September has been a turbulent month for financial markets as U.S. equities broadly logged their fourth consecutive week of losses last week, the longest such streak in over a year. Investor sentiment was weighed down by concerns of an uptick in coronavirus cases in Europe and in the U.S. as well as by political uncertainty, including increasing skepticism on the likelihood of additional fiscal stimulus. For the week, the S&P 500 and Dow Jones dipped by -0.6% and -1.8%, respectively, while the Nasdaq Composite managed a 1.1% gain as the tech sector recouped some of its losses from prior weeks. Meanwhile, a dip in economic growth momentum and inflation expectations weighed on commodity markets across the board with U.S. crude oil prices dropping -2.1% for the week and a sell-off in both precious metals and industrial metals with gold and copper each losing about -4.5%.
Weekly unemployment data remained stubbornly high this past week as initial claims rose to 870k, above the prior week’s job losses of 866k. Continuing jobless claims did show some progress dropping to 12.58 million from 12.747 million in the week prior, but fell short of expectations of 12.22 million. Small businesses, which accounted for almost half of national employment coming into the pandemic according to the Small Business Association, may be increasingly vulnerable in the months ahead without additional economic aid due to less access to capital from financial markets. Restaurants and bars that have managed to survive operating at partial capacity may lose footing as the weather turns colder and reduces the ability to offer outdoor dining options. According to a poll from Nation’s Restaurant News, 40% of restaurant owners reported that it is unlikely they will be able to stay afloat for the next 6 months without additional stimulus.
Market participants also continue to digest a heavy flow of political developments. Over the weekend President Trump nominated Judge Amy Coney Barrett, a member of the Chicago-based Seventh US Circuit Court of Appeals, to replace the late Justice Ruth Bader Ginsburg on the Supreme Court. Her confirmation hearing before the Senate Judiciary Committee will begin on October 12th, thereby setting up a final vote ahead of the election. Despite the opposition from Congressional Democrats on filling the Supreme Court vacancy before the election, the parties have revived negotiations for a fifth coronavirus relief package. House Speaker Nancy Pelosi has insisted that the next stimulus bill should provide at least $2.2 trillion in relief while the White House has noted willingness to go up to $1.5 trillion in additional fiscal aid.
In the week ahead, the spotlight will remain on the upcoming election with the first presidential debate between President Trump and Joe Biden set for Tuesday evening. However, the economic calendar will also be a busy one with an update on the health of the manufacturing sector, the final reading of second quarter GDP growth, and the crucial September labor market report, the last monthly employment report before the election. The consensus expectation is for 850k new payrolls in and a slight reduction in the unemployment rate to 8.2% from 8.4% in August.
