Early Gains Dissolve Following Fed Minutes…..

Early gains that came amid more upbeat earnings out of the retail sector and hopes of progress in a fiscal relief package were dashed late-day following the release of the minutes from the Fed’s July monetary policy meeting that showed continued concern surrounding the pandemic. As well, global COVID-19 cases and U.S-China tensions remained headwinds. In equity news, Target and Lowe’s posted stronger than expected earnings results, while Johnson & Johnson announced the acquisition of Momenta Pharmaceuticals for about $6.5 billion. Treasury yields reversed to the upside, as bond prices fell and the U.S. dollar advanced. In light economic news, mortgage applications declined amid the increase in interest rates. Gold tumbled and crude oil prices were nearly unchanged. Europe finished broadly higher and markets in Asia were mixed.

The Dow Jones Industrial Average lost 85 points (0.3%) to 27,693, the S&P 500 Index declined 15 points (0.4%) to 3,375, and the Nasdaq Composite lost 64 points (0.6%) to 11,146. In moderate volume, 766 million shares were traded on the NYSE and 3.4 billion shares changed hands on the NASDAQ. WTI crude oil was $0.01 lower at $43.11 per barrel and wholesale gasoline added $0.01 to $1.29 per gallon. Elsewhere, the Bloomberg gold spot price plunged $63.58 to $1,938.86 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—gained 0.8% to 93.02.

U.S. lawmakers remain deadlocked on a much-anticipated new fiscal relief package, which has caused some uneasiness in the markets as key emergency support measures have expired.

Mortgages apps fall as rates turn higher, Fed minutes released

The MBA Mortgage Application Index decreased 3.3% last week, following the prior week’s 6.8% increase. The decrease came as a 5.3% fall in the Refinance Index was met with a 0.8% increase for the Purchase Index. The average 30-year mortgage rate rose 7 basis points (bps) to 3.13%.

In afternoon action, the Federal Reserve released the minutes from its July monetary policy meeting, where it kept its policy stance and interest rates unchanged and extended its emergency lending facilities through the year. The report showed Committee members felt monetary policy was appropriate at this time, citing a U.S. economy that is “well below” pre-pandemic levels. The minutes also indicated that Members expect that the coronavirus disruption will “weigh heavily” on economic activity, while restating its commitment to use its full range of tools to support the economy and keep markets functioning smoothly.

Treasuries reversed course to finish lower after the release of the minutes, as the yield on the 2-year note ticked 1 bp higher to 0.15%, while the yields on the 10-year note and 30-year bond gained 2 bps to 0.68%, and 1.42%, respectively.

©2020 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.

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.