Weekly Economic Update: October 12, 2020

The Markets (as of market close October 9, 2020)

Equities rebounded last Wednesday as the president appeared to soften his stance on halting stimulus negotiations until after the election. Each of the major indexes listed here climbed higher, led by the Russell 2000 (2.1%), followed by the Dow (1.9%), the Nasdaq (1.9%), the S&P 500 (1.7%), and the Global Dow (0.9%). Treasury yields jumped ahead by 5.8%. Crude oil prices fell after a report showed that stockpiles increased. The dollar fell against a basket of currencies. Sectors that performed well include communication services, consumer discretionary, industrials, materials, and information technology.

For the week, the Nasdaq and the S&P 500 each posted their best weekly gains since July, climbing 4.6% and 3.8%, respectively. The Dow advanced 3.3% and the Global Dow gained 3.9%. But the week’s big winner was the Russell 2000, which shot up 6.4%. Sectors that helped drive the market last week include energy, health care, industrials, and information technology. For the year, the Dow is back in the black after this latest surge, joining the Nasdaq and the S&P 500 as the benchmark indexes with values ahead of their respective 2019 closing values.

Last Week’s Economic News

  • According to the latest Services ISM® Report On Business®, the services purchasing managers’ index registered 57.8% last month, 0.9 percentage point higher than the August reading. Not surprisingly, with expanded demand, deliveries slowed in September. Prices also fell in the services sector, while new orders, employment, and inventories each grew in September over August.

  • According to the latest report from the Bureau of Economic Analysis, the goods and services trade deficit was $67.1 billion in August, up $3.7 billion from July. August exports were $171.9 billion, $3.6 billion more than July exports. August imports were $239.0 billion, $7.4 billion more than July imports. The August increase in the goods and services deficit reflected an increase in the goods deficit of $3.0 billion to $83.9 billion and a decrease in the services surplus of $0.7 billion to $16.8 billion. Year to date, the goods and services deficit increased $22.6 billion, or 5.7%, from the same period in 2019. Exports decreased $296.1 billion, or 17.6%. Imports decreased $273.5 billion, or 13.1%. The trade balance with notable trade partners, the deficit with Germany increased $1.6 billion to $4.6 billion in August; the deficit with Japan increased $1.0 billion to $4.3 billion; and the deficit with China decreased $1.9 billion to $26.4 billion.

  • There were 6.5 million job openings in August, according to the latest Job Openings and Labor Turnover report from the Bureau of Labor Statistics. The August total of job openings is slightly below the July figure of 6.7 million. There were 5.9 million hires in August, roughly the same number as from the prior month. August saw total separations decrease to 4.6 million from July’s 5.0 million total. The number of job openings in August decreased over the year to 6.6 million (-685,000), reflecting the continued impact of the COVID-19 pandemic on the labor market.

  • For the week ended October 3, there were 840,000 new claims for unemployment insurance, a decrease of 9,000 from the previous week’s level, which was revised up by 12,000. According to the Department of Labor, the advance rate for insured unemployment claims was 7.5% for the week ended September 26, a decrease of 0.7 percentage point from the prior week’s rate, which was revised up by 0.1 percentage point. The advance number of those receiving unemployment insurance benefits during the week ended September 26 was 10,976,000, a decrease of 1,003,000 from the prior week’s level, which was revised up by 212,000.

Eye on the Week Ahead

The latest inflation indicators are available this week with the September release of the Consumer Price Index, the Producer Price Index, and the retail sales report. The CPI is up 1.3% year to date, while prices at the producer level are down 0.2%.

Have a nice week!





Robert G. Carpenter

President & CEO
Baltimore-Washington Financial Advisors