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Weekly Market Snapshot

July 2, 2020

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

Nonfarm payrolls rose by 4.8 million in the initial estimate for June, following a 2.7 million gain in May, still down 14.6 million (-11.0%) from February. Strong rebounds were recorded in areas hit hardest by the pandemic (leisure & hospitality, retail, construction, and manufacturing) – although still far below pre-pandemic levels. The unemployment rate fell to 11.1%, with a smaller under-reporting from misclassifications than in recent months. While the number on temporary layoffs fell, those on permanent layoffs picked up.

Other economic data reports remained consistent with a sharp-but-partial rebound from a steep drop in economic activity in March and April. The ISM Manufacturing Index rose to 52.6 in June, from 43.1 in May, with moderate gains in new orders and production, suggesting that manufacturing activity has turned the corner (although far from recovered). The Conference Board’s Consumer Confidence Index rose to 98.1, from May’s 85.9), but the survey was mostly before the recent rise in COVID-19 cases. Initial claims for unemployment benefits edged down to 1.427 million in the week ending June 27, still elevated. U.S. exports fell sharply in May (-32.1% y/y).

Minutes of the June 9-10 FOMC meeting showed that Federal Reserve officials were concerned about the economy and were prepared to do more to support the recovery.

Next week, the economic calendar thins out. The ISM Non-Manufacturing Index is expected to be less weak in June. The Producer Price Index should reflect higher wholesale gasoline prices, with core inflation remaining mild. Jobless claims, still elevated in recent weeks, will bear watching.


Indices

  Last Last Week YTD return %
DJIA 25734.97 25745.60 -9.82%
NASDAQ 10154.63 10017.00 13.17%
S&P 500 3115.86 3083.76 -3.56%
MSCI EAFE 1783.59 1780.69 -12.44%
Russell 2000 1427.31 1413.32 -14.45%

Consumer Money Rates

  Last 1 year ago
Prime Rate 3.25 5.50
Fed Funds 0.00 2.36
30-year mortgage 2.94 3.77

Currencies

  Last 1 year ago
Dollars per British Pound 1.2475 1.259
Dollars per Euro 1.1251 1.129
Japanese Yen per Dollar 107.47 107.88
Canadian Dollars per Dollar 1.359 1.311
Mexican Peso per Dollar 22.699 19.051

Commodities

  Last 1 year ago
Crude Oil 39.82 56.25
Gold 1779.90 1408.00

Bond Rates

  Last 1 month ago
2-year treasury 0.17 0.22
10-year treasury 0.71 0.92
10-year municipal (TEY) 1.32 1.31

Treasury Yield Curve – 07/02/2020

Chart

As of close of business 07/01/2020


S&P Sector Performance (YTD) – 07/02/2020


Chart

As of close of business 07/01/2020


Economic Calendar

July 6  —  ISM Non-Manufacturing Index (June)
July 9  —  Jobless Claims (week ending July 4)
July 10  —  Producer Price Index (June)
July 14  —  Consumer Price Index (June)
July 15  —  Industrial Production (June)
 —  Fed Beige Book
July 16  —  Retail Sales (June)
July 17  —  Building Permits, Housing Starts (June)
July 29  —  FOMC Policy Decision
July 30  —  Real GDP (2Q20, adv. est., benchmark revisions)
July 30  —  Employment Report (July)

 

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 July 2, 2020.