LAST WEEK AND THE ECONOMY
U.S. equity prices continue to fluctuate, as several economic crosswinds continue to collide. With the election nearing, fiscal stimulus talks possibly nearing conclusion, and increasing COVID-19 cases hitting most of the U.S., the S&P 500 shook off a midweek losing streak, and recorded a positive week.
The S&P 500 rose 0.19%, the Nasdaq Composite index gained 0.79%, and the Dow Jones Industrial Average just broke positive at 0.07% growth. The MSCI EAFE index, which tracks developed overseas stock markets, fell 1.46%.
Judge Amy Coney Barrett’s Confirmation Hearings
President Trump’s nominee for the Supreme Court endured almost 20 hours of questioning from the Senate Judiciary Committee last week. If the Senate’s vote follows party lines, as is expected, these hearings mean little to the Committee. However, as Chairman Lindsey Graham noted, these hearings will give the American people the opportunity to “find out about Judge Barrett.”
Judge Barrett refused to answer many of their pointed policy questions, and this is in line with many of the recent Supreme Court nominations who avoid answering direct questions. Judge Barrett describes herself as an originalist, meaning that she prefers to focus on the text of the Constitution rather than making new interpretations of a more elastic Constitution. The Committee is set to vote on Judge Barrett’s nomination on Oct. 22. They are expected to send Judge Barrett’s nomination to the full senate for a vote as soon as possible following the approval.
COVID-19 Cases Climbing in Midwestern and Southern States
A recent surge in COVID-19 cases is impacting the Midwest and South. These numbers are stoking fears of a new surge in cases. There were over 69,000 new cases on Friday, the highest one-day tally since July. A whopping 72% of those cases come from the South and Midwest. Now, 42 states are seeing their 7-day average move higher than their 14-day average, signaling an increased growth trajectory.
One positive takeaway from this recent swell in confirmed cases is that the daily death totals are remaining relatively steady. The 7-day average for deaths has remained below 750 throughout October, as opposed to the peaks of nearly 1200 during the summer spike. However, deaths trail infections by a few weeks, so those numbers are not yet complete. Hospital utilization and ventilator use has remained steady in some hard-hit states, like Wisconsin, but these figures often lag cases as well.
Retail Sales Shock Expectations and Used Cars Continue to Drive Consumer Prices
Retail spending rose 1.9% in September, following 0.6% in August and expectations of a 0.7% jump. Retail spending had been cooling for the past three months following a huge post-lockdown jump. However, this significant rise over last month surprised many and will hopefully carry this momentum into the holiday season. A good portion of future consumer spending power may hinge on further fiscal stimulus, given the slowing employment gains seen in recent months.
Consumer prices rose 0.2% last month, after a 0.4% rise in August. This puts the year-over-year gains at 1.4% through September. Previous upward pressures coming from supply constraints, like shrinking inventories due to lockdowns, may be starting to wane. Used cars continued their surge in prices, jumping 6.7% just last month – the most since 1969. Some believe this increased demand for used automobiles is related to people avoiding public transportation due to the pandemic. With overall inflation remaining relatively tame, it is unlikely for core inflation to worry Fed policy makers any time soon.
Key Economic Data
Unemployment Rate: 7.9% (As of September 2020 – Next Report: 11/6/20)
FOMC Target Rate: 0 – 0.25% (As of September 16, 2020 – Next Report: 11/5/20)
The Week Ahead – Key Economic Data
Tuesday: Housing Starts.
Wednesday: EIA Petroleum Status Report.
Thursday: Jobless Claims, Existing Home Sales.
Friday: PMI Composite Flash.
The Week Ahead – Companies Reporting Earnings
Monday: International Business Machines Corporation (IBM)
Tuesday: Netflix, Inc. (NFLX), Procter & Gamble Company, The (PG), Philip Morris International Inc. (PM)
Wednesday: Tesla, Inc. (TSLA), Verizon Communications Inc. (VZ), Thermo Fisher Scientific Inc. (TMO)
Thursday: Amazon.com, Inc. (AMZN), Att Inc. (T), Intel Corporation (INTC) Coca-Cola Company, The (KO), Southwest Airlines Co. (LUV)
Friday: American Express Company (AXP), Barclays Plc (BCS) Source: Zacks
The more that you read, the more things you will know, the more that you learn, the more places you’ll go.
Last Week's Riddle and Answer
Last Week's Riddle:
Your grandmother passed and left half her money to you and half that amount to your sibling. She left a sixth to her brother and the remainder, $1,000, to the animal shelter, because she loved her dogs! How much money did you receive from your grandmother?
Last Week's Answer:
You received $6,000. She left a total $12,000 because one half (you) plus one quarter (your sibling) plus one-sixth (her brother) equals eleven-twelfths. So, the remainder, $1,000, is one-twelfth of the whole, which must have been $12,000. Since you received half her money you would have received $6,000.
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