Markets showing resilience. After finishing near their lowest trading levels Tuesday, US markets opened higher this morning. Investors are gauging the wide differences between Republicans and Democrats on the next fiscal stimulus package given the present economic climate. The Federal Reserve (Fed) meeting today is expected to be a non-event, but it will get headlines. With the exception of Hong Kong and China, Asian markets traded lower. European markets are mostly higher through midday.
Fed unlikely to make waves. The Federal Open Market Committee (FOMC) announcement today is broadly expected to be a non-event, with Fed Chair Jerome Powell once again stressing we need more fiscal stimulus from Congress. While Wall Street doesn’t expect any major changes to monetary policy, many will be looking for clues on the Fed’s forward guidance. Discussions on inflation targeting, asset purchases, and flexibility on yield curve control have been cited as the primary themes of the meeting.
Big tech goes to Washington. The CEOs of some of the largest technology companies in the world will testify before House of Representative members today. Many in the House want to break up the industry, so there potentially may be fireworks in the sessions. Although a breakup of the group is unlikely, potentially higher taxes may be coming next year (regardless of who wins the election). Considering big tech has been accused of privacy complaints, paying virtually no taxes (Amazon paid no taxes in 2018), and creating a barrier for smaller companies to enter the field—it’s easy to see why the group is a lightning rod for potential controversy.
Gold at new highs. The yellow metal has gained eight days in a row, making a new all-time high along the way. It has been a long way back for gold from the September 2011 peak, but US dollar weakness, record stimulus and deficits, and worries over US-China relations have all added to the record run. We take a closer look at gold and show why we think this rally indeed could have legs, today on the LPL Research blog.
Still no deal. Republicans and Democrats remain far apart on the potential $1.5 trillion COVID-19 stimulus bill, with yesterday’s weak Conference Board Consumer Confidence number adding to the need to get both sides to agree on a deal before the summer recess in two weeks. A cut in federal unemployment benefits to $300–400 a week from $600 is likely, but the big sticking point is how much will be doled out to weakening state and local governments. When all is said and done, the total US fiscal stimulus to fight COVID-19 could be over $4 trillion, or about 17% of the US gross domestic product (GDP).
COVID-19 news. The United States reported just over 61,000 new COVID-19 cases Tuesday, down 4.5% from a week prior and the third straight week-to-week decline. The seven-day moving average of positive cases has fallen to 7.9% from 8.5%, while hospitalizations—a lagging indicator—have also declined. New case growth in many of the recent “hot spot” Sunbelt states has also subsided. New cases in Western Europe have begun to creep higher, although nearly half of those new cases appear to be in Spain.
Technology maintenance. We will be updating several LPL sites, including lpl-research.com, this Friday, July 31, beginning at 8 p.m. ET/5 p.m. PT. There may be intermittent outages of 5 to 15 minutes during the approximately two-hour update period.
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