The Markets as of Friday, June 12, 2020, Market Closing

 

The previous week kicked off on a positive note for the stock market, with all major indexes gaining over 1.0% in a single day. The S&P 500, rising by 1.2%, has now recovered nearly 45.0% from its 2020 low, pushing it back into positive territory for the year. The Nasdaq reached a record high, while the Dow and Russell 2000 both surged by nearly 2.0%. Oil prices experienced a slight decline, and the dollar weakened, along with the yield on 10-year Treasuries. Investors were buoyed by the prospects of further reopenings, the Federal Reserve’s expansion of its Main Street Lending Program, and growing optimism about an economic turnaround. Leading the market sectors were energy, real estate, airlines, financials, travel and leisure, and retail. However, investors took some profits off the table last Tuesday, causing a dip in all benchmark indexes except the Nasdaq. The Dow declined by 1.1%, and the S&P 500 slipped by 0.8%. The tech-heavy Nasdaq edged up by 0.3%, briefly reaching the historic milestone of 10,000 before closing slightly lower. Oil prices rose, while the yield on 10-year Treasuries and the dollar both decreased for the ninth consecutive day. Equities faced another decline last Wednesday, despite the Federal Reserve’s announcement that it would maintain the current target rate range of 0.00%-0.25% and continue asset purchases at the current pace. The Dow fell by 1.0%, the S&P 500 lost 0.5%, but the Nasdaq continued its ascent, gaining 0.7%. Notably, FAANG stocks (Facebook, Apple, Amazon, Netflix, and Alphabet Google) posted gains, along with health care and tech stocks. The stock market experienced a significant downturn last Thursday, with investors selling off stocks due to rising COVID-19 cases and the Federal Reserve’s grim assessment of the economic recovery. Each of the major indexes saw a decline of at least 5.27%, with the Russell 2000 dropping by 7.58% and the Dow plummeting by 6.90%. Yields on 10-year Treasuries and crude oil prices also sank. Despite the steep losses earlier in the week, equities managed to stage a modest comeback by the end of the week. Stocks posted solid gains last Friday, with the Russell 2000 leading the way with a more than 2.25% increase. Crude oil prices inched up, and the yields on 10-year Treasuries also rose slightly. However, the overall picture for the week was one of losses, largely driven by concerns of a second wave of the virus. Among the major indexes, the Russell 2000 suffered the most, followed by the Dow, Global Dow, S&P 500, and Nasdaq. Year-to-date, only the Nasdaq remains in positive territory, while the Russell 2000, Global Dow, and Dow are still down more than 10.0% each. Investors exercised caution in light of increasing COVID-19 infection rates and an uncertain economic outlook. Crude oil prices experienced their first decline in several weeks, closing the week at $36.41 per barrel, down from the previous week’s price of $39.16. In contrast, the price of gold (COMEX) saw significant gains, closing at $1,738.40 by the end of the week, up from the previous week’s price of $1,688.30. Gas prices, on the other hand, rose for the sixth consecutive week. The national average retail regular gasoline price stood at $2.036 per gallon on June 8, 2020, an increase of $0.062 from the previous week but $0.696 lower than a year ago.

Here’s a summary of the performance of major stock market indexes:

• DJIA (Dow Jones Industrial Average): Closed the week at 25,605.54, down 5.55% for the week and down 10.28% year-to-date.
• Nasdaq: Closed the week at 9,588.81, down 2.30% for the week and up 6.87% year-to-date.
• S&P 500: Closed the week at 3,041.31, down 4.78% for the week and down 5.86% year-to-date.
• Russell 2000: Closed the week at 1,387.68, down 7.93% for the week and down 16.83% year-to-date.
• Global Dow: Closed the week at 2,799.51, down 5.09% for the week and down 13.89% year-to-date.

The Federal Open Market Committee (FOMC) emphasized its commitment to supporting the U.S. economy in light of the ongoing COVID-19 pandemic. The FOMC maintained the federal funds rate target range at 0.00%-0.25% and pledged to continue its asset purchases at the current pace. The Committee expects to maintain this rate until it is confident the economy has weathered the recent events, which its projections suggest will extend through 2022. Additionally, the Committee indicated it would increase holdings of Treasuries and residential and commercial mortgage-backed securities.

The federal deficit for May was $399 billion, with a total of $1,880 billion for the first eight months of the fiscal year. This represents a significant increase compared to the same period last fiscal year when the deficit was $739 billion. The Department of Labor spent $94 billion in May, driven by expanded unemployment benefit payments. May has historically been a deficit month in 65 out of 66 fiscal years due to the absence of major corporate or individual tax due dates in this month. The Consumer Price Index (CPI) declined by 0.1% in May, following a 0.8% decline in April. Over the past 12 months, the CPI has increased by 0.1%. The decrease in May was primarily driven by lower energy prices, motor vehicle insurance, airline fares, used cars and trucks, and apparel, which offset price increases in food, recreation, medical care, household furnishings, operations, new vehicles, and shelter. The index, excluding food and energy, also fell by 0.1% in May, marking its third consecutive monthly decline, a first in its history. Producer prices saw an increase in May, with the Producer Price Index (PPI) rising by 0.4%. Over the 12 months ending in May, PPI increased by 0.8%. This marks the first monthly increase in producer prices in the last three months. The increase in May was driven by a 1.6% hike in goods prices, notably with food prices surging by 6.0% and energy prices climbing by 4.5%. However, prices for services fell by 0.2% in May, mirroring the decline seen in April. U.S. import prices rose by 1.0% in May, following declines of 2.6% in April and 2.4% in March. This increase in May was led by a significant jump in fuel prices, which surged by 20.5%, marking the largest monthly advance in the history of the index. U.S. export prices also rose, increasing by 0.5% in May after a 3.3% drop in the previous month. The Job Openings and Labor Turnover (JOLTS) report for April revealed a decrease of 4.8 million total separations from March. Despite this decline, April saw the second-highest level of total separations in the history of the series. Job openings decreased to 5.0 million, and hires dropped to 3.5 million, marking a series low. These changes reflect the impact of the COVID-19 pandemic and efforts to contain it. For the week ending June 6, there were 1,542,000 claims for unemployment insurance, a decrease of 355,000 from the previous week, which was revised up by 20,000. The insured unemployment rate dropped by 0.2 percentage points to 14.4% for the week ending May 30. The number of individuals receiving unemployment insurance benefits during the week ending May 30 was 20,929,000, a decrease of 339,000 from the prior week, which was revised down by 219,000. Looking ahead, one economic report to watch this week is the Federal Reserve’s industrial production report for May. April saw a significant decline in overall production, with manufacturing falling by 13.7%. As COVID-related restrictions eased partially, May’s production figures are expected to show improvement. Please note that this information is based on data from various sources and should not be considered as financial advice. Investing always carries risks, and past performance is not indicative of future results.

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