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Weekly Commentary For Week Ending August 21, 2020

Updated: Oct 5, 2020

Highlights


There Goes that S&P 500 Again


Home Builders Gaining Confidence


Existing Home Sales Keep Chugging


Retail Sales Improving



S&P 500 RECORDS FASTEST RECOVERY FROM BEAR MARKET IN HISTORY, NASDAQ KEEPS MARCHING TO NEW HIGHS AND HOUSING REMAINS HOT

Weekly Market Update — August 21, 2020

  • It was a mixed week for the major U.S. stock indices as the S&P 500 crept into record territory by inching up 0.7% on the week and NASDAQ kept pushing higher with a weekly gain of 2.7%

  • The smaller–cap Russell 2000 gave back 1.6% on the week while the 30–stock DJIA was unchanged, as it is within a couple of percentage points of being positive YTD

  • Much of the week's news seemed to focus on the 2020 presidential race, which the market seemed to mostly ignore, although there were hopes of another COVID–stimulus package that remains in limbo among lawmakers

  • Almost half of the sectors ended in the red, with five of the 11 recording losses with Energy faring the worst (-6.1%) and Technology faring the best (+3.5%)

  • Financials retreated on the week, as bank stocks came under pressure when Warren Buffett's Berkshire Hathaway's latest 13F filing revealed that Warren has been selling bank stocks like Wells Fargo and JPMorgan Chase and buying gold-stock Barrick Gold Corp.

  • The week saw more positive housing data, this time from home builders and existing home sales while retail sales continued to improve from the previous week

  • One not–so–bright spot was that weekly initial unemployment claims rose unexpectedly to 1.1 million, but the number of those filing unemployment claims fell to its lowest level since early April

  • Oil moved up 0.6% on the week and came to rest at $42.28/barrel

Weekly Market Performance


S&P 500 Records Fastest Recovery from Bear Market Ever


There was more positive economic news on the week, but Wall Street experienced relatively light trading activity, as the S&P 500 marched into record territory and NASDAQ continued its march to another record high. And while the weekly numbers were solid, the fact that the S&P 500 eclipsed its February 19th high and recorded the fastest recovery in history was impressive.

For perspective, recall that the S&P 500 closed at a then record high of 3,386 on February 19th and just three short and very painful weeks later, the S&P closed under 2,500, a drop of 26% in about 16 sessions. Well, on Monday morning this week, the S&P 500 eclipsed that February 19th high in mid-morning trading, and it managed to mostly stay there throughout the week. With a rally of near 50% since the lows of March, the S&P 500 is now in positive territory year–to–date.



Highest Hope from Home Builders since 1998


According to the latest from the NAHB, builder confidence for newly–built single–family homes increased seven points to 78 in August (50 is considered breakeven). For perspective, the index stood at 37 in May. Further, the HMI Index now stands at its highest reading in the 35–year history of the series, matching the record that was set in December 1998.

Looking at the three–month moving averages for regional HMI scores, we saw that:

  • The Northeast jumped 20 points to 65;

  • The Midwest increased 13 points to 63;

  • The South rose 12 points to 71; and

  • The West increased 15 points to 78.

In addition, the index reflecting builders' confidence about current sales conditions increased by six points to 84; the index measuring sales expectations in the next three months rose three points to 78 and the builders’ confidence index measuring prospective traffic of home buyers jumped eight points to its highest level ever at 65.



Existing Home Sales Skyrocket


For the second consecutive month, existing homes sales recorded big gains, as each of the four major geographical regions saw double–digit growth.



According to the National Association of Realtors, total existing–home sales leapt 24.7% from June to a seasonally–adjusted annual rate of 5.86 million in July. The previous record monthly increase in sales was 20.7% in June of this year. Sales also jumped up 8.7% year–over–year.

Further:

  • The median existing-home price for all housing types in July was $304,100, up 8.5% from July 2019 ($280,400), as prices rose in every region.

  • July's national price increase marks 101 straight months of year–over–year gains.

  • For the first time ever, national median home prices breached the $300,000 level.

  • Unsold inventory sits at a 3.1–month supply at the current sales pace, down from 3.9 months in June and down from the 4.2–month figure recorded in July 2019.

  • Properties typically remained on the market for 22 days in July, seasonally down from 24 days in June and from 29 days in July 2019.

  • Sixt–eight percent of homes sold in July 2020 were on the market for less than a month.


Retail Sales Best Reading Since Late March


Based on the release from August 18th, the Johnson Redbook Index reaffirmed the notion that retail sales continue to improve, despite being a few percentage points less this week versus this week last year. For the week, same-store sales moved up 0.6% to minus 2.8%. More importantly, this is the best reading since that COVID–induced panic buying in late March and early April, which was more of an outlier. This is on the heels of recent weekly sales data that showed strong numbers in the month of July too.



Sources

Nahb.com; nar.realtor; redbookresearch.com; fidelity.com; msci.com; nasdaq.com; wsj.com; morningstar.com;


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