Market Week: August 24, 2020

The Markets (as of market close August 21, 2020) Tech stocks rallied last Monday, and the S&P 500 once again spent some of the day above its record high, only to tail off by the end of trading. The Nasdaq jumped 1.0%, thrust higher by a surge in mega-tech stocks. The Dow fell 0.3%, the S&P 500 gained 0.3%, the Russell 2000 climbed 0.5%, and the Global Dow inched ahead 0.1%. Industrials fell, pulled lower by falling airline, aerospace, and defense stocks. Energy shares also dropped, despite a bump higher in crude oil prices. The dollar and Treasury yields declined by the close of trading last Monday.

The market was another mixed bag of results last Tuesday as the Nasdaq, the S&P 500, and the Global Dow posted modest gains, while the Dow and the Russell 2000 lost value. Treasury yields, crude oil, and the dollar fell, but gold prices rebounded to close the day higher. Mega-stocks and technology led the advance, while cyclical stocks dropped. A strong housing starts report drove the S&P 500 to a record high earlier in the day, but the index fell back as investors sold to capture gains.

Only the small caps of the Russell 2000 finished last Wednesday ahead, as the remaining benchmark indexes listed here fell. The Dow fell 0.3%, the S&P 500 dropped 0.4%, and the Nasdaq tumbled 0.6%. The dollar and Treasury yields rose, while crude oil prices sank.

Despite a spike in weekly jobless claims, stocks rebounded last Thursday. Market sectors fairing well included technology and communications, while financials, materials, industrials, and energy fell. The Dow rose 0.2%, the S&P 500 climbed 0.3%, and the Nasdaq surged 1.1% (reaching a new record). The Russell 2000 and the Global Dow fell 0.5% and 0.8%, respectively. Treasury yields, crude oil prices, and the dollar all lost value.

Last Friday saw tech stocks soar, pushing the Nasdaq to a record high. The Dow and the S&P 500 also advanced, gaining 0.7% and 0.3%, respectively. The Russell 2000 fell for the second consecutive day, dropping 0.8%. Crude oil prices and Treasury yields fell while the dollar rose.

For the week, the Nasdaq advanced 2.7%, followed by the S&P 500, which gained 0.7%. After reaching a record high last Tuesday, the S&P 500 recorded the fastest recovery from a bear market in history, as determined by Barron's and Dow Jones Market Data. For the week, tech stocks and communication shares performed well, while energy and financials underperformed.

Crude oil prices ended the week at $42.29 per barrel by late Friday afternoon, up from the prior week's price of $42.18. The price of gold (COMEX) fell for the second consecutive week, closing at $1,946.20, down from the prior week's price of $1,954.10. The national average retail price for regular gasoline was $2.166 per gallon on August 17, unchanged from the prior week's price and $0.432 less than a year ago.

Melissa MinterSeptember 1, 2020

Overview

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The year began with the government stymied by a shutdown, and ended with articles of impeachment levied against the president. In between, both domestic and global economies showed signs of slowing, all while the trade war between the United States and China loomed throughout the year. Nevertheless, investors remained relatively bullish toward stocks, pushing several major indexes to record highs.

While domestic economic growth may have slowed in 2019 compared to 2018, it showed resilience and stamina. The third-quarter gross domestic product expanded at an annualized rate of 2.1% — moderately down from 2018's 3.0% rate, yet still strong enough to outpace global economic growth by a considerable margin. Consumer spending — which accounts for about two-thirds of the U.S. economy — surged, buoyed by a strong labor market, near-record unemployment, solid wage growth, and a burgeoning stock market. All told, the domestic economic expansion continued into its 11th straight year, the longest run in U.S. history.

Last year saw trade disputes between the United States and several of its trade partners reach an accord, but the trade war with China roared. The world's two largest economies engaged in a tit-for-tat skirmish, with each country volleying tariffs on their respective imports at the expense of the exporting nation. Coincidentally, a limited deal was announced just before the holiday shopping season, with the U.S. agreeing to forgo new tariffs and China assenting to allow more U.S. agricultural imports. Further negotiations are presumed, but the relationship between the economic giants remains tenuous at best.

Not only did the ongoing trade war affect global economies, but it also impacted domestic business investment, industrial production, and exports. Part of the justification cited by the Federal Reserve for lowering interest rates three times last year was weakness in business fixed investment and exports. As of November, new orders for durable goods were down 1.3% from the same period in 2018, and business (nonresidential) investment fell 2.3% in the third quarter.

The new year begins with a strong stock market and solid economic growth. The Secure Act, passed in late December, should change the retirement planning (and saving) landscape to some extent. However, the Treasury budget deficit for fiscal 2019 (October 2018-September 2019) exceeded $980 billion — 26% higher than the 2018 fiscal-year deficit. The trade war with China may cool with more mutual concessions, or accelerate, which would continue to dampen global economic growth. The new year will begin with the impeachment process and end with November's presidential election. What happens in between is anyone's guess. Will unemployment and inflation remain low? Will stocks continue to experience growth? Will oil and gas prices moderate or surge? Will the domestic economy continue to accelerate, or suffer a setback? Can the world economy recover, or will it continue to stagnate? If nothing else, 2020 looks to be an interesting year.

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Market Week: August 24, 2020

Overview

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