Market and Economic Commentary for the Week-Ending 07/31/2020

Market and Economic Commentary for the Week-Ending 07/31/2020

Returns in the Markets for the Week-Ending 07/31/2020 Were as Follows:

US Major Market Index ETFs (The first number in each category is the 1-week performance. The second number is the year-to-date performance)

DIA Dow Jones 30 Industrial Average (-0.13%. -6.11%). SPY S&P 500 (+1.76%, +2.52%). QQQ NASDAQ Index (+4.00%, +25.69%). IWM Small-Cap Index (+0.88%, -10.42%). VIXY CBOE Volatility Index, or Fear Gage, (-5.10%, +88.58%).

US Sector ETFs

XLC Communication Services (+2.25%, +8.91%. XLY Consumer Discretionary (+1.08%, +10.01%). XLP Consumer Staples (+0.92%, +0.93%). XLE Energy (-3.95%, -37.77%). XLF Financial (-0.99%, -20.72%). XLV Health Care (+0.41%, +4.58%). XLI Industrials -0.15%, -10.85%). XLB Materials (-1.81%, -0.49%). XLRE Real Estate (+4.20%, -4.76%). XLK Technology (+4.97%, +21.43%). XLU Utilities (+0.91%, -4.09%).

Global Market ETFs

ACWI all-country World index (+0.66%, -1.17%). ACWX all-country World index ex US (-0.93%, -7.35%). AAXJ all-country Asia ex Japan (+0.89%, +2.22%). EWJ Japan (-2.69%, -7.55%). EZU Eurozone (-2.49%, -9.35%). ILF Latin America 40 Index -0.81%, -30.33%). EEM Emerging Markets (+0.35%, -2.96%).

Commodities ETFs

DBC Commodity Tracking Index (-0.31%, -18.87%). DBA Commodities Agriculture (+3.13%, -14.37%). USO United States Oil (-1.26%, -71.63%). DBB Base Metals (+1.45%, -1.67%). IAU Gold (+3.85% +30.07%). BDRY Dry Bulk Shipping (+10.28%, -47.25%).

Bond Market

In the bond market, the 10-year US Treasury interest rate went from 0.594 on July 26 to 0.533 on July 31.

Currencies

In currencies, the US Dollar DXY Index went from 94.380 on July 24 to 93.321 on July 31.

Other Significant Events

Week Ahead

The US earnings season continues next week with about a quarter of S&P 500 companies reporting second-quarter results. On the economic data front, US non-farm payrolls are seen rising by over 2 million in July and the jobless rate will likely fall to 10.3 percent. Elsewhere, central bank policy meetings in the UK, India, Brazil, Australia and Thailand will be in the spotlight as well as worldwide manufacturing and services PMIs. Other releases include trade figures for the US and China and GDP data for Indonesia and the Philippines.

US Stocks Close Higher Nudged by Earnings

Wall Street closed in the green on Friday nudged by a 10% jump and a new record of Apple shares after the company reported a blowout quarter, as investors shrugged off policy uncertainty in Washington. Stocks tanked early in the session to later come back, as emergency unemployment benefits are set to expire today and Congress and the White House still seem far apart. On the macro side, consumer confidence in the US fell to 72.5 in July from 78.1 in June amid a resurgence in coronavirus cases. Investors continued to flock to safe-haven assets and gold hit a new all-time high of $2005 an ounce. The Dow Jones added 115 points or 0.4% to 26,429. The S&P 500 climbed 25 points or 0.8% to 3271. The Nasdaq jumped 158 points or 1.5% to 10,745. During the month, the Dow gained 2.3%, the S&P 500 added 5.5% and the Nasdaq Composite climbed 6.8%.

Dollar Posts Biggest Monthly Drop Since 2010

The dollar index reversed early losses to trade above 93 on Friday as investors took profits and closed short positions. Still, for July, the index was down 4.1 percent, the most in percentage terms since September 2010 as recent data showed US recovery was losing steam as more states have to reimpose lockdown restrictions due to surge in COVID-19 cases. President Trump's suggestion to delay the election in November also weighed on investors' mood. Meanwhile, the number of coronavirus infections in US is approaching 4.5 million and the death toll surpassed 150K. Also, on Friday, data showed inflation-adjusted consumer spending rose but remained below its pre-pandemic level.

Fitch Revises United States’ Rating Outlook to Negative

Fitch Ratings changed on Friday 31 July 2020 the United States’ sovereign rating outlook to negative from stable and affirmed the debt grade at AAA, citing as main trigger behind the revision the ongoing deterioration in the U.S. public finances and the absence of a credible fiscal consolidation plan, issues that were highlighted in the agency's last rating review on March 26, 2020. Standard & Poor's credit rating for the United States stands at AA+ with stable outlook. Moody's credit rating for the United States was last set at Aaa with stable outlook. DBRS's credit rating for the United States is AAA with stable outlook.

US Economy Shrinks at Record 32.9%

The US economy shrank by an annualized 32.9 percent in the second quarter of 2020, compared to forecasts of a 34.1 percent plunge, the advance estimate showed. It is the biggest contraction ever, pushing the economy into a recession as the coronavirus pandemic forced many businesses including restaurants, cafes, stores and factories to close and people to stay at home, hurting consumer and business spending. Decreases were seen in personal consumption, exports, private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending while federal government spending jumped.

US Initial Jobless Claims Rise for 2nd Straight Week

The number of Americans filling for unemployment benefits rose 1.43 million in the week ended July 25th, lifting the total reported since March 21st to 54.1 million and compared to market expectations of 1.45 million. It was also the second consecutive week that claims have increased at a faster pace as a resurgence in new COVID-19 cases forced several states to scale back or pause the reopening of their economies. The recovery will depend on the capacity of the country to control the pandemic and avoid more waves of infections. Still, the number of new cases continues to increase, making several states to scale back or pause the reopening of their economies. Fed officials see the US economy shrinking 6.5 percent in 2020.

Thank you and please stay tuned for more upcoming reports.

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Len Martinez is a Financial Consultant. Information in the "Bull Valley Advisor” newsletter should not be considered as investment advice or an offer to buy or sell securities. Data is derived from sources considered to be reliable including Morningstar, StockCharts.com, YAHOO Finance, FINVIZ, TipRanks, Investing.com, ECRI, OECD, gurufocus, Crestmont Research, Trading Economics and S2O. Results are not guaranteed. Len Martinez is not an RIA. The data is shown for informational purposes and should not be considered investment advice or an offer to buy or sell securities.