Market Perspective for September 4, 2020

The technology sector pulled the markets lower for the week. The Dow Jones Industrial Average declined 1.82 percent, the S&P 500 Index 2.31 percent, the Russell 2000 Index 2.66 percent and the Nasdaq 3.27 percent.

SPDR Materials (XLB) gained 0.84 percent this week and SPDR Utilities (XLU) added 0.54 percent. SPDR Financials (XLF) declined only 0.24 percent and SPDR Consumer Staples (XLP) 0.38 percent. SPDR Technology (XLK) slipped 4.12 percent.

The unemployment rate fell to 8.4 percent in August, a full percentage point lower than the consensus forecast and down nearly 2 percentage points from July. The Bureau of Labor Statistics counted 1.37 million net new jobs for the month. Average wages increase 0.4 percent, far above the 0.0 percent consensus estimation.

Temporarily unemployed workers fell 33 percent or 3.1 million in August as businesses reopened. The labor force participation rate increased to 61.7 percent, indicating discouraged workers are looking for jobs. Initial jobless claims fell to 881,000 for the week ending August 29th, beating expectations. Continuing claims fell as well, hitting 13.25 million for the week ending August 22.

Motor vehicle sales climbed to an annualized rate of 15.2 million in August, up from 14.5 million in July.

The U.S. manufacturing PMI hit 56.0 in August, the highest reading since November 2018. The service PMI rose from 54.8 in July to 55.0 in August. Germany’s PMI crossed the 50 level that signals expansion. China’s manufacturing PMI hit a 9-year high.

The U.S. Dollar Index rebounded this week, rising 0.52 percent. iShares MSCI EAFE (EFA) fell 1.46 percent and iShares MSCI Emerging Markets (EEM) 2.62 percent.

iShares 20+ Year Treasury (TLT) closed the week with a gain of 1.13 percent. iShares Investment Grade Corporate Bond (LQD) gained 0.20 percent. iShares iBoxx High Yield Corporate Bond (HYG) slipped 0.28 percent.

Crude oil declined 7.5 percent this week to $39.54 per barrel. It was the first close below $40 in more than a month. SPDR Energy (XLE) slipped 4.33 percent.

Earnings season is concluding with only a handful of companies left to report. Currently, S&P 500 earnings fell 31.7 percent in the second quarter, better than the 44.1 percent forecasted by analysts. Analysts normally cut their estimates during a quarter, but they are raising their estimates for the third quarter, the first time they’ve done this in 2 years. GDP growth estimates have been rising as well. The Atlanta Fed’s GDP Now model forecasts 29.6 percent growth as of September 3.

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