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Weekly Market Update – Sept 28, 2020

  • It was another mixed week for U.S. stock markets, leaving investors trying to decide which way the trend is headed
  • The S&P 500 was down 0.6%, which technically is its fourth weekly decline, although last week it was down by just a few points
  • The DJIA dropped 1.8% and the Russell 2000, which was the only major U.S. index positive last week, gave back 4.0%
  • NASDAQ, which was down last week, moved up 1.1% this week
  • Given the different returns for the different stock market indices, it was really challenging to point to any main themes that drove the markets one way or the other
  • Of the 11 S&P 500 sectors, Energy plummeted 8.6% whereas the Materials and Financial sectors both dropped more than 4%
  • Information Technology climbed 2.1% and Consumer Discretionary and Utilities both gained more than 1%
  • The passing of Supreme Court Justice Ginsburg on the Friday before this week might have derailed conversations between law makers trying to pass another COVID-relief bill, but most would agree that Congress does not seem any closer to passing a bill this week either
  • The 10-year Treasury yield declined to 0.66%
  • Gold fell close to 5% on the week and the U.S. Dollar Index moved up almost 2%


 U.S. Stocks Mixed Again This Week

U.S. stock markets were mostly down this week, as investors did not really need to digest any new news on the week, so time was spent speculating when a coronavirus vaccine might be available and when a new stimulus package might be passed. And the data that did come out this week was widely expected – housing is still red hot, jobless claims barely moved from week to week, consumer sentiment is improving at a slower rate and manufacturing is pretty good.

For a brief period of time, the S&P 500 flirted with correction territory – defined as a decline of 10% or more from a recent peak – but that was short-lived. Energy stocks were once again the biggest losers on the week, pushed down by falling oil prices.

The technology and mega-cap names did decently whereas the smaller-cap and cyclical stocks were hit much harder, likely on the presumption that we are further away from a vaccine than most had hoped.

Housing is Very Hot

On Tuesday, September 22nd, the National Association of Realtors released Existing Home Sales Data for the month of August and not only was August the third consecutive month of positive sales gains, but all four major regions of the country experienced month-over-month and year-over-year gains.

Consider these eye-popping stats:

  • Total existing-home sales rose 2.4% in August.
  • Sales were up 10.5% from a year ago.
  • August’s national price increase marks 102 straight months of year-over-year gains.
  • Unsold inventory sits at a 3-month supply.
  • Properties typically remained on the market for 22 days in August.
  • Sixty-nine percent of homes sold in August 2020 were on the market for less than a month.

Home Prices Skyrocketing from August 2019

Consider these eye-popping price increases:

  • The median existing-home price for all housing types in August was $310,600, up 11.4% from August 2019 ($278,800), as prices rose in every region.
  • Existing-home sales in the Northeast jumped 13.8% in August and the median price of $349,500 was a 10.4% increase from a year ago.
  • Existing-home sales in the Midwest increased 9.3% from a year ago and the median price of $246,300 was a 10.7% increase from a year ago.
  • Existing-home sales in the South rose 13.0% from a year ago and the median price of $269,200 was a 12.3% increase from August 2019.
  • Existing-home sales in the West leapt 9.6% from a year ago and the median home price of $456,100 was a 11.8% jump from August 2019.

Jobless Claims Mostly Unchanged

On Thursday, the Department of Labor released jobless claims for the week ending September 19th and reported that initial claims came in at 870,000, an increase of 4,000 from the week before. Further, the 4-week moving average was 878,250, a decrease of 35,250 from the previous week\’s average. Finally, the unemployment rate was 8.6% for the week ending September 12th, a decrease of 0.1% from the previous week\’s level.

The Fed Chair Speaks

The following are excerpts from Fed Chair Jerome Powell’s remarks to the U.S. House of Representatives’ Select Subcommittee on the Coronavirus Crisis on September 23rd and then to the U.S. Senate’s Committee on Banking, Housing, and Urban Affairs on September 24th. The entire text can be read at the Federal Reserve’s website, but these paragraphs reinforce the Fed’s focus on supporting the economy:

“Chairwoman Waters, Ranking Member McHenry, and other members of the Committee, thank you for the opportunity to update you on our ongoing measures to address the hardship wrought by the pandemic. The Federal Reserve, along with others across government, is working to alleviate the economic fallout. We remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.

Economic activity has picked up from its depressed second-quarter level, when much of the economy was shut down to stem the spread of the virus. Many economic indicators show marked improvement. Household spending looks to have recovered about three-fourths of its earlier decline, likely owing in part to federal stimulus payments and expanded unemployment benefits. The housing sector has rebounded, and business fixed investment shows signs of improvement. In the labor market, roughly half of the 22 million payroll jobs that were lost in March and April have been regained as people return to work. Both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain. The downturn has not fallen equally on all Americans; those least able to bear the burden have been the most affected. The rise in joblessness has been especially severe for lower-wage workers, for women, and for African Americans and Hispanics. This reversal of economic fortune has upended many lives and created great uncertainty about the future.

A full recovery is likely to come only when people are confident that it is safe to reengage in a broad range of activities. The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government.

Our economy will recover fully from this difficult period. We remain committed to using our full range of tools to support the economy for as long as is needed.”


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