Tod
d’s Take on the Market
Stocks, once again gained ground despite coronavirus cases surging in U.S. and Brazil and as Germany reports more outbreaks, but markets don’t seem worried. The Dow gained 1.07%, the S&P 500 1.88% and the tech-heavy NASDAQ gained another 3.74%.
There was good news out of Europe that they found something that slowed the death rate from COVID-19.
Retail sales came in much better than expected. In fact, it was the biggest monthly jump ever, especially since everything was shut down the prior month.
This is going to be a key point for virtually all economic data in the coming months: Large percentage changes off low levels can still leave you in a deep hole (e.g. if you go down 50% and then bounce back up 50%, you’re still down 25% from where you started) after everything was shut down the first part of May.
The markets really gained traction after the Federal Reserve announced they would start buying corporate bonds—it appears the FED is doing its best impersonation of the Lone Ranger to rescue beleaguered financial markets.
Industrial production was lower than expected. The market was rallying because the recession ended in April it looked like—two months long and it would be the shortest ever. Also, there’s talk of an infrastructure bill. Some say the chance of this happening is marginally above zero before the election.
Headline National Association of Home Builders/Wells Fargo Housing Market Index (HMI) jumped by a record 21 points to 58 from 37—far above the consensus, 45.
U.S. weekly jobless claims total 1.508 million vs. 1.3 million expected. It is improving because we are running out of people to fire. But the continuing claims (20.5 million) is still concerning to analysts.
Existing home sales plummeted in May as the coronavirus continued to hammer the economy, but realtors expect that it will represent the bottom.
Sales of existing homes in May fell 9.7% compared with April, to a seasonally adjusted annualized rate of 3.91 million units, according to the National Association of Realtors.
But then there is this…BEIJING TO SHUT ALL SCHOOLS AMID CORONAVIRUS RESURGENCE. This concerned the markets for about an hour. Cases are surging in the U.S., especially in the South where we have opened up pretty much everything.
But there is great news America! Leading Economic Indicators ‘soared’ 2.8% MoM in May—the biggest monthly gain ever. They had nowhere to go but up. The biggest positive contributor to the leading index was jobless claims at 1.9. The biggest negative contributor was ISM new orders at -0.48. However, this bounce follows the record collapse in March and April…
We had FED Chair Powell on the hill this week and what was Powell saying to congress now? Is the FED about to launch a new program? And then what about those surging rates of diagnosed infections—are they something to be concerned about or not? Let’s be careful to not misunderstand this—half of the newly diagnosed infections are coming from just 3 states: FL, AZ and TX. And that’s a positive when you consider there are 50 states and a handful of territories. Next, we are making great strides in fighting COVID-19. We have more experience now, we have new ways of treating it, we are making real headway on developing a vaccine, and while that may still be a while away, we are making progress. Deaths from COVID-19 are in decline even though newly diagnosed infections are up! Let’s not lose sight of this. It’s ok to accentuate some of the positives in this vs. always focusing on the negatives.
This week, we will have a headline-driven market so I would urge you to stay tuned and we will keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
