’s phone conference on Friday with executives from the major cruise lines helped drive an increase of more than 1 percent for Norwegian, Carnival and Royal Caribbean.

Crude oil climbed to $40.60 per barrel this week after OPEC’s Secretary-General said he believed the worst was over for the oil market. Natural gas recovered back near its high for the year. It closed at $2.74 per mmBTU.

The Job Openings and Labor Turnover Survey (JOLTS) showed 6.5 million openings in August, down from 6.7 million in July. Initial claims for unemployment were 840,000 last week. Continuing claims on state programs fell by 1 million, from 11.98 million to 10.98 million.

The services PMI increased in September, beating expectations. Aside from a higher spike when the lockdowns first ended, last month’s reading was higher than any reading in 2019.

Bond yields extended their rally from last week. The 10-year Treasury yield closed the week at 0.78 percent. Rising yields weighed on most bond funds, but tumbling credit risk boosted corporate bonds, particularly high-yield. iShares iBoxx High Yield Corporate Bond (HYG) returned 1.34 percent and iShares iBoxx Investment Grade Corporate Bond (LQD) gained 0.10 percent.