Todd’s Take on the Market
September is continuing to live up to its reputation as a bad month for stocks. Global equities had a volatile week following a spike in coronavirus cases globally, a pullback in technology sector performance, and the Federal Reserve’s perspective on further policy support. The Dow closed down 1.75%, the S&P 500 was down 0.61%, but the NASDAQ was up 1.12%.
The major averages are on track to post steep losses for September, a historically weak month for stocks. The Dow and the S&P 500 have fallen 4.4% and 5.8%, respectively, while the Nasdaq has dropped 7.3%. The declines followed a massive comeback from the coronavirus sell-off that saw the S&P 500 climb more than 50% from its March bottom.
Something to note—corporate insiders are hitting the exits. Over the past four weeks, executives have sold their company stock at the fastest rate since 2012. Just last week, they unloaded $975 million, more than double the previous week.
FED Chair, Jerome Powell, continues to say that rates will remain lower for longer. In his testimony before Congress, Chairman Powell emphasized the need for further fiscal stimulus to mitigate downside risks to mortgage defaults and evictions, warning of the economic impact from the stalled fiscal negotiations.
On the economic front, U.S. jobless claims came in higher than expected as did continuing claims. The concern here is that the economic recovery is hitting stall mode. Layoffs continued at a high rate and the labor market recovery struggled to maintain momentum. In California specifically, unemployment benefit processing is on pause for the next two weeks over mounting concerns of fraudulent claims.
U.S. Treasury yields were little changed, overlooking the higher-than-expected jobless claims and the Federal Reserve’s call for additional fiscal action. The Chicago Fed National Activity Index suggests slower, but still above-average economic growth in September.
This Friday, the September jobs report will be the final employment report before the election when it is released.
Some strategists say the presidential debate has the potential to be a factor for markets if it shows one candidate or the other as a clear winner. There are rising concerns that a clear winner will not be known immediately and that, I believe, should be negative for stocks, but we’ll have to see.
Please stay tuned and we’ll keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
