Midweek Market Insights – September 3rd

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NASDAQ and S&P 500 hit new highs as U.S. manufacturing expands and construction spending remains strong


August Makes 5 Straight Positive Months

As we close the book on another month, investors rejoiced as global equity markets continued to advance and recorded a very positive August, pushing two of the major U.S. equity markets to new highs and recording five straight positive months as:

  • The DJIA finished August up 7.6%
  • The S&P 500 finished August up 7.0%
  • NASDAQ finished August up 9.7%

August will be remembered for the S&P 500 passing its pre-COVID level mid-month, hitting new highs later in the month and having NASDAQ reach new highs as:

  • The DJIA recorded its best August since 1984
  • The S&P 500 recorded its best August since 1986
  • NASDAQ recorded its best August since 2000

Further, over the past 5 months, the S&P 500 is up 35.4% – its best five-month run since October 1938.

U.S. Manufacturing Continues to Expand

Every month, IHS Markit releases the U.S. Manufacturing PMI (PMI) from responses to questionnaires sent to purchasing managers from over 800 U.S. manufacturers. The survey covers topics like new orders, output, employment, suppliers’ delivery times and stocks of purchases. And since manufacturers still account for 11.4% of our total economic output and employ 8.5% of the total workforce, the report is closely watched.

On September 1st, IHS Markit ran the headline screaming: “Fastest manufacturing expansion since January 2019” and then wrote the following:

“August data signaled a solid improvement in operating conditions across the U.S. manufacturing sector, with overall growth accelerating to the strongest since early- 2019.

The upturn reflected faster increases in output and new orders, with firms also indicating a renewed rise in employment. Moreover, companies registered the highest degree of confidence in the outlook for output over the coming year since April 2019 amid hopes of further growth of client demand.”

In addition, the following was reported:

  • Faster upturn in new orders as export growth hits four-year high;
  • Quickest rise in employment since November 2019; and
  • Cost pressures strongest since early 2019.

Construction Spending Remains Strong

Construction spending is viewed as a good indicator of the economy\’s momentum because both individuals, businesses and our governments generally only put money into construction when they are confident to justify the building expenses (that might not be as true with respect to our local-, state- and federal-government, but that’s another topic). On September 3rd, it was reported that:

  • Total construction spending during July 2020 was 0.1% above June’s spending and 0.1% below July 2019’s spending
  • During the first seven months of this year, construction spending amounted to $792.6 billion, 4.0% above the same period in 2019
  • Spending on private construction was up 0.6%
  • Residential construction was up 2.1%
  • Nonresidential construction was down 1.0%
  • Public construction spending was down 1.3%

More Data Later in the Week

More economic data will be released later this week, including Jobless Claims and the ISM Services Index on Thursday and the Employment Situation Report on Friday.

census.gov; markiteconomics.com

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