Market/Earnings Update – Monday Morning Market Memo – August 17, 2020

Market/Earnings Update – Monday Morning Market Memo – August 17, 2020

Good morning,

The major stock market averages all posted gains last week, led by the Dow Jones Industrial Average which rose 1.81% to 27,931. The Standard & Poor’s 500 Index gained .64% to 3,372 (its third straight weekly gain putting it within a fraction of a percent of its all-time high), and the NASDAQ Composite added .08% to finish the week at 11,019.

Overall, the market continues to benefit from supportive fiscal policy (government spending and taxation) and monetary policy (Federal Reserve management of the money supply and interest rates). Two market axioms describing the market uptrend of late are the trend is your friend and don’t fight the Fed. Also in the big picture mix is that the market does expect there to be a vaccine for the coronavirus later this year or early next year.

Looking at some specific economic data from last week’s action, the most recent number on initial unemployment claims came in below 1 million (at 963,000), which was better-than-expected. This marked the first time initial claims were below the one million mark since the pandemic struck, and was the second straight notable decline, signaling at least some revival in the hard hit U.S. labor market. The preliminary University of Michigan Index of Consumer Sentiment for August also came in ahead of market expectations.

Looking to the week ahead, it is what we refer to as retail week within earnings season. Retailers scheduled to report results include Home Depot, Advance Auto Parts, Kohl’s, Walmart, Lowe’s, Target, TJX Companies, and BJ’s Wholesale Club. Away from retail, NVIDIA and Deere are also scheduled to report. Looking at aggregate earnings results so far, of the 457 companies in the S&P 500 that have reported earnings to date for the second quarter of 2020, 81.4% have reported earnings above expectations, which compares to a long-term average of 65%, according to I/B/E/S data from Refinitiv.

As always, don’t hesitate to contact us with any questions you may have, or if you would like to set up a meeting.

All the best – Southport Station Financial Management, LLC.