Stocks Mixed on China Tensions and Fiscal Stalemate…..
U.S. equities finished mixed, but the major indexes were able to post gains for the week, as a stronger-than-expected July nonfarm payroll report came up against the negative sentiment surrounding stalled talks in Congress on a fiscal deal, as well as the heightened tensions between the U.S and China. President Donald Trump signed executive orders banning Americans from doing business with TikTok and WeChat, and it has been reported that the U.S. is set to impose sanctions on Hong Kong’s leader Carrie Lam. Treasury yields were higher as bond prices dipped and the U.S. dollar rebounded noticeably, while gold and crude oil prices were lower. In equity news, T-Mobile and Zillow Group rallied following their quarterly results, Uber Technologies saw a mixed impact of the COVID-19 pandemic, and Biogen rose after getting favorable news from the FDA on its investigational Alzheimer’s treatment. Europe finished mostly higher and markets in Asia were mixed.
The Dow Jones Industrial Average rose 47 points (0.2%) to 27,433, the S&P 500 Index increased 2 points (0.1%) to 3,351, while the Nasdaq Composite declined 97 points (0.9%) to 11,011. In moderate volume, 808 million shares were traded on the NYSE and 4.2 billion shares changed hands on the NASDAQ. WTI crude shed $0.73 to $41.22 per barrel and wholesale gasoline lost $0.02 to $1.21 per gallon. Elsewhere, the Bloomberg gold spot price tumbled $32.71 to $2,030.83 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—gained 0.7% to 93.41. Markets finished higher for the week, as the DJIA rose 3.8%, the S&P 500 increased 2.5% and the Nasdaq Composite advanced 2.5%.
July job growth rises more than expected…..
Nonfarm payrolls increased by 1,763,000 jobs month-over-month (m/m) in July, compared to the Bloomberg forecast of a 1,480,000 rise, and following June’s downwardly-adjusted gain of 4,791,000. Excluding government hiring and firing, private sector payrolls grew by 1,462,000, versus the forecasted rise of 1,200,000 after advancing by a negatively-revised 4,737,000 in June. The labor force participation rate dipped to 61.4% from June’s 61.5% rate, versus an expected increase to 61.8%. The Department of Labor said notable job gains occurred in leisure and hospitality, government, retail trade, professional and business services, other services and health care. However, the report did note that in government, employment declines occurred earlier than usual this year due to the pandemic, resulting in unusually large July increases in local government education and state government education and the July gain in federal government reflected the hiring of temporary workers for the 2020 Census.
The unemployment rate fell to 10.2% from June’s 11.1% rate, versus forecasts of a decline to 10.6%. Average hourly earnings rose 0.2% m/m, versus projections of a 0.5% decline and compared to June’s negatively-revised 1.3% drop. Y/Y, wages were 4.8% higher, above estimates of a 4.2% increase. Finally, average weekly hours ticked lower to 34.5 from June’s upwardly-revised 34.6 rate, and compared to forecasts of 34.4 hours.
June wholesale inventories were revised positively to a 1.4% m/m drop, versus expectations to be unrevised at a 2.0% fall, and compared to May’s unadjusted 1.2% decline. Sales jumped 8.8% after May’s 5.7% gain.
Consumer credit, released in the final hour of trading, showed consumer borrowing expanded by $9.0 billion during June, slightly less than the $10.0 billion forecast of economists polled by Bloomberg, while May’s figure was adjusted from the originally-reported decline of $18.3 billion to a $14.4 billion shortfall. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, rose $11.3 billion, a 4.3% increase y/y, while revolving debt, which includes credit cards, declined by $2.3 billion, a 2.8% y/y decrease.
Treasuries were lower, as the yield on the 2-year note ticked 1 basis point (bp) higher to 0.13%, while the yields on the 10-year note and the 30-year bond rose 3 bps to 0.56% and 1.23%, respectively.
Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.
© 2020 Charles Schwab & Co., Inc.