Market Update: Thu, Sept 3, 2020 | LPL Financial Research


Stocks opened lower. The S&P 500 Index opened lower this morning after a strong start to September, historically a seasonally weak month. Better than expected jobless claims were released this morning, and the much-anticipated monthly jobs report will be released Friday, while Institute for Supply Management (ISM) services data will garner some attention. Asian markets closed mixed with Japan up and China and Hong Kong down. European markets rose after France introduced a stimulus package and German purchasing managers’ data exceeded forecasts.

Jobless claims below 1 million. Filings for initial jobless claims came in at 881,000 for the week ending August 29, better than expectations (950,000) and down about 130,000 from the prior week (US Department of Labor). Continuing claims for the week ending August 22 (reported with a one-week lag) also came in solidly better than expected at 13.2 million (Bloomberg’s consensus estimate was 14 million) and fell 1.2 million over the week. Though enhanced by a seasonal adjustment, the improvement bodes well for Friday’s monthly jobs report. The steady recovery continues, but still-high jobless claims, elevated unemployment, and fading stimulus all point to a gradual recovery ahead and suggest more stimulus is justified.

Fed Beige Book points to improving activity. The latest release of the Federal Reserve’s (Fed) Beige Book, a qualitative survey of the Fed’s reporting districts, revealed that economic activity has improved modestly and Main Street sentiment is on the rise. Improvement was particularly pronounced in manufacturing and housing activity, while employment generally increased among reporting districts. While the Beige Book noted that considerable uncertainty remained, improving sentiment shows that policy actions have helped to stabilize the economy and growth is returning. We take a closer look at the improvement on Main Street later today on the LPL Research blog.

The recession is likely over. LPL Research Chief Market Strategist Ryan Detrick highlights improving economic data that suggests the recession may be over in the short, client-approved Street View video, The Recession Is Likely Over.

Technical update. The S&P 500 powered to new highs Wednesday, closing at 3580. The benchmark index is nearly 6% above the February highs and has gained 10.8% on a price-return basis thus far year to date. Pullbacks in strong uptrends like this are likely buyable, but the market is showing signs of being stretched near term. The S&P 500 is now 16% above its 200-day moving average, the most since December 2009. RSI-14, a momentum measure commonly used to determine overbought and oversold conditions, has reached its highest level since January 2018.

COVID-19 news. The seven-day average of new cases dipped below 40,000 for the first time since June 28, reversing Tuesday’s increase (source: COVID Tracking Project). Wednesday’s new cases fell 29% week over week, while hospitalizations declined 12%. The Centers for Disease Control (CDC) asked distribution centers to be ready to distribute COVID-19 vaccines by November 1. India and Spain remain global hot spots.



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