Market Perspective for July 3, 2020

Equities rallied over the holiday shortened trading week. Strong economic data and Federal Reserve intervention boosted investor sentiment. The Nasdaq increased 4.65 percent, the S&P 500 Index 4.04 percent and the Dow Jones Industrial Average 3.26 percent.

SPDR Consumer Discretionary (XLY) gained 4.65 percent, SPDR Industrials (XLI) 4.29 percent and SPDR Healthcare (XLV) 4.23 percent.

Economic data was better than expected. The ISM manufacturing PMI moved back into expansion in June. Pending home sales spiked 44.3 percent in May, more than making up for the 21.8 percent drop in April.

Consumer confidence jumped to 98.1 in June, up from 85.9 in May according to the Conference Board survey. This was far ahead of the 90.8 consensus forecast. The survey asks how confidence consumers are about the coming six months.

The unemployment rate fell to 11.1 percent in June according to the Bureau of Labor Statistics. Economists had forecasted a rate of 12.5 percent. New jobs hit 4.8 million, more than 1 million higher than expectations. Leisure and hospitality saw 2.1 million new jobs as the country reopened restaurants and bars.

Bond funds gained this week as the Federal Reserve initiated its final bond buying facility. The Primary Market Corporate Credit Facility allows the Fed to buy bonds, up to 100 percent of an issue, directly from corporations. In effect, it allows companies to borrow directly from the Federal Reserve. iShares iBoxx High Yield Corporate Bond (HYG) climbed 1.40 percent, iShares iBoxx Investment Grade Corporate Bond (LQD) 1.40 percent and Fidelity Corporate Bond (FCOR) 1.12 percent.

iShares MSCI Emerging Markets (EEM) advanced 3.53 percent and iShares MSCI EAFE (EFA) 2.13 percent. Both the House and Senate unanimously passed mandatory sanctions on Chinese officials and businesses that transact with them following the passage of the new national security law. China began arresting dissidents and government critics this week, for violations such as holding protest signs.

FedEx (FDX) delivered far better than expected earnings this week. Analysts were looking for $1.52 per share, but FedEX delivered $2.53 per share. Shares jumped 19.58 percent for the week.

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