Market Perspective for June 20, 2020

Stocks rallied this week, led by a 3.74-percent advance by the Nasdaq. The S&P 500 Index increased 1.88 percent and the Dow Jones Industrial Average rose 1.06 percent. SPDR Healthcare (XLV) gained 3.23 percent, SPDR Technology (XLK) 2.88 percent and SPDR Communication Services (XLC) 2.61 percent.

Strong retail sales data boosted the market. May sales rose 17.7 percent, more than double the consensus forecast. Clothing sales jumped 188 percent. Other retail outlets such as furniture, book and sporting goods stores saw sales climb nearly triple digits. Auto sales increased 44 percent. The New York Fed’s Nowcast model hiked its second-quarter GDP forecast to negative 19 percent following the report.

Housing starts and building permits missed forecasts in May, but both increased from April. Housing starts were slower than expected because builders couldn’t restart as quickly under lockdown policies.

Initial claims for unemployment were 1.51 million for the week ending June 13, down from 1.57 million the week prior. Continuing claims fell to 20.5 million.  The Department of Labor, which reports weekly claims data, estimates unemployment is down to 12.8 percent.

China agreed to buy more U.S. agricultural exports after a meeting in Hawaii on Wednesday. China committed to buying huge increases of exports such as soybeans earlier this year. The two sides also discussed Hong Kong and the situation in China’s Xinjiang region, where human rights activists claim the government is detaining millions of Uighurs. President Trump signed a law allowing for sanctions of Chinese officials involved with this policy.

The 10-year Treasury yield was flat. It closed at 0.70 percent. iShares iBoxx Investment Grade Corporate Bond (LQD) and Fidelity Corporate Bond (FCOR) were two of the better performing funds. They gained 1.22 percent and 1.16 percent, respectively. The Federal Reserve announced it would buy individual corporate bonds, boosting the entire sector.

Crude oil closed at $39.75 per barrel. SDPR Energy (XLE) fell 0.65 percent on the week. First Trust ISE Revere Natural Gas (FCG) slid 2.74 percent.

 

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