S&P 500 Index: 1.8%
Dow Jones Industrial Average: 1.0%
Nasdaq Composite: 4.0%
US equities delivered modest returns this week, with small and midcaps firmly lower. The Nasdaq, after being down approximately 25% year to date in late March, is now up almost 18% this year and reached an all-time high Thursday.
With regard to sector performers, consumer discretionary, technology, and communication services led. Energy, real estate, healthcare, and industrials lagged this week. Large cap growth outperformed value by almost 2%.
Treasury Secretary Mnuchin stated on Thursday that Congress and the White House will look to pass another coronavirus relief bill by the end of the month. He noted that the White House supports another round of stimulus checks; however, overall details remain murky.
Dr. Anthony Fauci, the United States’ leading infectious disease expert, said on a recent podcast that states with rapidly expanding coronavirus outbreaks should seriously consider “shutting down.” These comments come after the nation’s coronavirus cases topped 3 million with daily infections in California, Texas, and Florida all hitting new record highs. How the virus affects these three populous states could play a role in our economic recovery efforts.
In addition to the United States’ issues with a potential second wave, various international regions, such as Hong Kong and Tokyo, reported record spikes in new infections. Moreover, Melbourne recently locked down again.
Both the MSCI EAFE and the MSCI Emerging Markets Indexes were higher this week, with the emerging markets index outperforming the developed markets index by almost 4%. Moreover, European markets gave back some this week, with the STOXX Europe 600 Index down over 1%.
In the wake of COVID-19 along with tensions between Beijing and Washington, China’s equities enjoyed a strong week, with the Shanghai composite up 7% for the week. A China state-controlled media article encouraging its nation’s citizens to buy Chinese equities, sparking much of the rally. There is some concern of a potential bust in Chinese equities, as what happened in 2015, especially as new traders enter the marketplace. However, margin trading, which was seen as a major culprit to 2015’s problems, is reported to be more modest now than it was then.
Fixed Income and Commodities
The Bloomberg Barclays Aggregate Bond Index returned a solid 2.9% in the second quarter of this year, its eighth consecutive quarter of gains. Economically sensitive sectors led, but most are still in negative territory year to date. The index is up slightly more than 17% over the past eight quarters, the best two-year stretch since 2010.
Filings for initial jobless claims totaled 1.31 million for the week ending July 4. This was below Bloomberg’s consensus forecast of 1.38 million and down from a revised 1.41 million for the prior week. Reported with a one-week lag, the continuing claims number declined from a revised 18.8 million to 18.1 million. Per the US Bureau of Labor Statistics, while unemployment claim filings have dropped 14 straight weeks from a peak near 7 million in late March, claims are remaining stubbornly high and is another reminder how this recovery could take years.
The August contract for West Texas Intermediate crude oil (WTI) gave back over 2% this week. Gold closed at its highest level since 2011, up over 1% for the week. Year to date, the precious metal has gained over 19%. The dollar continues to hold its own versus the euro this week.
Economic data for the week starts with the Treasury Budget on Monday. We should get a good idea of where the Federal Reserve (Fed) stands on its asset purchases. Tuesday, data on June’s Consumer Price Index (CPI) and National Federation of Independent Business Small Business Index, along with last month’s hourly earnings and workweek stats will be announced.
Wednesday could prove to be a market-moving day when the Federal Reserve’s Beige Book is announced. Moreover, data is announced concerning the trade deficit, capacity utilization, and manufacturing production.
Thursday provides investors another anticipated weekly unemployment claims report, where progress has stalled over the past couple weeks. We hope to see declines in both initial and continuing claims that would potentially signal further progress in the job market recovery even as US COVID-19 cases in have risen in recent weeks.
June’s retail sales are announced Thursday. Given May’s retail sales upside surprise and now with an increase in COVID-19 cases, June’s report should prove interesting to market participants. Friday concludes with housing starts, building permits, along with Michigan Sentiment.
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