The Markets (as of market close June 19, 2020)
Equities began the week edging higher following the Federal Reserve’s announcement that it would buy corporate bonds under an emergency lending program. The Russell 2000 closed up 2.3%, the Nasdaq gained 1.4%, while the S&P 500 and the Dow eked out gains of less than 1.0%, respectively. After last week’s tailspin, crude oil prices rebounded while the yield on 10-year Treasuries advanced slightly. Investors are cautious, however, as more than 20 states are reporting an uptick in cases of COVID-19, and new hotspots in Beijing and India are raising concerns of a resurgence.
Following an impressive retail sales report, stocks jumped higher last Tuesday. Also climbing were crude oil prices (2.24%), gold (0.47%), and the yield on 10-year Treasuries (7.69%). Most sectors advanced, with the best performers being energy, health care, and materials. Along with the robust retail sales report, the U.S. government announced that it is preparing a $1 trillion infrastructure proposal aimed at accelerating the economy.
The Nasdaq inched ahead on Wednesday, but that was the only benchmark to gain. The large caps of the Dow and S&P 500 Each fell slightly. The Russell 2000 sank 1.77%, and the Global Dow changed negligibly. The yield on 10-year Treasuries dropped 3.04% while crude oil prices decreased 1.75% to $37.71 per barrel. It appears increases in reported COVID-19 cases were enough to divert investors from stocks in the short run.
Stocks were mixed last Thursday over health concerns and related employment status due to government shut downs. The Dow fell 0.15% while the S&P 500, the Nasdaq, and the Russell 2000 all posted marginal gains. Energy stocks helped buoy stocks following a pledge from major oil-producing countries to continue to limit output.
Friday closed what may be best described as a roller-coaster ride for stocks. The Dow fell 0.80%, the S&P 500 dropped 0.56%, the Russell 2000 lost 0.59%, and the Global Dow gave back 0.29%. Only the tech-heavy Nasdaq eked out a 0.03% gain. Earlier in the day, stocks rallied following reports out of China that it would comply with phase one of the trade deal by accelerating purchases of U.S.-exported farm goods. Nevertheless, ongoing COVID-19 news drew stocks back from earlier gains.
For the week, the ups and downs experienced by equities ended with the benchmark indexes closing ahead, led by the Nasdaq, followed by the Russell 2000, the S&P 500, the Global Dow, and the Dow. The yield on 10-year Treasuries closed the week where it began. Year to date, the Nasdaq is safely ahead of last year’s closing value, while the other benchmark indexes have yet to catch up to their respective 2019 year-end marks.
Last Week’s Economic News
- Retail sales spiked in May, advancing 17.7% from the previous month. Retail trade sales also increased, climbing 16.8% last month. Nonstore (online) retail sales increased 9.0% in May and are up 30.8% since May 2019. Last month, a tremendous spike in sales was seen by some retailers including clothing and clothing accessories stores (188.0%), motor vehicle and parts dealers (44.1%), furniture and home furnishing stores (89.7%), electronics and appliance stores (50.5%), and sporting goods, hobby, musical instrument, and book stores (88.2%).
- New home construction should be on the rise in June as May saw building permits jump by 14.4%. Housing starts climbed 4.3% last month but housing completions fell by 7.3%, likely due to a scale-back of construction work due to the health crisis.
- Total industrial production increased 1.4% in May as many factories resumed at least partial operations following suspensions related to COVID-19. Manufacturing advanced 3.8% in May, with most major industries posting increases, the largest of which coming from motor vehicles and parts.
- For the week ended June 13, there was a decrease of 58,000 in unemployment claims from the previous week’s level, which was revised up by 24,000. According to the Department of Labor, the advance rate for insured unemployment claims was 14.1% for the week ended June 6. The advance number of those receiving unemployment insurance benefits during the week ended June 6 was 20,544,000, a decrease of 62,000 from the prior week’s level, which was revised down by 323,000.
Eye on the Week Ahead
Several important economic reports are out this week. The final estimate for the first-quarter gross domestic product is released this week. It is not expected that much will change from the prior estimate, which had the economy slow at a rate of 5.0%. May home sales figures are also available this week. Existing home sales plunged in April, while new home sales were little changed. The durable goods orders report for May is also out this week. Orders fell more than 17.0% in April. May should show some improvement. Have a nice week!
Sincerely,
Robert G. Carpenter
President & CEO
Baltimore-Washington Financial Advisors