This Week's Market Moves | October 19, 2020

Stock prices struggled to find a direction last week, as rising coronavirus cases and stimulus worries continued to dominate the headlines. While off its high for the week, the S&P 500 Index managed to eke out a modest gain of 0.2%. Here are some other insights on the markets and economy from this past week:

Stock prices fluctuated in a narrow range this week, as investors digested the news of rising coronavirus infection rates, new lockdowns across Europe, and fading hopes of another round of government stimulus before the election. Despite worrisome developments, the major indices were largely flat on the week, with the Dow Jones rising 0.1%, the S&P 500 Index gaining 0.2% and the tech-heavy NASDAQ advancing 0.8%.

Third-quarter earnings season kicked off this past week. Banks were among the first to report earnings, with Citigroup, Goldman Sachs, and J.P. Morgan reporting better-than-expected results on pandemic-fueled trading windfalls and lower loan-loss provisions. Wells Fargo and Bank of America did not fare quite as well as their peers. Despite the mixed news, the banking sector remains deeply out of favor with investors.

Mortgage interest rates hit another all-time low this past week, with the average 30-year fixed rate falling to 2.81%. This is the 10th time that mortgage rates hit a new record low this year. This is encouraging news for some homeowners who have been able to refinance their mortgages to take advantage of the lower rates. However, tightening credit standards and ever-increasing house prices are presenting challenges for some potential buyers.

The amount of negative yielding debt, or bonds that cause bondholders to lose money, has climbed back towards its 2019 high of nearly $17 trillion. The recent surge has been driven by Central Banks, who have pumped record amounts of money into the bond market to stem the economic damage caused by the coronavirus. The lack of yield is forcing investors into the riskier sectors of the bond market.

Initial jobless claims jumped to 898,000 last week. Nearly 370,000 Americans filed new claims under the Federal emergency program as well. This is the highest level of first time claims in 7 weeks, a sign that the labor market recovery may be stalling. However, continuing claims, which report the total number of Americans collecting benefits, declined to 10 million.

Consumer prices rose at 1.4% annualized pace in September. The core measure, which excludes food and energy prices, held steady at a 1.7% for the last twelve months. While inflation has increased from its pandemic-induced decline, it remains below the Fed’s 2.0% target. However, the record fund flows into Treasury Inflation Protected Securities (TIPs) suggests that investors think inflation may continue to rise.

Retail sales were surprisingly strong in September, rising 1.9%, well ahead of expectations. The indicator is closely watched, as it is seen as a barometer of the health of the economy, which is primarily driven by consumer spending. Electronics and appliance stores were the only category of spending to see a decline. While the data is unabashedly strong, investors may question whether the momentum can be sustained now that the labor market recovery is stalling and further stimulus from the government has been delayed.

The race to find a vaccine appears to be running into a few speed bumps. Last month, AstraZeneca’s trial was paused after a U.K. volunteer contracted an unexplained neurological illness. This past week, Johnson and Johnson and Eli Lily temporarily halted their phase three trials due to safety concerns. These developments are likely to intensify concerns that drug companies are bowing to political pressure in a rush to find a cure.

Indices: Core Bond: Bloomberg Barclays U.S. Aggregate Index, High Yield: ICE BofA US High Yield, Large Value: Russell 1000 Value Index, Large Blend: S&P 500 Index, Large Growth: Russell 1000 Growth, Emerging Markets, MSCI EM NR USD, Foreign Equities: MSCI ACWI Ex USA NR USD, REITs: FTSE NAREIT All Equity, Small Blend: Russell 2000

Should you have additional questions, please contact your Cammack Retirement Group consultant or info@cammack Note that this article was published on October 19, 2020. Data represented is as of the publication date. The information contained herein has been obtained from sources that are believed to be reliable. However, Cammack Retirement Group does not independently verify the accuracy of this information.

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.

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