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THIS WEEK'S UPDATE

| June 29, 2020
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The Week on Wall Street
A jump in COVID-19 cases dampened investor enthusiasm last week, sending stock prices lower on worries that rising infections could derail the economic recovery. The Dow Jones Industrial Average slumped 3.31%, while the Standard & Poor’s 500 retreated 2.86%. The Nasdaq Composite Index lost 1.90% for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, declined 1.28%.
 
A Rocky Week for Stocks 
Investors began the week overlooking a jump in COVID-19 cases in some early reopening states, sending stocks higher and powering the NASDAQ Composite to close above 10,000 and establish a new record high on successive days. But the market quickly reversed course as investors reacted to data showing a troubling spike in nationwide COVID-19 cases. In Thursday’s trading, stocks opened lower but then rallied late in the day on no apparent news. Stocks resumed their decline on Friday, falling on news that Texas and Florida were rolling back some reopening plans amid rising COVID-19 infections. 
 
COVID-19 Cases 
Investor expectations for an economic rebound took a hit last week, following reports of an increase in nationwide COVID-19 cases. The pace of infections had picked up in 33 states, with the seven-day average of new cases higher than the average over the last two weeks. While traders understood that reopening and increased testing would lead to an uptick in reported cases, the numbers were a bit unsettling. The week’s action reminded investors that the market remains tightly tethered to COVID-19 developments. 
 
THIS WEEK: KEY ECONOMIC DATA
Wednesday: ADP (Automatic Data Processing) Employment Report. Purchasing Managers Index (PMI) Manufacturing Index. Institute for Supply Management (ISM) Manufacturing Index. Federal Open Market Committee (FOMC) Minutes.
Thursday: Employment Situation Report. Jobless Claims. Factory Orders.
 
THIS WEEK: NOTABLE COMPANIES REPORTING EARNINGS
Monday: Micron Technologies (MU).
Tuesday: FedEx Corp. (FDX), Conagra Brands (CAG).
Wednesday: Constellation Brands (STZ), General Mills (GIS).
 
Final Thoughts
As is painfully obvious, COVID-19 is once again front and center on the market's mind.  While markets will be closed on Friday for Independence Day in the U.S., the shortened week offers plenty of potential COVID-19 headline risk.  While investors continue to weigh whether the abrupt pause in certain states’ reopening will result in return to stay-at-home lockdown measures, focus will turn to the June nonfarm payrolls return as to whether May’s nonfarm payrolls report was an anomaly. Expectations are for 3 million net jobs returning to the labor market and the unemployment rate decreasing to 12.5%. Initial claims have remained stubbornly elevated despite continuing claims modestly declining, so additional focus on Thursday’s report may be warranted. Are elevated claims a sign that the first wave of labor market losses continues, or are businesses beginning to throw in the towel after an unsynchronized re-opening process defined by weaker demand? It seems too early to tell, but this remains a major question mark for global investors.

Federal unemployment benefits are set to expire at the end of July, and with virus cases bending the curve the wrong way, not renewing such benefits could materially dent market sentiment. Outside of the labor market, expectations are for Chicago PMI, consumer confidence, and ISM manufacturing to all tick higher. Lastly, on the political front, according to PredictIt, Democratic nominee Joe Biden’s lead has widened versus the incumbent President Trump.  Stay tuned...

Have a good week!

Kind regards,

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