Performance for Week Ending 7/10/2020:
The Dow Jones Industrial Average (Dow) gained 0.96%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) added 2.04%, the Standard & Poor’s 500 Index (S&P 500) rose 1.76% and the Nasdaq Composite Index (NASDAQ) tacked on 4.01%. Sector breadth was mixed with 6 of the S&P sector groups closing higher and 5 finishing lower. The Consumer Discretionary (+4.83%) sector was the best performer while Energy (-4.64%) was the worst.
||Closing Price 7/10/2020
||Percentage Change for Week Ending 7/10/2020
||Year-to-Date Percentage Change Through 7/10/2020
*See below for Index Definitions
MARKET OBSERVATIONS: 7/6/20 – 7/10/20
The major market indices finished higher for a second straight week as investors looked past an uptick in COVID cases, primarily in the Sunbelt states. The renewed flare up has resulted in the reclosing of bars and restaurants in some states and has led to other states reviewing their re-opening plans and issuing new restrictions on businesses and public gatherings. The tech-heavy Nasdaq Composite was the star performer as investors scooped up technology companies thought to be insulated from the rise in coronavirus infections and that benefit from the work from home trend.
Earnings Season on Tap: Second quarter earnings season kicks off in earnest this week. According to Bloomberg, S&P 500 earnings are expected to plunge by 44 percent as the bulk of the economic damage from the coronavirus occurred during the April through June time frame. While earnings reports will be watched closely, more important will be the forward guidance from company management and their outlooks for the remainder of the year and into 2021. As has been the case with the economic recovery, where investors have underestimated the strength of the rebound, the bar coming into earnings season has been set very low, potentially leaving room for upside surprise – stay tuned.
Economic Roundup: Last week’s economic calendar was on the light side, but as has been the case over the past several weeks, data continues to signal that the economic recovery remains intact. Of note, the Institute for Supply Management (ISM) reported that the ISM Non-Manufacturing Index (i.e. Services) surged a record 11.7 points in June to 57.1, well above the consensus of 50.1. It was the highest level since February, before the shutdown of the economy in response to COVID-19. Along with the jump in the ISM Manufacturing Index during the prior week, it confirms that economic activity is rebounding, and the recession that started in February may have already come to an end. Separately, the Markit U.S. Services PMI rose 10.4 points in June, its second 10-plus point surge in a row, to 47.9. Unlike the ISM services activity index, it remained below 50 (the dividing line between expansion and contraction), but nonetheless showed significant improvement from the bottom reached a couple of months ago.
More Stimulus Coming? Atlanta Fed President Raphael Bostic told a business panel last week that 'business leaders and consumers are getting worried' with respect to the resurgence in U.S. infections, which has now topped the 3 million mark. "There is a real sense this might go on longer than we have planned for,' he added. Bostic's remarks were softened somewhat by Fed Vice Chair Richard Clarida, who said "there's more that we can do, there's more that we will do" in terms of monetary accommodation if the economic recovery were to stall. In terms of more fiscal stimulus, Senate Majority Leader McConnell signaled a willingness to pass another stimulus bill, with the White House announcing they want a package by the first week of August. President Trump said that there would be another round of stimulus checks for Americans, though it will likely be even more targeted this time around.
The Week Ahead: The focal points of the coming week’s data calendar include; the June consumer price index (CPI), June retail sales, May business inventories, the Empire Manufacturing Index for July, and June Housing starts & building permits. The Federal Reserve will release its periodic Beige Book report on Wednesday. On the earnings front, just over 30 members of the S&P 500 are scheduled to report results. Included in this group is a handful of Dow Jones Industrial Average components. The Fed speaking calendar will be busy with eight Fed officials scheduled to present. Also, this Wednesday (July 15) marks the revised deadline for filing 2019 federal tax returns.
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.
Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
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*Assets under management is as of 06.30.2020 and includes leverage of $13bn.
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