In this week’s sitrep: as fears of economic shutdown diminish, the U.S. economy gains momentum.
THE WEEK ON WALL STREET
Stocks moved higher last week on news of more Federal Reserve market support and diminished concerns that new COVID-19 cases might lead to another economic shutdown.
The Dow Jones Industrial Average rose 1.04%, while the Standard & Poor’s 500 gained 1.86%. The Nasdaq Composite Index jumped 3.73% for the week. The MSCI EAFE Index, which tracks developed overseas stock markets, increased 1.88%.1,2,3
News on Monday that the Fed would be expanding its bond-buying program to include the debt of individual companies sparked a sharp jump in stocks. The momentum gained through the week as investors focused on positive economic signals, especially with retail sales. A midweek report of an effective COVID-19 treatment for critically ill patients boosted investor optimism.
Market sentiment also was helped by talk of more fiscal stimulus and a report that China would be moving ahead with agricultural purchases to comply with phase one of the trade deal, easing concerns over growing friction in the U.S.-China relationship.
MIXED ECONOMIC DATA
Last week’s economic data illustrated the uneven nature of the nation’s nascent economic recovery.
Retail sales, which were up by 17.7% in May, reflected a strong, encouraging rebound in the U.S. consumer. Consumer spending was particularly strong in clothing, furniture, sporting goods, and autos.4,5
But industrial production (up by only 1.4%) and new housing starts (ahead by just 4.3%) showed tepid rebounds, indicating that recovery has yet to reach all corners of the American economy. Jobless claims posted their best number since mid-March (1.5 million), but remained high by historical standards.6,7,8
Last week saw the flare-up of border tensions in two geopolitical hotspots: North Korea and the disputed border region between China and India. The hope, of course, is that escalation can be avoided through diplomacy, but any heightening in tensions may become a concern for global markets.
TIP OF THE WEEK
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THE WEEK AHEAD: KEY ECONOMIC DATA
Monday: Existing Home Sales.
Tuesday: New Home Sales.
Thursday: Durable Goods Orders. Gross Domestic Product (GDP). Jobless Claims.
Friday: Consumer Sentiment.
Source: Econoday, June 19, 2020 – The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Wednesday: KB Home (KBH).
Thursday: Accenture Plc (ACN), Darden Restaurants (DRI).
Source: Zacks, June 19, 2020 – Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
QUOTE OF THE WEEK
“We do not quit playing because we grow old, we grow old because we quit playing.“
OLIVER WENDELL HOLMES
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1 – The Wall Street Journal, June 19, 2020
2 – The Wall Street Journal, June 19, 2020
3 – The Wall Street Journal, June 19, 2020
4 – The Wall Street Journal, June 16, 2020
5 – The Wall Street Journal, June 16, 2020
6 – MarketWatch, June 16, 2020
7 – CNBC, June 17, 2020
8 – The Wall Street Journal, June 18, 2020
The Wall Street Journal, June 19, 2020
The Wall Street Journal, June 19, 2020
Treasury.gov, June 19, 2020