Markets “In a Nutshell” for July 28, 2020
Investment Week at a Glance
Stocks finished mixed for the week. The Dow Jones Industrial Average was down 0.76%, the S&P 500 fell 0.28%, the New York Stock Exchange Composite (2,000 stocks) rose 0.48% and the average investors index (Value Line Index) was up 0.51%. Foreign stocks (DJ Global ex U.S.) were up 0.57%. Bond prices were higher for the week, with the 10-year U.S. Treasury ending the week 5 basis points lower at 0.59%. (Data source: Wall Street Journal)
Mixed Week for Stocks
While stocks as a whole in the U.S. were more or less unchanged for the week, rising uncertainties regarding stimulus, a rise in initial jobless claims and tensions with China caused technology stocks to take a fairly steep drop with the Nasdaq falling over 1% for the second straight week. The rise in weekly initial jobless claims was surprising to most analysts who figured, even with the recent rises in COVID-19 cases, initial claims would still be falling week to week. With the unexpected rise, economists are now wondering whether we are beginning to see the permanent effects taking place in the labor market. Rising China tensions also caused worries in the market, especially with technology stocks that have so far greatly benefited from the unprecedented shift to working from home. Technology stocks have carried the U.S. market this year to a positive gain and whether or not the sector can hold up its massive rise this year is still in question and will be of great interest to investors going forward. (Barron’s)
As Republicans put the finishing touches on their plans for another round of fiscal stimulus, the real debate can begin with Democrats to figure out how to continue to build a bridge to better economic times. Maybe the only certainty of the stimulus at this point is that it will be another immense package well over $1 trillion. Who it goes to and how it gets there will be the topics of debate, which could span a couple of weeks as Congress tries to get the deal done before an August recess. Democrats are fairly united on a more than $3 trillion plan, with a focus on state and local governments and a renewal of enhanced unemployment benefits, while Republicans are less united and working out whether direct payments or a payroll tax cut is more beneficial, as well as what to do with unemployment benefits. The end result will more than likely be a compromise of both, but the stock market is certainly expecting a deal, so any failure or unexpected delay may cause excess volatility in the coming weeks. (Barron’s)
With the 2nd Quarter GDP estimate to be released this week and almost certainly be the worst ever on record, what is the consensus estimate for the loss in economic output for the quarter?
Have a Great Week!
4. GDP is expected to have fallen 34% in the 2nd quarter. The previous record fall was 10% in 1958. (Barron’s).