Market Perspective for August 16, 2020

The Dow Jones Industrial Average gained 1.79 percent last week, the S&P 500 Index 0.63 percent, the Russell 2000 Index 0.55 percent and the Nasdaq 0.06 percent.

SPDR Industrial (XLI) advanced 3.19 percent, SPDR Energy (XLE) 2.77 percent and SPDR Consumer Discretionary (XLY) 2.29 percent.

Data continues to show an improving economy. The June Job Openings & Labor Turnover Survey (JOLTS) showed 5.9 million job openings, up 10 percent from May’s level. The University of Michigan’s consumer sentiment survey climbed to 72.8 in July, beating expectations.

Inflation increased in July with both the producer and consumer indexes seeing sharp one-month gains. The producer price index climbed 0.6 percent, doubling analyst expectations. The headline CPI also rose 0.6 percent, exceeding forecasts. Most ominous was the core CPI that strips out food and energy. It also spiked 0.6 percent, triple what economists expected. The high inflation numbers contributed to falling bond prices this week.

Initial claims for unemployment fell to 963,000, the first number below 1 million since the start of the pandemic. Continuing claims fell 600,000 to 15.5 million.

Retail sales climbed 1.2 percent in July, missing forecasts of 2.0 percent. Retail sales ex-autos grew 1.9 percent.

Bonds declined this week, led by a weak 30-year Treasury auction. iShares 20+ Year Treasury (TLT) fell 3.94 percent. iShares iBoxx Investment Grade Corporate Bond (LQD) slid 2.41 percent and iShares iBoxx High Yield Corporate Bond (HYG) 1.30 percent. Invesco Senior Loan (BKLN) gained 0.74 percent on the week.

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