LAST WEEK AND THE ECONOMY
Equity markets rallied last week following a better than expected jobs report, shrugging off the lack of stimulus renewal and growing tensions abroad. By the week’s end, major averages had recorded gains across the board.
The Standard & Poor’s 500 advanced 2.45%, the Dow Jones Industrial Average rose 3.80%, and the Nasdaq Composite index climbed 2.47% for the week. In addition, the MSCI EAFE index, which tracks developed overseas stock markets, rose by 1.92%.
Latest Jobs Report Beats Wall Street Estimates
The latest jobs report for the month of July showed an increase of 1.8 million non-farm payroll jobs, following an increase of 4.8 million in June. The unemployment rate ticked down to 10.2% from 11.1% in June.
Some of the largest gains were seen in food service and retail jobs, which were hit hardest by the lockdowns of March and April. Job growth in July was also impacted by additional lockdown procedures in many states due to a resurgence in cases. With new case numbers finally trending down, there may be cause for optimism that unemployment can continue to fall.
Trump Extends Unemployment Benefits with Executive Action
Following weeks of negotiation, lawmakers still had not passed a stimulus renewal. This left millions of Americans unsure about the status of their now-expired unemployment benefits. Many in Congress are calling for an extension of the $600 a week in additional federal benefits to the unemployed, while others want it cut to $200 a week.
On Saturday, President Trump signed an executive order that would restart additional unemployment benefits at a reduced rate of $400 per week. The new caveat is that $100 of the $400 should come from the states’ budgets. The orders also delayed payroll tax collection for those making less than $4,000 every two weeks. This move immediately came under fire from Democrats as being both not sufficient and possibly unconstitutional. Challenging this in court, however, may be a touchy subject for voters who have been reliant on these benefits.
TikTok in the United States
Following last week’s confrontation between the White House and TikTok parent company ByteDance, the Trump administration has given the company less than 45 days to either sell U.S. operations or cease operating in the U.S. To date, multiple branches of the U.S. military, Wells Fargo, and India have all banned TikTok and similar Chinese owned apps, citing to national security concerns.
The bidding for TikTok’s U.S. presence is underway, and Microsoft has expressed interest in making the acquisition. However, recent reports indicate that Twitter has joined the race. With a potential valuation ranging from $15 billion to $50 billion, TikTok is likely too big for Twitter to buyout on its own. This means a deal with Twitter could resemble more of a merger. TikTok has recently announced plans to sue the Trump administration, citing the president’s move as unconstitutional.
Key Economic Data
Unemployment Rate: 10.2% (As of July 2020 – Next Report: 9/4/20)
FOMC Target Rate: 0 – 0.25% (As of July 29, 2020 – Next Report: 9/16/20)
Check your emergency fund. The current pandemic has caused a major shift in how most of us spend our money. Take time to re-evaluate your emergency fund based this new environment, and make sure it is sufficient to meet your needs when the next disaster strikes.
The Week Ahead – Key Economic Data
Tuesday: Producer Price Index.
Wednesday: Consumer Price Index, EIA Petroleum Status Report.
Thursday: Jobless Claims.
Friday: Retail Sales, Industrial Production.
The Week Ahead – Companies Reporting Earnings
Monday: Duke Energy Corporation (DUK)
Tuesday: Sysco Corporation (SYY)
Wednesday: Samsung Electronics Co. (SSNLF), Cisco Systems, Inc. (CSCO)
Friday: Draftkings Inc. (DKNG)
“Change is the end result of all true learning.”
Last Week's Riddle and Answer
Last Week's Riddle:
I went to the hardware store to buy something for my home. I approached an employee for a quote. I was quoted $1.50 for 3, $3.00 for 20, and $4.50 for 100. I am trying to buy 50. How much will I pay?
Last Week's Answer:
I would pay $3.00. I am buying address numbers for my house. I need 2 digits “5” and “0”. Per the quote, these number are $1.50 each.
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