The Week on Wall Street
Stocks advanced relentlessly last week on positive COVID-19 developments, encouraging economic data, and a supportive policy shift in the Fed’s approach to its target inflation rate.
The Dow Jones Industrial Average increased by 2.59%, while the Standard & Poor’s 500 jumped 3.26%. The Nasdaq Composite index leaped 3.39% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 1.19%.
Stocks Power Higher
Investors pushed stock prices higher all week as hopeful news came with each new day, from the announcement of a potential treatment for COVID-19 to news that U.S. and China negotiators had met by videoconference. Despite another high new jobless claims number, other economic data released during the week indicated a continuing economic recovery, further supporting investor enthusiasm for stocks.
The Fed’s announcement of a shift in its inflation policy, which suggested that rates are likely to remain low for a long time, helped push the market higher. The momentum carried over into Friday, leaving the S&P 500 and NASDAQ Composite at new record highs and the Dow Jones in positive year-to-date territory.
Changes in the Dow Industrials
It was announced last week that the Dow Jones Industrial Average will be undergoing some changes. Starting Monday, August 31, Salesforce.com, Amgen, and Honeywell International will be added to the 30 stocks in the Dow Industrials and Exxon Mobil, Pfizer, and Raytheon Technologies will be removed.
In part, these changes were prompted by Dow-component Apple, which plans a four-to-one stock split on Monday, August 31. The Dow Jones Industrial Average is a price-weighted index, and Apple’s split reduces the impact of technology on the index. The new changes are an attempt to mitigate that issue.
THIS WEEK: KEY ECONOMIC DATA
Tuesday: ISM (Institute of Supply Management) Manufacturing Index.
Wednesday: ADP (Automated Data Processing) Employment Report. Factory Orders.
Thursday: Jobless Claims. ISM (Institute of Supply Management) Services Index.
Friday: Employment Situation Report.
THIS WEEK: NOTABLE COMPANIES REPORTING EARNINGS
Monday: Zoom Video (ZM)
Wednesday: Macy’s (M), Cloudera, Inc. (CLDR), Mongodb (MDB), Crowdstrike Holdings (CRWD)
Thursday: Broadcom (AVGO), Docusign (DOCU)
With earnings season in the rearview mirror, the economic calendar will feature the August jobs report on Friday. This month's number could cause a hiccup in the recovery trend. According to Refinitiv, economists expect that 1.4 million jobs were created in August, down from 1.76 million in July. However, they expect the unemployment rate to fall to 9.8% from 10.2%.
Thank goodness for the Fed because it's becoming less likely that Congress can come to a bipartisan agreement on another round of stimulus before the election. Although, they renewed a dialogue last week, it goes without saying that both parties are far apart as to the size of the package. Imagine if they actually cared about the mathematics and the solution instead of the political optics.
Obviously, the daily COVID-19 numbers will also weigh heavy on the markets as we head into Labor Day.
Stay healthy and have a great week!