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In with a bang! Stocks gained ground on Thursday in response to a better-than-expected unemployment report. More hires than fires attracted a bid for stocks but the good news was tempered by a hesitant Administration.
N O T E W O R T H Y
Short fuse. Time seems to be a bit out of sorts these days. Since the pandemic crept into the US triggering rolling lockdowns, there have been days that seemed never ending while some months appeared to pass in a flash. But here we are just past the halfway point of 2020 and entering the dog days of summer. If you want to get an objective idea of how the US is progressing through the virus and the subsequent economic recession, you would have to search far and wide. If you looked at the stock market alone you would think that we are well past the calamitous event. Each news outlet has their own version of just how bad things are, usually based on the political leaning of their respective viewer bases. The White House is past it and has moved on to the upcoming election. The Federal Reserve, literally on the front line of the economic battle, remains very cautious and unwilling to predict a rosy near-term economy. Congress has returned to their bickering which has left a very-necessary CARES Act 2.0 up in the air for the moment. Turning to the COVID statistics would show that there has been a noticeable increase in the positivity rate in over 20 states. By “noticeable” I mean: not small. The President insists that the numbers are only high because the US is testing too much, though that does not affect the positivity rate, just the overall cases, which is not a number most people follow. How about economic statistics? Those are mixed, but improving. At the center of the US economic storm is the high rate of unemployment, and those numbers, still bad, have been improving. On Thursday, the Bureau of Labor Statistics released its monthly employment situation which revealed a decrease in the Unemployment Rate from 13.3% to 11.1%, better than economists expected. Further, the report showed that +4.8 million Nonfarm Payrolls were added last month, also beating expectations for +3.2 million new jobs. The stats showed the majority of the new hires were in Leisure and Hospitality, the hardest hit aggregate. Hotels and Casinos added +283 k jobs, while Food and Drinking Services added +1.4834 million jobs. That probably doesn’t surprise you as many states began easing restrictions last month. There is a wrinkle in those numbers that bears recognition. Though the statistic is for the month of June, it technically covers data from unemployment offices from the 15th of May through the 15th of June, so it doesn’t cover the final two weeks of the month which included the spike in new COVID cases. Now, I have to throw in that the news coming out of the healthcare industry regarding therapies has been very encouraging. However, we are still very much in the thick of it now and the statistics are pointing to a really bumpy ride in the months ahead. Here in the New York area, most of the local, beloved fireworks displays were cancelled this year. If you live in or very close to Manhattan, you could have watched the annual Macy’s fireworks display, which was uniquely tailored to avoid large crowds. On Saturday night I walked out into my yard with my family and I heard a barrage of explosions like none that I have ever heard in my lifetime. People were firing off fireworks on their own and the volley of bangs was continuous, lasting for hours. It seemed to me that America was making a statement of resilience. The same resilience that founded the country and propelled it to the largest economy in the world, still standing. The same resilience that will drive us through this dark chapter in history. Stay resilient, stay safe.
THE MARKETS
Stocks rose on Thursday capping an abbreviated week on positive news on jobs. However equities closed off their highs as Stephen Mnuchin raised some concern regarding the follow-up stimulus package being worked out. The S&P500 climbed by +0.45%, the Dow Jones Industrial Average added +0.36%, the Russell 2000 Index traded up by +0.32%, and the Nasdaq Composite Index advanced by +0.52%. Bonds climbed on Thursday and 10-year treasury yields gave up -1 basis point to 0.66%.
NXT UP
- Markit Services PMI (June) is expected to come in at 47.0, up from the prior reading of 46.7.
- ISM Non-Manufacturing Index (June) may come in at 50.0, up from May’s 45.4 print.
- It will be a slow week for economic numbers. We will get JOLTS Job Openings and The Producer Price Index, but the focus will be on Thursday’s weekly Jobless Claims numbers. We are also expecting to get a few notable earnings releases. Please refer to the attached earnings and economic calendars for details.
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