The Market Today
Budget Deficit Expected to Show $2T Deficit over Three-Month Period
by Craig Dismuke, Dudley Carter
Vining Sparks 3Q Economic Outlook Webinar (CPE Eligible, CLICK HERE TO REGISTER)
Vining Sparks will host our 3Q Economic Outlook Webinar tomorrow, July 14 at 10:00 a.m. CT. We will highlight the historic economic destruction caused by the coronavirus, discuss how we expect the virus will change consumer behaviors and economic growth in the future, and detail our projections for interest rates.
Vining Sparks MarketWatch Video (CLICK HERE)
Budget Deficit Expected to Hit $2 Trillion over Three Months: Today’s economic calendar is quiet with only the June monthly budget statement from Treasury. After a record-$1.14 trillion deficit over the past two months alone, the monthly deficit is expected to hit a record-high $863 billion in June. Also on the calendar today are New York Fed Bank President Williams (10:30 a.m. CT) and Dallas Bank President Kaplan (12:00 noon CT).
Bloomberg Survey of Economists and V.S. Projections: The July Bloomberg Survey of Economists and VS Projections were published Friday. There were only minor changes to most economic forecasts with expectations continuing for mid-5% contraction in 2020 followed by a smaller recovery in 2021. Much like the Fed’s forecast, economists collectively do not see the unemployment rate dropping below 6% before 2022. Click here for the full results.
Equities Rise Despite Rising Infections and Well-Known Risk of Ugly Earnings Season: Reflective of complicated market dynamics that could continue in the weeks and months ahead, global equities are notably stronger Monday as hopeful investors seemed to ignore disconcerting weekend virus updates amid hopes for medical breakthroughs and stimulus efforts to support economic recovery in the second half of the year. Stocks started strongly in Asia led by a 2.1% jump for China’s CSI 300, its ninth daily gain in the last 10 sessions to its highest level in more than five years. The momentum carried Europe’s Stoxx 600 0.9% higher and kept U.S. futures buoyant. Sovereigns are under pressure, although Treasurys lagged yield increases across Europe, while other markets were mixed. Oil prices were weaker after weekend reports indicated OPEC+ could allow a small portion of the current production cuts to expire this month, and gold added to its unbreakable upward march that has taken the commodity to its highest levels since 2011.
Treasury Yields Stuck Near Record Lows: Equities’ gains unfolded even as weekend updates showed a new record for daily global infections, a U.S. state record in Florida at more than 15,000, an increase in Germany’s transmission rate, and elevated cases in Hong Kong. Earnings season, which begins this week, adds another element of uncertainty for the markets but wasn’t a headwind on Monday. Hopes that stimulus efforts can support activity until a vaccine is found has helped equity markets recover sharply from March lows. U.S. stock futures hit new overnight highs after a couple of vaccine candidates from Pfizer and BioNTech received FDA fast track designation. The uncertainty that still attends the outlook, however, has kept Treasury yields near record low levels. The 2-year yield was flat at 7:40 a.m. at 0.15% while the 10-year yield had inched 0.8 bps higher to 0.65%.
ICYMI – July 10, 2020 Weekly Market Recap: Equities inched higher last despite Treasury yields testing record lows as record infections in the U.S. weighed on optimism of a swift economic recovery. The economic calendar was quiet, but included an encouraging record jump for the ISM’s Non-manufacturing index showing a better-than-expected pace of activity at U.S. services businesses in June. Mortgage applications rose after two weekly declines and jobless claims continued their slow, improving trends. Treasury yields, however, gradually moved lower throughout the week as the U.S. set a record daily infections and several states reported increases in hospitalizations and deaths. The caution was eased up some on Friday after Gilead reported positive test results for its remdesivir drug in treating the virus. Click here to view the full recap.