“STOCK MARKETS LOSE GROUND AS JOBLESS CLAIMS CREEP UP WHILE JUNE’S NEW HOME SALES SURGE 13%”

Weekly Market Update – July 27, 2020

  • The U.S. stock markets reversed course this week and ended down, except for NASDAQ which ended down for the second week in a row, but not before hitting a new high early in the week
  • NASDAQ ended the week down 1.3%, followed by the DJIA’s decline of 0.8%, the Russell 2000’s drop of 0.4% and the S&P 500’s retreat of 0.3%
  • The 11 S&P 500 sectors were mixed, with Energy up over 2% and the Financials and Consumer Discretionary both up 1.3%
  • Information Technology had a tougher week, giving back 1.5%, while Communication Services gave back more than 1%
  • While earnings season was in full swing, the news cycle seemed to be all COVID, all the time, with some tentatively positive news about a vaccine from Pfizer
  • Tensions with China increased as the U.S. ordered the Chinese consulate in Houston to be closed and China did the same to a U.S. consulate in China
  • EU leaders agreed to a massive EUR 750 billion stimulus plan, while talks of another stimulus package here in the U.S. stalled out
  • U.S. Treasuries were mixed with the 2–year yield ending the week unchanged at 0.14% whereas the 10–year declined to 0.58%
  • Oil gained on the week as West Texas Intermediate Crude was up about 1.5% to end the week at $41.67/barrel
  • Gold futures settled at their highest price ever at $1897.50/ounce
Weekly Market Performance

  Close Week YTD
DJIA 26,470 -0.8% -7.2%
S&P 500 3,216 -0.3% -0.5%
NASDAQ 10,363 -1.3% 15.5%
Russell 2000 1,468 -0.4% -12.0%
MSCI EAFE 1,852 0.4% -8.7%
*Bond Index 2,390.63 0.43% 7.44%
10-Year Treasury Yield 0.58% 0.05% -1.5%

*Source: Bonds represented by the Bloomberg Barclays US Aggregate Bond TR USD. This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

Stocks End Down After Coming Close to Record Highs

The major U.S. stock markets ended the week down, but not after NASDAQ breached its all-time high and the S&P 500 came within about 3% from its all-time high from February of this year.

There was a palpable sector rotation much of the week, as Energy led the way and Information Technology was the worst of the 11 S&P 500 sectors, a marked difference to their respective past performance records. In addition, the small-cap and mid-cap names picked up steam relative to their large–cap counterparts and even the value names triumphed over the growth names for the week.

While COVID news continued to dominate, there was some good news on the vaccine front as AstraZeneca and Oxford University announced positive results in a trial involving more than 1,000 patients.

Weekly Jobless Claims Streak Ends at 15

This time last week, investors were taking note of the 15–week streak of declining jobless claims, although that streak was viewed in context of massive claims since mid–March. Unfortunately, that 15–week streak came to an end.

On Thursday, July 23rd, the Department of Labor released the following:

  • In the week ending July 18, the advance figure for seasonally adjusted initial claims was 1,416,000, an increase of 109,000 from the previous week’s revised level.
  • The 4–week moving average was 1,360,250, a decrease of 16,500 from the previous week’s revised average.
  • The advance seasonally adjusted insured unemployment rate was 11.1 percent for the week ending July 11, a decrease of 0.7 percentage point from the previous week’s revised rate.
  • The 4–week moving average was 17,505,250, a decrease of 758,500 from the previous week’s revised average.
Earnings, Earnings & Earnings

While just more than one–quarter of the S&P 500 companies have reported earnings results for the second quarter, the results are mixed, depending on your perspective. But research firm FactSet released their summary as of Friday and found that:

  • In terms of earnings, the percentage of companies reporting actual EPS above estimates (81%) is above the five–year average
  • In aggregate, companies are reporting earnings that are 11.4% above the estimates, which is also above the five–year average
  • In terms of sales, the percentage of companies reporting actual sales above estimates (71%) is above the five–year average
  • In aggregate, companies are reporting sales that are 3.0% above estimates, which is also above the five–year average
New Home Sales Surge 13% in June

New home sales surged in June and are even better than they were pre–COVID as the surge was much higher than consensus expectations. In fact June’s numbers are the best in over a decade.

On Friday, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced the following statistics for June 2020:

  • Sales of new single–family houses in June 2020 were at a seasonally adjusted annual rate of 776,000
  • This is 13.8% above the May rate and is 6.9% above the June 2019 rate
  • The median sales price of new houses sold in June 2020 was $329,200
  • The average sales price was $384,700
  • The seasonally–adjusted estimate of new houses for sale at the end of June represents a supply of 4.7 months
 
Sources

dol.govCensus.gov factset.com fidelity.com msci.comnasdaq.comwsj.commorningstar.com;

 

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