STOCKS MAKE BIG WEEKLY JUMPS AS THE DJIA, S&P 500 & RUSSELL 2000 ALL RECORD MILESTONES AND NASDAQ CONTINUES ITS TORRID PACE

Weekly Market Update – October 13, 2020

• U.S. stocks jumped during the first full week in October, as all the major indices advanced significantly, with small-caps making a big leap on the week
• Of the three larger-cap indices, NASDAQ led the way with a gain of 4.6%, followed by the 3.8% jump from the S&P 500 and the 3.3% jump from the DJIA
• The small-cap Russell 2000 outpaced the others significantly, leaping 6.4% on the week, suggesting that at least for this week, many investors were more hopeful in the recovery
• As has been the case since early this year, the coronavirus was constantly in the news and this week investors received positive news, including that President Trump has recovered, which takes away the one thing the market despises – uncertainty
• More good news on the coronavirus front was that Washington might indeed be closer to a new stimulus bill and that the antibody treatments that the President was administered are on the way towards an emergency authorization edict from the White House
• Every one of the 11 S&P 500 sectors rose this week, with the Materials and Energy sectors each gaining more than 5% and the Information Technology and Utilities sectors each gaining more than 4%
• The 2-year Treasury yield increased to 0.16% and the 10-year yield increased to 0.78%, its highest level in four months
• WTI crude futures jumped close to 10% and ended the week north of $40/barrel

 Stocks Make Huge Weekly Gains

U.S. stocks made huge strides this week, with the S&P 500 recording its best weekly gain in about three months, the DJIA climbing into the positive performance column YTD and NASDAQ ending the week with a staggering YTD gain of close to 30%. But wait, that’s not all.

Small-cap investors were cheering the huge gains for the Russell 2000, not just because of the weekly 6.4% gain or the fact that the Russell 2000 is less than 2% from joining the DJIA in the positive YTD performance column. While those milestones were important, small-cap investors were relieved that this week finally brought the small-caps out of correction territory, as the Russell 2000 now sits within 10% of its 2018 peak.

Most of the positive news on the week seemed centered around discussions on another stimulus package. In fact, the market was up 4 out of the 5 days this week and the only day it declined was when President Trump called off negotiations and then appeared to reverse course somewhat. While there is still a long way to go, the White House has increased its proposal to about $1.8 trillion, which is still short of the $2.2 trillion that the House already approved, but at least the gap is shrinking.

Hope in the COVID-19 Fight

While there continues to be lots of partisan arguing about the President’s recovery from COVID-19 diagnosis from the previous Friday, there was hope that the new antibody (Regeneron’s REGN-COV2) and antiviral (Gilead’s Remdesivir) treatments the President received were helpful and the President promised that those treatments would be available to all Americans by the end of the year – and that they would be free. These developments appeared to release some pressures to a degree.

Late in the week, Eli Lilly sought emergency use authorization for its antibody therapy and pledged to have a million doses available by late December.

Manufacturing Data Better Than Expected

Early in the week, Markit and the Institute for Supply Management released several data sets for September and the consensus was that the data was generally beyond most expectations.

Here are the highlights from the released dated October 5^th:

• Business activity rises further amid stronger expansion in new sales
• Employment growth remains historically elevated
• Selling prices increase at sharpest pace for two years

“September PMI data signaled a solid upturn in U.S. service sector business activity, albeit one that was slightly slower than August\’s recent high. The expansion was largely driven by a faster rise in new business. Quicker growth in new sales was supported by another strong increase in foreign client demand. As a result, employment growth remained historically marked, with firms mentioning strains on capacity. Business confidence, however, sank to a four-month low amid concerns regarding the coronavirus disease 2019 (COVID-19) pandemic. “

The JOLTS Report

The Department of Labor compiles a lesser-known report called the Job Openings and Labor Turnover Survey – the JOLTS Report – which tracks monthly changes in job openings as well as job offerings and “quits.” Unlike other reports that track employment data, the JOLTS reporting period lags by a month, although it does provide additional color to the employment landscape.

The JOLTS release includes estimates of the number and rate of job openings, hires, and separations for the total nonfarm sector, by industry, and by four geographic regions. On Tuesday, October 6^th, it was reported that for August:

• The number of job openings was little changed at 6.5 million on the last business day of August
• Hires were little changed at 5.9 million in August
• Total separations decreased to 4.6 million

• Job openings decreased in construction (-68,000), and information (-25,000)
• Job openings increased over the year for federal government reflecting recruitment efforts related to the 2020 Census
• Job openings decreased in a number of industries with the largest decreases in accommodation and food services and in transportation, warehousing, and utilities

• Hires increased in federal government (+246,000), largely because of temporary 2020 Census hiring
• Hires also increased in durable goods manufacturing (+41,000)
• Hires decreased in accommodation and food services (-177,000), health care and social assistance (-73,000), and real estate and rental and leasing (-28,000)

Sources:

Markiteconomics.com; bls.gov;
fidelity.com; msci.com; Nasdaq.com; wsj.com; Morningstar.com;