Chief Economist Scott Brown discusses the latest market data.
Initial claims for unemployment benefits fell below one million for the first time since mid-March (20 weeks). However, unadjusted claims had already dipped below that level a week earlier. (The seasonal adjustment is multiplicative, with exaggerated adjusted figures in August and September, when claims are typically at their lows for the year.) Unadjusted claims totaled 831,000.
The Consumer Price Index rose 0.6% (+1.0% y/y), also up 0.6% excluding food and energy (+1.6% y/y). As with the Producer Price Index and import prices, the CPI reflected rebounds in prices that were depressed due to the pandemic (apparel, transportation services, gasoline) and a continued low underlying trend. Retail sales rose 1.2% in July (+2.7% y/y). While overall retail sales are now 1.7% higher than in February, the mix has changed (apparel, department stores and restaurants are still well below February levels, but sales of groceries, motor vehicles, sporting goods and home improvements are all higher). Industrial production rose 3.0% in July (-8.2% y/y), with manufacturing output up 3.4% (-7.5% y/y). The University of Michigan’s Consumer Sentiment Index was little changed in the mid-August assessment (72.8, vs. 72.5 in July). The report noted that “two significant changes since April have been that consumers have become more pessimistic about the five-year economic outlook and more optimistic about buying conditions.”
Next week, the economic data reports aren’t expected to be market-moving, although weekly jobless claims will remain a key focus. Claims should continue to trend lower (amplified by the seasonal adjustment). Residential construction activity should continue to improve. The Index of Leading Economic Indicators should post another gain, led by the longer factory workweek and the drop in jobless claims. FOMC minutes should reveal the debate about changes to the Fed’s monetary policy goals and strategies (such as an inflation trigger for the next Fed rate hike).
Indices
| |
Last |
Last Week |
YTD return % |
| DJIA |
27896.72 |
27386.98 |
-2.25% |
| NASDAQ |
11042.50 |
11108.07 |
23.07% |
| S&P 500 |
3373.43 |
3349.16 |
4.42% |
| MSCI EAFE |
1912.76 |
1862.30 |
-6.10% |
| Russell 2000 |
1579.79 |
1544.62 |
-5.32% |
Consumer Money Rates
| |
Last |
1 year ago |
| Prime Rate |
3.25 |
5.25 |
| Fed Funds |
0.00 |
2.11 |
| 30-year mortgage |
3.08 |
3.60 |
Currencies
| |
Last |
1 year ago |
| Dollars per British Pound |
1.3067 |
1.206 |
| Dollars per Euro |
1.1814 |
1.114 |
| Japanese Yen per Dollar |
106.93 |
105.91 |
| Canadian Dollars per Dollar |
1.322 |
1.332 |
| Mexican Peso per Dollar |
22.167 |
19.676 |
Commodities
| |
Last |
1 year ago |
| Crude Oil |
42.24 |
55.23 |
| Gold |
1970.40 |
1527.80 |
Bond Rates
| |
Last |
1 month ago |
| 2-year treasury |
0.16 |
0.14 |
| 10-year treasury |
0.70 |
0.60 |
| 10-year municipal (TEY) |
0.95 |
1.15 |
Treasury Yield Curve – 08/14/2020
As of close of business 08/13/2020
S&P Sector Performance (YTD) – 08/14/2020
Economic Calendar
| August 17 |
— |
Homebuilder Sentiment (August) |
| August 18 |
— |
Building Permits, Housing Starts (July) |
| August 19 |
— |
FOMC Minutes (July 28-29) |
| August 20 |
— |
Jobless Claims (week ending August 15) |
| August 25 |
— |
CB Consumer Confidence (August) |
| August 26 |
— |
Durable Goods Orders (July) |
| August 27 |
— |
Real GDP (2Q20, 2nd estimate) |
| August 28 |
— |
Personal Income and Spending (July) |
| September 4 |
— |
Employment Report (August) |
| September 7 |
— |
Labor Day Holiday (markets closed) |
| September 16 |
— |
FOMC Policy Decision |
| November 3 |
— |
Election Day |
All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business August 13, 2020.
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