Stocks opened lower. After four straight record-high closes for the S&P 500 Index, stocks are showing a bit of fatigue this morning. Federal Reserve Chair Jerome Powell’s policy speech this morning from Jackson Hole, WY, is the featured event on today’s macro calendar. Powell is expected to outline a more dovish approach to inflation fighting. Meanwhile, weekly jobless claims data will also garner some attention. Asian markets were mixed overnight with China higher and Hong Kong and Japan lower. European markets are lower in midday trading.
Jobless claims fall, remain over 1 million. Filings for initial jobless claims came in at 1 million for the week ending August 22, roughly in line with expectations and down 100,000 from the prior week (source: US Department of Labor). Continuing claims for the week ending August 15 (they are reported with a one-week lag) were marginally above expectations at 14.5 million, but down about 220,000 from the prior week. Still-high claims, elevated unemployment, and fading stimulus support the case for more stimulus and suggest a gradual recovery ahead.
Economic data blowing past expectations. The Citi Economic Surprise Indexes for the United States and the Eurozone remain near record 17-year highs, indicating that the respective economic recoveries continue to surprise to the upside. This data is a positive earnings signal and suggests these economies—with help from a potential vaccine(s)—may fully recover lost output in 2021, earlier than many have anticipated.
New highs are going global. Amid strength from US and Chinese equities—and even modest improvement in Europe—the MSCI All Country World Index set a new all-time high Wednesday, just 109 trading days from the March low. While much of the discussion in equity markets has been around the strength of the US market, risk appetite for global equities has also risen despite sluggish economic growth. We take a closer look at the early stages of the global bull market later today on the LPL Research blog.
Technical update. As we’ve noted in the past, new highs are often accompanied by more highs. Fueled by a 2% surge in the tech sector, the S&P 500, Nasdaq Composite, and Nasdaq 100 each set another new high Wednesday, while defensive sectors continued to underperform. Momentum appears to be reaccelerating, as new all-time highs were also accompanied by fresh recovery highs in the relative strength index. We now look for former highs at 3393 to set a short-term level of support on any pullback.
COVID-19 news. The pace of improvement in new cases and hospitalizations slowed Wednesday but remains steadily lower. New cases fell 4.1% week over week, while the seven-day average dropped 12.6%. Hospitalizations fell about 8% compared with the prior week after declining by double-digit percentages in nine of the past ten days (source: COVID Tracking Project). Abbott Laboratories received US authorization for a portable COVID-19 test that can deliver results in 15 minutes and costs $5. Republicans may soon release a smaller $500 billion stimulus package that appears unlikely to gain traction with House Democrats.
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