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Week in Review: November 20, 2020

Recap & Commentary

After a volatile week, US equity markets ended mixed, as investors weighed near-term coronavirus surges heading into the Thanksgiving holiday against continued optimism of a vaccine. In a surprise move, Treasury Secretary Steve Mnuchin requested that the Fed return billions of unspent dollars earmarked for five emergency relief programs designed to support small and medium sized businesses. After responding that it “would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy”, the Federal Reserve indicated that it will return the funds.

As of Saturday, the CDC had reported nearly 253k coronavirus-related deaths in the United States. US daily cases have surged 73% in the last two weeks, while global cases have only risen 9% in that same time period. Millions of students will transition back to remote learning starting Monday as Michigan, Kentucky, and New York City, amongst others, will close all public schools as cases climb. On Friday, Pfizer formally submitted an Emergency Use Authorization application to the FDA for their COVID-19 vaccine.

Through Friday, 95% of S&P 500 companies had reported third quarter earnings, with 84% beating their consensus estimate. Currently, third quarter earnings are expected to contract 6.3%.

Economic Bullet Points

A busy week for economic data could best be described as mixed. However, disappointing retail sales and weekly jobless claims left the impression that the recent surge in coronavirus cases is beginning to impact the economy.

October retail sales rose 0.3% from the prior month, below the expected 0.5%, and well below September’s 1.6% increase. Core retail sales told a similar story, up just 0.2%, below the expected 0.6% increase and 1.2% increase in September. Recent restriction to curb the spread of the coronavirus could further dampen consumer spending ahead of the all-important holiday shopping season.

Weekly jobless claims registered at 742K, above the expected 707K and the prior week’s figure of 711K. That marked the first increase in four weeks.  Continuing claims fared better, falling 429K to a new pandemic low of 6.37M.

The housing sector continued its strong growth as housing starts rose 4.9% from September, to an annualized pace of 1.53M, and existing home sales rose 4.3% to an annualized pace of 6.85M, the highest level in 14 years. Compared to a year ago, sales increased nearly 27%.

Industrial data was mixed. At the regional level, manufacturing along the eastern seaboard continued to grow, albeit at a slower pace than in October.  At the national level, industrial production grew 1.1%, up from the -0.4% decline in September.  Given recent restrictions to slow the spread of the coronavirus, the regional data suggest that national data for November might slow as well.

Of Note

Negative yielding global debt is again surging. In Europe, all bonds with a maturity of less than two years are yielding less than 0%, including Greek debt. Not to be left out, China sold negative yielding debt for the first time, issuing a modest amount of 5-year Euro-denominated bonds with a yield of -0.15%.

Market Indices Week of 11/20

S&P 500-0.8%
Small Caps2.4%
Intl. Developed1.9%
Intl. Emerging1.8%
Commodities0.6%
U.S. Bond Market0.4%
10-Year Treas. Yield0.82%
US Dollar-0.4%
WTI Oil ($/bl)$42
Gold ($/oz)$1,870

The Week Ahead

  • Mfg. and Services PMI
  • Consumer Confidence
  • Consumer Sentiment
  • Durable Goods Orders
  • PCE Inflation
  • GDP
  • Personal Income & Spending
  • New Home Sales
  • Weekly Jobless Claims

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