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Week in Review: September 18, 2020

Recap & Commentary

US equity markets ended the week lower after Congress left Washington for the weekend no closer to an agreement on the terms of the next aid package and the US coronavirus death toll approaches 200k. The S&P 500 closed at a six-week low and another tech selloff caused the Nasdaq 100 to close below its 50-day moving average as investors rotated out of the high-flying stocks.

The Federal Reserve met this week, remarking that the recovery of the economy will likely depend on the path of the virus but believes that the pandemic will continue to weigh on economic activity in the near team. The Fed reiterated that they will continue to use all available tools to support the US economy in pursuit of maximum employment and price stability. The Fed will let inflation rise for an unspecified amount of time in order to allow inflation to average out at its 2% target. The Fed also announced it would increase its holdings of Treasuries and mortgage-backed securities to support credit markets.

As of Saturday, the CDC had reported nearly 30M global cases of coronavirus, and over 953k deaths. Yelp released its Economic Impact Report this week, pulling back the curtain on the effect that the pandemic has had on small businesses in America. The report showed that over 163k businesses have closed as of August 31, a 23% increase since July. According to the data, over 60% of those businesses indicated that their closure was permanent. Separately, the National Restaurant Association reported that the industry was on track to lose $240B in sales this year due to restaurant closures.

Economic Bullet Points

Economic data for the week was mixed, with housing starts and retail sales both slowing, while consumer sentiment rose to its best level in six months.

Retail Sales increased 0.6% in August, below the expected 1% increase and down from July’s growth of 0.9%.  The decline was attributed to the waning benefits of the coronavirus stimulus that expired at the end of July.

After posting three consecutive months of double-digit gains, housing starts fell 5% in August. Housing data is notoriously volatile making broader trends more important that any single month’s data.  Illustrating the volatility, within the headline number, multi-family housing starts fell 23%, after rising 36% in July. Similar to starts, permits declined 1% after three consecutive months of gains.

Consumer sentiment rose to its highest level in six months, boosted by improvements in both the current conditions and expectations components.

Regional manufacturing out of New York and Philadelphia was generally inline to better-than-expected, with both regions registering growth to varying degrees. Importantly, companies in both regions expressed optimism regarding their outlooks over the next six months.

Initial jobless claims fell slightly from 893k the prior week, to 860k.  Continuing claims showed even more improvement dropping from 13.5M to 12.6M.

Of Note

Supreme Court Justice Ruth Bader Ginsburg passed away Friday after battling pancreatic cancer. Chief Justice Roberts issued a statement saying “Our nation has lost a justice of historic stature” and that Bader Ginsburg would be remembered as “a tireless and resolute champion of justice.“. Ruth Bader Ginsburg was 87.

Market Indices Week of 09/18

S&P 500-0.6%
Small Caps2.6%
Intl. Developed0.8%
Intl. Emerging1.6%
Commodities2.0%
U.S. Bond Market-0.1%
10-Year Treas. Yield0.69%
US Dollar-0.4%
WTI Oil ($/bl)$41
Gold ($/oz)$1,949

The Week Ahead

  • Chicago Fed NAI
  • Existing Home Sales
  • Initial Jobless Claims
  • New Home Sales
  • Durable Goods Orders

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