President’s COVID-19 Diagnosis Hampers Stocks…..

U.S. equities finished lower, but still managed to post weekly gains, amid ramped-up concerns about COVID-19 after President Donald Trump and First Lady Melania Trump tested positive for the virus. Moreover, the September employment report suggested the job recovery has slowed. A glimmer of hope that lawmakers may be able to come to an agreement on a new fiscal relief package was renewed to help stocks pare some of the losses after House Speaker Pelosi hinted that aid for the airline industry could be coming soon. However, tech stocks kept the Nasdaq well entrenched in the red. In other economic news, September consumer sentiment improved much more than projected and factory orders rose for a fourth-straight month. Treasury yields were higher as bond prices dipped and the U.S. dollar ticked to the upside, while gold was modestly lower and crude oil prices lost noticeable ground. In light equity news, Tesla announced higher-than-expected deliveries and Lennar boosted its dividend, while Twilio and Nu Skin Enterprises preannounced positive guidance. Europe pared early losses to finish mixed, while markets in Asia were lower in thin trading volume with a number of markets in the region closed for holidays.

The Dow Jones Industrial Average declined 134 points (0.5%) to 27,683, the S&P 500 Index fell 32 points (1.0%) to 3,348, and the Nasdaq Composite decreased 251 points (2.2%) to 11,075. In moderately-heavy volume, 901 million shares were traded on the NYSE and 3.7 billion shares changed hands on the Nasdaq. WTI crude oil was $1.67 lower at $37.05 per barrel and wholesale gasoline lost $0.03 to $1.12 per gallon. Elsewhere, the Bloomberg gold spot price shed $3.37 to $1,902.64 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 93.85. Markets were higher for the week, as the DJIA gained 1.9%, the S&P 500 increased 1.5%, and the Nasdaq Composite rose 1.5%.

Employment report suggest slowing recovery, consumer sentiment improves…..

Nonfarm payrolls increased by 661,000 jobs month-over-month (m/m) in September, compared to the Bloomberg forecast of an 859,000 rise, and following August’s upwardly-adjusted gain of 1,489,000. Excluding government hiring and firing, private sector payrolls grew by 877,000, versus the forecasted rise of 850,000 after advancing by a downwardly-revised 1,022,000 in August. The Department of Labor said job gains were notable in leisure and hospitality, retail trade, health care and social assistance, and in professional and business services, but employment in government declined, mainly in state and local government education.

The unemployment rate fell to 7.9% from August’s 8.4% rate, versus forecasts of a decline to 8.2%, with the labor force participation rate unexpectedly declining to 61.4% from August’s 61.7% rate, versus an expected increase to 61.9%. The number of persons on temporary layoff fell by 1.5 million to 4.6 million, down considerably from the high of 18.1 million in April but 3.8 million higher than in February. The number of permanent job losers increased by 345,000 to 3.8 million and the figure has risen by 2.5 million since February.

Average hourly earnings ticked 0.1% higher m/m, versus projections of a 0.2% gain and compared to August’s downwardly-revised 0.3% rise. Y/Y, wages were 4.7% higher, below estimates of a 4.8% increase. Finally, average weekly hours rose to 34.7 from August’s unrevised 34.6 rate, where it was forecasted to remain.

This was the last employment report before the pivotal election and the numbers likely exacerbate concerns about a slowing of the economic recovery. The stalemate among lawmakers on finding an agreement to provide further relief for impacted workers and small businesses, and the economic implications of the resurgence of COVID-19 cases are likely compounding the uneasiness.

The September final University of Michigan Consumer Sentiment Index was revised higher to 80.4, versus expectations for an adjustment to 79.0 from the preliminary reading of 78.9. The stronger-than-expected revision that took the index to the highest since March came as both the current conditions and expectations components of the survey were adjusted to higher levels than initially-reported, with a notable adjustment to the latter.

Both portions of the survey were solidly higher versus August, and the overall index also improved from the prior month’s 74.1 level. The 1-year inflation forecast fell to 2.6% from August’s 3.1% rate, and the 5-10 year inflation forecast remained at the prior month’s 2.7% pace.

Factory orders rose 0.7% month-over-month (m/m) in August, versus estimates of a 0.9% gain, and compared to July’s upwardly-revised 6.5% gain. This was the fourth-straight monthly rebound from the historic 13.5% tumble in April which followed the 11.0% fall in March, but the pace was notably slower.

Stripping out the volatile transportation component, orders gained 0.7%, compared to July’s upwardly-adjusted 2.4% rise. Final durable goods orders (chart), preliminarily reported last week, were revised higher to a 0.5% m/m gain for August, and orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, were adjusted upward to a 1.9% increase.

Treasuries were lower, as the yield on the 2-year note was flat at 0.13%, while the yield on the 10-year note was up 1 basis point (bp) at 0.69%, and the 30-year bond rate rose 2 bps to 1.48%.

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