Market Update – Monday Morning Market Memo – July 6, 2020

Market Update – Monday Morning Market Memo – July 6, 2020

Good morning,

The major stock market averages closed nicely higher last week, hopefully making your long weekend a bit more enjoyable. The Dow Jones Industrial Average gained 3.3%, the NASDAQ Composite jumped 4.6% (closing at a record high), and the Standard & Poor’s 500 Index increased 4%.

Primary reasons for the gains were encouraging news related to a vaccine for coronavirus, along with a better-than-expected June Jobs Report. An experimental coronavirus vaccine being developed by pharmaceutical heavyweight Pfizer and its biotech partner BioNTech reportedly spurred immune responses and generated neutralizing antibodies, giving investors optimism a vaccine may in be available in a relatively fast time frame.

The U.S. Department of Labor reported the economy added a record 4.8 million jobs last month, and that the unemployment rate fell to 11.1% (down from 13.3% in May). Market expectations were for job gains of 3 million and for the unemployment rate to come in at 12.2%. June marked the second consecutive month where the jobs report came in ahead of expectations. The market clearly liked the numbers and the encouraging update on the development of a vaccine.

Stocks would likely have done even better on the week except for a late day paring of gains shortly before the market closed ahead of the holiday weekend – partly due to reports of rising coronavirus cases in hotspots which are impacting the pace of the economic reopening, and partly due to some profit taking going into the long weekend.

Looking to the week ahead, we’ll get a handful of interesting earnings reports from the likes of Paychex, Walgreens Boots Alliance, Levi Strauss, and WD-40. Consider this a teaser before we are head deep into another earnings season, which begins to heat up next week. For the second quarter of 2020 the estimated earnings decline for the S&P 500 Index is 43.8%, according to data from FactSet, which would mark the largest year-over-year decline since 2008. Remember, reaction to earnings numbers depends mostly on how they are versus expectations, and what the outlook is going forward.

A large number of companies are not providing guidance due to the uncertainty caused by the pandemic, and this could lead to an extra dose of volatility. Expect the market to be extremely focused on the path of and developments related to the coronavirus.

As always, 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