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August 8, 2020

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

The week’s data reports remained consistent with a further recovery in the economy, but the level of activity remains far below pre-pandemic levels and the pace of improvement appears to have slowed. The ISM surveys for July were stronger than expected, with stronger growth in new orders, but the employment gauge in both reports remained weak. Unit auto sales continued to improve.

The July Employment Report was close to expectations. Nonfarm payrolls rose by 1.763 million, still 12.9 million below February, with a seasonal boost in education jobs (as seasonal job losses were pulled forward). Construction, manufacturing and retail continued to add jobs, but gains were much more moderate than in May and June. The unemployment rate fell to 10.2%, although labor force participation stalled at 61.4% (vs. 62.7% in February).

Next week, the jobless claims report will remain the key near-term indicator to watch, but important monthly figures will arrive on Friday. The Consumer Price Index is expected to reflect higher gasoline prices and some rebound in prices (hotels, air travel) that were depressed by the pandemic. One-sixth of rents are adjusted each month, which will likely see some downward pressure. Unit auto sales rose in July and should drive the headline retail sales figure higher. The ex-auto figure should reflect broad gains, but the pace of improvement is expected to have slowed. Industrial production should also pick up, still well below the pre-pandemic level.


Indices

  Last Last Week YTD return %
DJIA 27386.98 26313.65 -4.03%
NASDAQ 11108.07 10587.81 23.08%
S&P 500 3349.16 3246.22 3.66%
MSCI EAFE 1862.30 1845.95 -8.57%
Russell 2000 1544.62 1495.10 -7.42%

Consumer Money Rates

  Last 1 year ago
Prime Rate 3.25 5.25
Fed Funds 0.00 2.11
30-year mortgage 2.82 3.74

Currencies

  Last 1 year ago
Dollars per British Pound 1.3143 1.214
Dollars per Euro 1.1877 1.120
Japanese Yen per Dollar 105.55 106.27
Canadian Dollars per Dollar 1.331 1.330
Mexican Peso per Dollar 22.399 19.631

Commodities

  Last 1 year ago
Crude Oil 41.95 51.09
Gold 2069.40 1519.60

Bond Rates

  Last 1 month ago
2-year treasury 0.12 0.14
10-year treasury 0.53 0.57
10-year municipal (TEY) 0.88 1.28

Treasury Yield Curve – 08/07/2020

Chart

As of close of business 08/06/2020


S&P Sector Performance (YTD) – 08/07/2020


Chart

As of close of business 08/06/2020


Economic Calendar

August 11  —  Producer Price Index (July)
August 12  —  Consumer Price Index (July)
August 13  —  Jobless Claims (week ending August 8)
August 14  —  Retail Sales (July)
 —  Industrial Production (July)
 —  UM Consumer Sentiment (mid-August)
August 18  —  Building Permits, Housing Starts (July)
August 19  —  FOMC Minutes (July 28-29)
August 25  —  CB Consumer Confidence (August)
September 7  —  Employment Report (August)
September 7  —  Labor Day Holiday (markets closed)
September 16  —  FOMC Policy Decision

 

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 7, 2020.

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