The third quarter ended this past week and despite the recent weekly downward movements, the major indices ended up on the quarter overall.
The S&P 500 and Dow Jones had similar performances- 7.93% and 7.95% returns, respectively, while the Nasdaq outperformed both, ending at 9.97% while the Russell 2000, a more realistic indicator of the broader economy in my opinion since it tracks small-cap companies, was only up 5.63% in the same time period.
From a year-to-date perspective, you start seeing the S&P and Dow diverge. The S&P is up only 3.64% on the year, while the Dow is actually down 3%. The Nasdaq is unsurprisingly up 23.43% on the year, as investors poured money into tech stocks poised to benefit from work-from-home trends. The Russell 2000, however, is down 7.74%, which again, is more indicative I think of the broader economy.
The four major indexes- you can see how the Dow and S&P move almost in lockstep while the Russell 2000 and Nasdaq are less correlated
The latest unemployment rate was reported on Thursday. It clocked in at 7.9% for the month of September, declining a bit from 8.4% in the prior month. Although on the surface it looks like an improvement, part of the reason the rate fell was because many people simply stopped looking for jobs. Meanwhile applications for unemployment benefits remained above 800,000, while 11.7 million individuals continue to receive unemployment benefits.
Early Friday morning the president announced he tested positive for covid-19 and was taken to the Walter Reed Medical Center in Bethesda, MD, where he’s been receiving a cocktail of treatments to combat the virus. He appears to be recovering, going so far as visiting supporters outside of the hospital during a short car ride.
The jobs data and news of the president’s diagnosis has certainly injected volatility into the markets, with the major indices down Friday morning, and rebounded sufficiently to allow the indices to end their quarters in positive territory. The S&P was up 1.5%, the Dow up 1.87%, Nasdaq up 1.48% and Russell 2000 up 4.37%.
What’s Next
Next on the horizon is a potential new stimulus deal, although news of three Republican Senators also contracting the virus prompted Senate Majority Leader Mitch McConnell to implement a recess which means the chamber won’t reconvene until October 19th at the earliest. The House passed a $2.2 trillion bill on Thursday but the White House and Senate have pushed back, asking instead for a $1.6 trillion bill instead. The two sides have indeed agreed on an additional $1,200 check for families much like the one sent out earlier this year but they’ve yet to agree on certain tax credits as well as a renewal of the expanded unemployment benefit of $600- the White House wants to reduce this to $400 per week.
A stimulus deal would prove bullish for stocks as well as precious metals as it would increase the likelihood of future inflation, a driver of gold and silver prices.
Monday - Markit services PMI
Tuesday - Trade deficit; job openings
Wednesday - FOMC meeting minutes; Consumer credit
Thursday - Initial and continuing jobless claims
Friday - Wholesale inventories