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Showing posts from July, 2020

Breaking Down the Worst Quarterly GDP Decline in US History

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Economic Report Monitor #56 July 30th, 2020

The long-awaited 2020 Q2 GDP came out today after months of deliberation on how the COVID-19 outbreak and the lockdown would initially impact the economy. Consensus estimates suggested that 2020 Q2 GDP would fall about -34% from the previous quarter in the largest drop in economic output in history. The official advance estimate came in at -32.9% just above expectations but still the worst quarterly GDP data point ever reported. Stocks saw mixed reactions as the Dow (-0.85%) and the S&P 500 (-0.38%) finished lower while the Nasdaq (0.43%) actually saw a gain. The 10-year Treasury yield dropped back to its low near 0.55% as investors continued to move away from risk.
Personal consumption, which has been a strong driver of GDP growth in the past, tanked -34.6% in the second quarter with service spending seeing the largest drop at -43.5%. Goods expenditures fared slightly better at -11.3% as the goods economy adjusted to the new COVID-19 envir…

Consumer Expectations Sour as Market Turns Lower

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Economic Report Monitor #55 July 28th, 2020
Consumer confidence is an important indicator of consumption and overall economic health as the US economy as measured by GDP is heavily driven by consumption. Since the beginning of the COVID-19 pandemic, current measures of consumer confidence in the two main surveys for the indicator, the Conference Board Consumer Confidence Index and the University of Michigan Survey of Consumers, have trended near all-time lows comparable to the 2008 financial crisis. However, readings of expectations typically fared better as the initial evaluation of consumers was that the lockdowns and pandemic would be temporary. Almost 5 months later, those trends have begun to reverse.

In today's Conference Board Consumer Confidence Index July report, the index reported a drop from 98.3 in June to 92.6 in July with a large deterioration in expectations. The current conditions index continued to improve as reopening measures assuaged concerns of financial instabil…

Market Drops on More Tepid Economic Data

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Economic Report Monitor #54 July 23rd, 2020
As the pandemic continues to add new cases to the overall count, the market continues to struggle with an economic condition that is not improving. In another day of selling off, major indexes fell -1 to -2% with the Nasdaq leading the drop at -2.29%. Safe havens like gold and silver flourish as optimism stales and valuations continue to be tough to justify. The jobless claims reports today is just one example of that as initial claims increase for the first time since it seemed to have peaked in April. At 1.416 million, an additional 109,000 claims were added last week as the number of individuals beginning the unemployment process remains above 1 million for another week. Continuing claims did drop though as the insured unemployment rate fell to 11.1% and 1.107 million individuals stop receiving unemployment insurance. States where COVID-19 cases are resurging, Florida, Georgia, and California, are the main culprits for the increase in claim…

Jobless Claims Struggle to Fall Despite Bullish Spending Seen in Retail Sales

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Economic Report Monitor #53 July 16th, 2020
The previous choppy bullish trading session was reversed into a choppy bearish trading on Thursday as indexes headed for a loss. The Nasdaq, down -0.73%, underperformed the Dow Jones Industrial Average and the S&P 500 again, down -0.50% and -0.34%. Over the last 5 days, information technology stocks have dropped -2.75%, the most in a list of 11 sectors, with energy leading at 5.57%. This differs greatly from the YTD performance where information technology is up 17.51%, well above the -37.78% movement in energy. It seems money might be avoiding the sectors which have benefited the most in the rebound as a resurgence could crash them harder. Economic reports confirmed the shaky status in a mixed bag of data points.
Most notably, initial jobless claims came in above 1 million once again at 1.3 million, just 10,000 lower than the week before. Overall insured unemployment also fell but again only at a slow pace. Totaled continued claims were 17…

More Economic Reports Point to a Bottom, but a Recovery Continues to Look Father Off

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Economic Report Monitor #52 July 15th, 2020
A choppy day in trading ends with indexes higher about 0.5% to 1.0%. Nasdaq once again lagged the other major indexes as tech stocks look to slow from their fast pace. Treasury yields remain low despite hopes that Moderna's coronavirus vaccine would continue to show positive results. The dollar reaches towards YTD lows. Consolidation looks to be the trend as bad news continues to outweigh the good news, and the recovery pauses as investors look for a reason to buy. The latest Empire State Manufacturing Index for July 2020 suggested manufacturing activity has stabilized in NY.
The general business conditions index grew to 17.2 in July marking its first positive reading since February. While the index values have completed a V-shaped recovery, most categories point to just a stabilization. Despite the indexes jumping to near-term highs, only a net 17.4% and 15.2% reported seeing higher new orders and shipments. Unfilled orders were gridlocked…

Inflation Is Mostly Flat in June but Battered Indexes Show Signs of Life

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Economic Report Monitor #51 July 14th, 2020
The market ripped higher today on continued hope that a vaccine would quell the coronavirus pandemic earlier than expected. The Dow Jones Industrial Average jumped 2.13% with the S&P 500 and Nasdaq up 1.34% and 0.94%. With tech stocks lagging, the market favored the most battered companies beating out stocks that have fared better. In another bid of optimism, the latest CPI report for June 2020 signaled a resurgence in demand after three months of contraction.

In June, the CPI's monthly gain was 0.6%, a strong improvement that grew YoY CPI to 0.6%. Food and energy CPI caused most of the gains with the former up 0.6% and the latter up 5.1%. That left the YoY ex-food-and-energy CPI flat at 1.2%. Most notably in the food category the meat index continued its rise, up 4.8% in June and 20.4% in the last 3 months. In fact, all six major grocery store food group indexes rose over the past 12 months as stockpiling pressure continued through COV…