Markets Close Mixed on a Hectic Week as Mixed Earnings and Weak Economic Data Continue to Roll in
Market Recap week ending 7/31/2020
Markets closed mixed in a hectic week on Wall Street. 2nd quarter earnings continued to spotlight strength in the Technology sector while cyclical issues results were somewhat disappointing. The Fed provided an update to its policy statement, which remained extremely dovish. In Washington, Republican Senators unveiled their 1 Trillion dollar stimulus package called the Heals Act, and the Judiciary committee welcomed mega-cap technology leaders to the Hill to ask questions regarding antitrust concerns. Economic data continued to show weakness in employment and regression in sentiment and confidence from the consumer.
For the week, the S&P 500 tacked on 1.7% with strong showings in consumer discretionary issues and technology. The Dow lost 0.20%, while the NASDAQ led with an increase of 3.7%, and the Russell 2000 lagged with a loss of 0.9%. US Treasuries rallied on the dovish FOMC policy statement. The 2-year and 10-year yields decreased by four basis points to close at 0.10% and 0.54%, respectively. The US dollar index fell to a 2-year low, which prompted Gold to continue its break out to all-time highs. Gold closed $88.70 higher for the week and closed at 1986.20 an Oz. Oil traded lower by 2.35% to close at $40.13 a barrel. There were no changes to our models for the week.
Q2 earnings continue to roll in, and last week produced some extraordinary results. Apple stood out and blew away Street expectations. The stock gained 10.50% on Friday, while Facebook and Amazon also traded meaningfully higher on solid results. Alphabet announced disappointing results and, for the first time, reported negative year over year revenue. Semiconductor company, AMD, also had blow out results that sent shares soaring. Industrials, Boeing, Raytheon Technologies, and General Electric, missed their earnings estimates. McDonald’s results were also disappointing.
The FOMC policy statement was made on Wednesday and reassured investors that the Fed was still in a dovish mode for the foreseeable future. Federal Reserve President. Jerome Powell commented that the Fed was not even thinking about raising rates and reiterated the statement for effect. The Fed kept their policy rate at 0-.0.25% and announced that it would maintain its lending facilities through the end of the year.
Democrats pushed back on a Trillion dollar stimulus plan introduced by Republican senators that outlined more money going to healthcare, testing, and schools. The Heals act also proposed liability protection, another $1200 direct stimulus check to Americans, and decreased the unemployment benefit by $400 to $200 plus the current state benefit. Negotiations were pushed into the weekend as the increased unemployment benefits expired on Friday. Also taking place on the Hill, the Judiciary committee questioned mega-cap technology leaders on antitrust issues. The hearing did very little to sway investor sentiment for the sector even as some lawmakers voiced concerns.
Economic data continued to show the damage done to the economy. The resurgence of Covid-19 put pressure on consumer confidence and sentiment. The Consumer Confidence Index slipped to 92.6 versus the June reading of 98.3. The University of Michigan’s Consumer sentiment for July fell to 72.5 versus the June reading of 78.1. Initial jobless claims were higher than expected coming in at 1.434 million, and continuing claims surged 867k to 17.018 million. Q2 GDP came in better than consensus at -32.9% but is still just an ugly figure. June Durable goods came in better at 7.3% and showed signs that businesses were picking up their spending. The Case-Schiller home price index also showed an excellent pick up in home prices.
