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Week in Review: October 2, 2020

Recap & Commentary

US equity markets ended the week higher for the first time in a month as investors weighed mixed signals about the likelihood of more stimulus, weaker than expected jobs numbers, and President Trump’s coronavirus diagnosis. US stock futures fell more than 1% early Friday morning after the President announced that he had tested positive for the virus and Treasury yields sank lower as investors prepared for more volatility.

Disney announced it would be cutting nearly 30k jobs at its parks citing low demand recovery and continued closures of its California parks. United and American Airlines have laid off over 32k workers, but said they would rescind the job cuts if additional Federal aid was received. Speaker of the House Nancy Pelosi urged airlines to delay more layoffs, saying that aid is on the way as lawmakers scramble to compile a standalone bill to help the airline industry.

As of Saturday, the CDC had reported nearly 34M global coronavirus cases   and over 1M deaths. Large cities appear to be emerging as hot spots again as London cases soar and New York City reported its most new cases since May. Moderna announced that their vaccine elicits an immune response in trial subjects over the age of 56 but the drug maker’s CEO confirmed that the vaccine won’t be ready before March.

Economic Bullet Points

A busy week for economic data saw better-than-expected results for housing and the consumer, along with continued growth in manufacturing. However, the most notable release of the week, September’s employment report, provided more mixed signals.

At the headline level, unemployment fell 0.5% in September to 7.9%, better than the expected 8.2%. However, the decline was driven largely by 695k individuals leaving the workforce, as opposed to a large increase in new jobs.  In fact, the household survey data used to calculate the unemployment rate showed just 275k news jobs created during the month. According to employer data, nonfarm payrolls added 661k new jobs during the month, below the expected 850k and less than half the 1.5M added in August. Overall, September’s report suggests that job creation is moderating after a strong initial rebound in May and June.

Personal incomes fell 2.7% in August reflecting the expiration of enhanced unemployment benefits at the end of July. Despite the decline, consumer spending increased 1.0%. The result of falling income and rising spending led the personal savings rate to decline to 14.1%, down from 17.7% in July.

Housing data remained strong with pending home sales increasing nearly 9% in August, much stronger than the expected 3%.

Consumer confidence and sentiment both improved in September, aided by increased optimism about both current and future conditions.

Of Note

Second quarter U.S. GDP shrank 31.4%, according to revised data. Some economists believe 3Q20 GDP may increase as much as 35%. However, that would still leave GDP down 12% from where it began the year.  To fully recoup first and second quarter losses, third quarter GDP would need to increase 53%

Market Indices Week of 10/2

S&P 5001.5%
Small Caps4.4%
Intl. Developed1.5%
Intl. Emerging2.2%
Commodities-1.3%
U.S. Bond Market-0.1%
10-Year Treas. Yield0.70%
US Dollar-0.9%
WTI Oil ($/bl)$37
Gold ($/oz)$1,900

The Week Ahead

  • ISM Services
  • Small Business Optimism
  • Initial Jobless Claims

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