Stocks rose Monday on hopes for more Covid relief but retreated Tuesday after President Trump halted talks with Congress. Adding to the uncertainty was Federal Reserve Chairman, Jerome Powell’s comments to the National Association for Business Economics annual meeting warning of tragic consequences if Congress and the White House don’t provide additional support.
On Wednesday President Trump he would be willing to accept pieces of the relief spending on things like airlines but House Speaker Nancy Pelosi declined.
On Thursday the President reversed course and sent Steven Mnuchin back to negotiate a broad relief bill with the House.
On Friday news broke of the White House preparing a $1.8TN relief bill up from the $1.6TN previous offer with the House still at $2.2TN. Then in the afternoon on a radio interview, Trump said he was hoping to do even more than the Democrat’s bill included.
Stocks finished the week with the biggest gains in three months.
European Central Bank President, Christine Lagarde announced that the ECB is ready to inject more monetary stimulus including cutting interest rates further below zero.
The FED released the minutes of the September meeting which showed divisions on applying the new policy framework to keep rates low.
Treasury yields rose with the 30-year bond yield at 1.566% and the 10-Year note at 0.773%. Crude oil rose to $40.54 a barrel and natural gas rose to $2.76 per MMBTUs. The U.S. dollar index fell to 93.06 and gold prices rose to $1934 an ounce.
In the economic numbers this week:
- IHS Markit reported non-manufacturing (services) purchasing managers indexes. Keep in mind that anything below 50 represents contraction and over 50 represents expansion:
- U.S. services fell from 55.0 in August to 54.6 in September.
- Eurozone composite fell from 51.9 in August to 50.4 in September.
- Japan services rose from 45.0 in August to 46.9 in September.
- Household spending in Japan dropped 6.9% in August, following a 7.6% decline in July. Japan’s household spending has declined every month since September 2019.
- U.K. gross domestic product rose 8.0% in the three months ending in August following five consecutive three month periods of declines.
- The Congressional Budget Office reported that in the fiscal year ending in September the U.S. had a deficit of $3.1TN up from $984BN in the previous year.
- The Commerce Department reported that the U.S. trade deficit grew 5.9% in August. While both imports and exports grew, the US imports far more than it exports.
- The Labor Department reported:
- A seasonally adjusted 840,000 workers filed initial claims for unemployment in the prior week, a decrease of 9,000 from a revised 849,000 the week before. The weekly claims still remain above the pre-pandemic record of 695,000.
- Continuing claims fell to 11MM down from 12MM partly due to people exhausting unemployment claims.
- The EIA weekly oil report is here wpsrsummary (10). Also, the EIA reported in the past week:
- Field production of crude oil rose from 10.7MM barrels per day to 11MM barrels per day.
- Natural gas storage rose by 75BN cubic feet and is above the highest level at this time of year during the past five years.
- Baker Hughes reported the number of active oil rigs rose 4 to 193. The number of active natural gas rigs decreased 1 to 73.
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Loren C. Rex, CFP®, AIF®, MA Erik A Smith AIF®
President Managing Partner
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Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
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These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.