Market Update: Mon, Jul 20, 2020 | LPL Financial Research


US stocks opened little changed. The S&P 500 Index, which ended last week fractionally shy of positive territory year to date, will try to continue its three-week win streak as markets focus on flattening the COVID-19 curve, vaccine prospects, stimulus haggling, and earnings season. Most Asian markets were little changed, with the Shanghai Composite’s 3.1% jump the outlier after the equity investment cap for insurers was raised. European markets are higher in midday trading.

First week of earnings season. S&P 500 earnings are tracking to a 43% year-over-year decline for the second quarter, the worst since fourth quarter 2009, amid pandemic-related disruptions in economic activity. Amid tremendous uncertainty, the resilience in earnings estimates so far in July has been encouraging.

Stimulus talk heats up. Republicans are expected to deliver a $1 trillion or more stimulus proposal this week, countering the $3 trillion initial wish list from Democrats. Additional unemployment benefits, state and local government funding, tax refunds, funding for COVID-19 testing and treatment, and corporate liability protections are likely to be in the final package, while payroll tax cuts and school aid remain on the table. Meanwhile, European Union (EU) leaders are reportedly nearing an agreement on the EU recovery fund.

Week ahead. The economic data for the week includes the Chicago Fed National Activity Index on Tuesday, followed by home prices and existing home sales data on Wednesday, the Conference Board’s Leading Economic Index and jobless claims on Thursday, and Markit’s preliminary Purchasing Manager’s Index (PMI) and the US Census Bureau’s new home sales for June on Friday. In addition, 92 S&P 500 companies will report second quarter results.

COVID-19 news. After record cases in the United States heading into the weekend, the curve flattened on Sunday. Johns Hopkins reported 61,800 new cases in the United States on Sunday, up less than 5% over the past week on a 14.3% increase in tests. The seven-day average weekly increase of 13.9% reached a one-month low. Results of early-stage trials of Oxford University’s vaccine are expected later today.



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