Surprisingly Strong Economic Data Helps Push Indices Higher Despite COVID-19 Infections
Market Recap week ending 7/2/2020
The holiday-shortened week saw a nice rally on Wall Street. The S&P 500 gained 3.03%, the Dow rose 3.25%, the NASDAQ led gains with a 4.62% return, and the Russell 2000 tacked on 3.85%. Positive corporate news, coupled with surprisingly strong economic data helped push indices higher despite the continued rise in COVID-19 infections. US Treasury trade was subdued again with the 2-year note yield falling one basis point to .15% and the 10-year bond yield climbing three basis points to close at .67%. Gold, too, traded in a tight range but gained $9.60 to close at 1789.90 an Oz. Oil traded 4.75% higher on the week to close at $40.42 a barrel. Our Flex Model series did have a couple of changes at the end of the month, which reduced exposure to mid-duration US Treasuries and Treasury Inflation-Protected securities and added exposure to emerging markets and US investment-grade credit.
The week kicked off nicely on news that some of the larger banks would keep their dividend in place for the 3rd quarter, Wells Fargo, however, did announce that they would suspend their dividend for the quarter. Boeing, an influential component in the Dow, also traded higher on news that the company would start testing on the 737 MAX, shares gained almost 14%. Fed Ex and Tesla also help extend gains. Fed Ex had a better than expected earnings report, and Tesla announced strong Q2 delivery data. Mega- Cap Tech also continued its leadership role throughout the week.
Economic data continued to impress, albeit off very low base for month over month comparisons. Home sales increased by 44.3% in June, much better than the consensus estimate of 18%. Consumer confidence for June rose to 98.1 versus the forecast of 92. The ISM manufacturing index for June went in expansionary mode coming in at 52.6 versus the estimate of 49.2 and well ahead of May’s print of 43.1. The employment situation report came out on Thursday due to the July 4th holiday and produced an increase of 4.8 million non-farm payrolls; the street had estimated an increase of 3.5 million. The unemployment rate fell to 11.1%, which was also better than the consensus estimate of 12.6%. Initial claims continued to be elevated, coming in at 1.427 million.
