Markets End the Week on a Positive Vibe…..

U.S. equities finished higher, with better-than-expected reads on personal income and spending, as well as consumer sentiment, adding additional touches to a picture of economic recovery. The data came as the markets continued to adjust to yesterday’s shift in policy by the Fed that suggested it will tolerate higher inflation to ensure the employment picture brightens. Treasuries ended little changed after a noticeable steepening of the curve yesterday and the U.S. dollar fell, while crude oil prices were little changed even as Hurricane Laura impacted regions on the Gulf Coast, and gold was sharply higher. In equity news, Ulta Beauty and Workday rallied on their quarterly results, Dow member Coca-Cola traded higher after announcing a reorganization plan, but Gap saw only a modest gains, as its positive Q2 performance was overshadowed by its announcement that it plans to close stores. In other economic news, regional manufacturing unexpectedly declined but continued to show expansion, the trade deficit widened more than expected and wholesale inventories dipped. Europe finished mixed with the euro and British pound rallying versus the greenback, while markets in Asia were mixed.

The Dow Jones Industrial Average rose 162 points (0.6%) to 28,654, the S&P 500 Index advanced 23 points (0.7%) to 3,508, and the Nasdaq Composite increased 70 points (0.6%) to 11,696. In moderate volume, 785 million shares were traded on the NYSE and 3.0 billion shares changed hands on the NASDAQ. WTI crude oil shed $0.07 to $42.97 per barrel and wholesale gasoline gained $0.03 to $1.25 per gallon. Elsewhere, the Bloomberg gold spot price jumped $35.47 to $1,965.01 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.7% to 92.34. Markets were solidly higher for the week, as the DJIA rose 2.6%, the S&P 500 increased 3.3% and the Nasdaq Composite gained 3.4%.

Personal income and spending top forecasts, consumer sentiment revised higher…..

Personal income rose 0.4% month-over-month (m/m) in July, versus the Bloomberg forecast of a 0.2% dip, following June’s favorably-revised 1.0% fall. Moreover, personal spending gained 1.9%, above the forecasted 1.6% rise and versus the prior month’s upwardly-adjusted 6.2% gain. The July savings rate as a percentage of disposable income was 17.8%. The PCE Deflator rose 0.3% m/m, versus expectations of a 0.4% increase and June’s upwardly-adjusted 0.5% rise. Compared to last year, the deflator was 1.0% higher, matching estimates and compared to June’s upwardly-adjusted 0.9% gain. Excluding food and energy, the PCE Core Index rose 0.3% m/m, below expectations of a 0.5% gain and versus June’s upwardly-revised 0.3% rise. The index was 1.3% higher y/y, versus estimates of a 1.2% increase and compared to June’s upwardly-adjusted 1.1% gain.

The August final University of Michigan Consumer Sentiment Index was revised higher to 74.1, versus expectations for an unadjusted preliminary reading of 72.8. The positive revision came as both the current conditions and expectations components of the survey were adjusted to better levels than initially-reported. Both portions of the survey were higher versus July, along with the overall index, which improved from the prior month’s 72.5 level. The 1-year inflation forecast ticked higher to 3.1% from July’s 3.0% rate, and the 5-10 year inflation forecast also edged higher to 2.7% from the prior month’s 2.6% pace.

The Chicago PMI unexpectedly declined but remained at a level depicting expansion (a reading above 50). The index decreased to 51.2 in August from July’s 51.9 level, and versus forecasts calling for a rise to 52.6.

The advance goods trade balance showed that the July deficit widened much more than expected, coming in at $79.3 billion, versus estimates calling for it to widen to $72.0 billion from June’s unadjusted deficit of $70.6 billion.

Preliminary wholesale inventories dipped 0.1% m/m for July, compared to expectations of a 0.9% decrease, and versus June’s downwardly-revised 1.3% drop.

Treasuries were little changed, as the yields on the 2-year and 10-year notes were flat at 0.15% and 0.74%, respectively, while the 30-year bond rate ticked 1 basis point higher to 1.52%.

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