The S&P 500 (Index: SPX) continued to track upward in the first week of August 2020, closing the week at 3,351.28. That's less than 35 points from the index' record high of 3,386.15 recorded back on 19 February 2020, just before the market melted down with the arrival of the coronavirus pandemic in the United States.
That outcome is also largely as expected according to the redzone forecast indicated in the following chart, which assumes that investors are largely focusing on 2020-Q4 and that the Federal Reserve will maintain an expansionary monetary policy into the indefinite future....
Sharp eyed readers will note that the upward slope of the redzone forecast has steepened over the last two weeks. We believe that's primarily attributable to the Fed's commitment to continue providing support for the economy, which has slowed since mid-June with the delayed first wave of coronavirus cases in many states that had previously avoided significant numbers of cases. Several Fed officials indicated their concern over that developing situation during the past week, where they also indicated they expect to continue the measures they've launched well into 2021. For investors, their statements are setting the expectation the Fed will continue their expansionary policies throughout the reasonably foreseeable future.
For the S&P 500, that support is benefiting a limited number of firms whose businesses are relatively well positioned to grow in the current economic climate in the environment created by the Fed's policies. In today's environment, that's enough to put the index onto a trajectory that will send the S&P 500 tracking toward record territory in the near future.
Not that there won't be any bumps on the road ahead, but that's something that will be determined by the random onset of new information. Speaking of which, here are the market-moving headlines that caught our attention during the week that was.
- Monday, 3 August 2020
- Daily signs and portents for the U.S. economy:
- https://www.reuters.com/article/us-global-oil/oil-rises-more-than-1-on-hopes-for-economic-recovery-idUSKBN24Z00V
- U.S. manufacturing activity near 1-1/2-year high, factory job losses persist
- U.S. auto sales pandemic recovery continues as Toyota decline slows
- Construction spending falls to one-year low in June
- Bigger stimulus changing structure in China, under negotiation in U.S.:
- China will make monetary policy more flexible, targeted in second half: central bank
- Congressional Democrats, White House still at impasse over coronavirus bill
- Bigger stimulus takes hold in Eurozone, what could possibly go wrong?:
- Euro zone factory activity bounced back to growth in July: PMI
- Italy enjoys oversized ECB support as debt balloons
- Spanish factory activity grows in July after long lockdown, car sales up
- Fed minions want more fiscal aid, more lockdowns:
- Fed policymakers call for fiscal support to save U.S. economy
- U.S. economic recovery appears to have slowed in July, Fed's Bullard says
- Fed's Kashkari suggests 4-6 week shutdown; says U.S. Congress can spend big on coronavirus relief
- Bigger trouble developing in Indonesia, South Korea, but light seen at end of tunnel:
- Indonesia second quarter GDP seen shrinking 4.61% year-on-year, weakest since 1999: Reuters poll
- South Korea's factory activity shrinks for seventh month but recovery in sight - PMI
- Nasdaq hits record high close as traders eye M&A and stimulus
- Tuesday, 4 August 2020
- Daily signs and portents for the U.S. economy:
- Oil edges up to highest since March on hopes for U.S. stimulus
- Motor vehicles power U.S. factory orders in June
- Bigger trouble developing as China shirks living up to 'Phase 1' trade deal commitments:
- Eurozone starts showing signs of post-coronavirus economic recovery:
- Strain on global manufacturing eases as euro zone returns to growth
- Germany's car industry shows initial signs of recovery: Ifo
- Spain logs first fall in unemployment since February
- ECB minions pledge to do more stimulus, Fed minions look to Congress to do more stimulus:
- ECB committed to stimulus with outlook `highly uncertain', Lane says
- Fed policymakers call for fiscal support to save U.S. economy
- S&P 500 ends higher as investors eye stimulus
- Wednesday, 5 August 2020
- Daily signs and portents for the U.S. economy:
- Oil prices at five-month high on big drop in U.S. crude stocks
- U.S. trade deficit shrinks in June
- Trump says he may suspend payroll tax himself: Fox News interview
- U.S. job market recovery appears to be slowing, services sector powering ahead
- U.S. services sector activity hits 16-month high in July
- Bigger trouble developing in China, Indonesia, South Africa:
- China's July exports seen falling on global virus surge; import growth cools: Reuters poll
- China's services sector expands at slower pace in July: Caixin PMI
- Indonesian economy shrinks for first time since 1999 in second quarter
- South Africa's sharp economic downturn extends into July: PMI
- Positive signs of post-coronavirus recovery developing in the Eurozone and in Sweden:
- Euro zone business activity returned to modest growth in July: PMI
- Euro zone retail sales return to pre-pandemic levels
- Record drop in Swedish GDP is still better than most of Europe
- Fed minions see slow post-coronavirus recession recovery:
- Fed's Clarida says economy could reach pre-pandemic levels by end of 2021
- Fed policymakers say pickup in infections slowing U.S. economic recovery
- Wonderful world of Disney boosts Wall Street
- Thursday, 6 August 2020
- Daily signs and portents for the U.S. economy:
- Oil settles below 5-month highs amid fuel demand worries
- More signs point to U.S. economic recovery losing momentum
- U.S. household debt falls amid COVID-19 spending cutbacks
- Fed minions realize small businesses need more relief, also prepping for zero-delay banking transactions:
- Fed's Kaplan says small businesses need more financial help
- Fed's Brainard lays out central bank's instant payment framework
- Wall Street gains as markets look to aid package, Nasdaq closes above 11,000
- Friday, 7 August 2020
- Daily signs and portents for the U.S. economy:
- Oil slips below $45/bbl on demand concerns but posts weekly rise
- Payrolls increase by nearly 1.8 million, topping expectations despite coronavirus resurgence
- U.S. earnings recovery may be faster than in previous crises
- Trump vows to suspend U.S. payroll tax after coronavirus aid talks with Congress break down
- Post-coronavirus rebounds starting to take hold?
- Taiwan's July exports unexpectedly rise, but outlook uncertain
- China demand fuels German export, production rebound
- China's July export surge may point to more sustainable recovery
- Instant View: China commodity imports surge in July from a year earlier
- Fed minion has high hopes for "Main Street" loan program:
- More businesses will tap Fed loan program if economy worsens, Rosengren says
- Fed's Rosengren says 509 financial institutions have registered with Main Street Lending Program
- Slowing job growth, stimulus worries weigh on Nasdaq
Looking for more news? Barry Ritholtz' list of positives and negatives he found in the week's economics and markets news is available over at The Big Picture.