The Week on Wall Street
Stock prices drifted higher in an otherwise quiet news week, as a slowdown in new COVID-19 cases outweighed a Congressional impasse on a new fiscal-spending measure.
The Dow Jones Industrial Average gained 1.81%, while the Standard & Poor’s 500 rose by 0.64%. The Nasdaq Composite Index inched 0.08% higher for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, advanced 3.11%.
S&P 500 Nears All-Time High
Stocks prices were supported by a falling rate of COVID-19 cases nationwide and optimism that – despite a lack of progress on a fiscal-aid bill – Congress would eventually come to a spending agreement.
The industrial and financial sectors saw solid gains, while technology stocks, after slipping earlier in the week, found some footing as the week came to a close.
The S&P 500 Index flirted all week with setting a new record high. At one point on Thursday, it traded above its February 2020 record close before closing slightly lower. Stocks treaded water into Friday, as Congress recessed for the summer.
Consumer Prices Jump
On Wednesday, the Labor Department said that the Consumer Price Index rose 0.6% in July, matching the 0.6% increase in June. The increase was double the consensus estimate of 0.3%. The general view is that the acceleration in consumer prices is more indicative of a healing economy than the beginning of a cycle of higher inflation.
The Fed does not appear concerned about these recent monthly price jumps. It remains more worried about disinflation. However, if inflation continues to pick up, the Fed may be forced to reconsider its COVID-19 monetary policy.
THIS WEEK: KEY ECONOMIC DATA
Tuesday: Housing Starts.
Wednesday: Federal Open Market Committee (FOMC) Minutes.
Thursday: Jobless Claims. Index of Leading Economic Indicators.
Friday: Existing Home Sales.
THIS WEEK: NOTABLE COMPANIES REPORTING EARNINGS
Monday: JD.com (JD).
Tuesday: Walmart (WMT), The Home Depot (HD), Kohls (KSS).
Wednesday: Nvidia (NVDA), Target (TGT), Lowe’s (LOW).
Thursday: Alibaba Group (BABA).
Friday: John Deere (DE).
You might wonder why the stock market seems to continue to seek new watermarks, in spite of the virus surge and the political warfare. There is a hard reality that needs to be said with proper respect to the suffering out there. The stock market is a capital market, discounting future growth, while the human suffering is borne by wage earners. The stock market looks at the resurgence of consumption and expanding global trade and is fully aware should a vaccine not found soon, its projection of growth may well have to be reassessed.
As Yogi Berra may well have said, "the unknown is not for me to know." There is no crystal ball that can give us certainty. Volatility remains embedded in our environment, but if we run away from managing the known risk factors, we will never know what winning feels like. It's a simple, but challenging, task - to manage the risks as we encounter them. All we can do now is focus on the fundamental data and follow our process.