U.S. equities logged a mixed week of returns last week as Congress remained at an impasse on the next round of fiscal stimulus to extend coronavirus relief measures. Meanwhile, economic data continued to demonstrate progress in the recovery, albeit
at a moderating rate from the breakneck pace from May and June. The S&P 500 struggled to reclaim its all-time high that it set in February but managed to eke out a small gain of 0.7% for the week alongside the Dow, which rose 0.3%, while the
Nasdaq Composite was flat. Bond yields gained some upward traction with the 10-year U.S. Treasury rising to 0.71% from 0.56% in the week prior, reflecting increasing confidence in the improving economic outlook and less demand for safe-haven assets
at the current low offered yields. Enthusiasm for precious metals was tempered by the rise in bond yields and drove gold to its first down week in over two months with a -4.4% loss.
Progress on the fifth coronavirus relief bill remains elusive as Congress adjourned for summer recess until September 8th without being able to reach a consensus last week. Though Congress members can still be recalled with 24-hours notice to vote on
a proposed deal, it is unlikely that a deal will materialize in the very near-term as the recess alongside improved economic data and White House executive actions have pushed the timeline potentially to late September.
Last week’s economic data showed improving health of the U.S. consumer outlook as retail sales increased 1.2% in July over June despite pockets of Covid-19 resurgence during the month, though the growth rate moderated from the 8.4% monthly gain
in June. Although the pandemic delivered a significant shock to sales in March and April, retail sales year-to-date through July are only down -2.4% compared to 2019 due to the significant amounts of stimulus that have replaced lost wages and supported
personal income so far. The employment picture has improved as well as weekly new unemployment claims dropped below 1 million for the first time since early March with last week’s report of 963,000 new filers. However, this number is still extraordinarily
high compared to pre-pandemic times and continuing unemployment claims, now at 15.5 million, have a long way to recover with fading stimulus support. The coming weeks and months of employment, personal income, and consumer spending data will remain
crucial to watch.
The week ahead will be relatively light from an economic news perspective aside from the weekly unemployment report and some updated housing market data. Instead, market participants will digest earnings reports from some the major U.S. retailers and
monitor the progress of school reopenings across the country to see if the recent decline in new Covid-19 cases can be sustained. Meanwhile, the continued back-and-forth between the U.S. and China will also keep investors’ attention. Most recently,
the White House tightened restrictions on Chinese telecom giant Huawei’s access to foreign-made chips that use U.S. designs and technology. This follows his executive orders banning applications WeChat and TikTok from Chinese firms Tencent and
ByteDance and Beijing’s recent sanctions against 11 American officials
