The Market Today

Hopes for Vaccine Results; Fiscal Stimulus Talks


by Craig Dismuke, Dudley Carter

CORONAVIRUS UPDATE

VS Coronavirus Chartbook (PDF) (Link)

Vining Sparks MarketWatch Video (CLICK HERE)

 

TODAY’S CALENDAR

Quiet Calendar Before Fed Meeting Next Week: There are no reports on the economic calendar today.  However, investors will continue to watch for evidence that the EU can come to terms on a hopefully better-late-than-never stimulus package.  In addition, U.S. Senate leaders are working on another round of stimulus and an Oxford vaccine study is expected to be published today.  Corporate earnings season is in full swing including Amazon’s report on Friday. While the economic calendar is light, there will be plenty with the potential to move the markets.


OVERNIGHT TRADING

Chinese Stocks Gain While Others Struggle for Direction: Excluding another volatile day in China, global stocks are off to a slow and uneven start early Monday as investors watch for virus developments and brace for a second week of corporate earnings. China’s CSI 300 stood out with a nearly 3% gain, extending the second most volatile two-week stretch for the index since early 2016. The index has gained more than 13% during the rally that initially kicked into gear after a state-run paper hinted at continued government support for markets. Monday’s jump followed news that Chinese regulators had raised the limit on insurance companies’ equity holdings from 30% to 45% of total investments. China’s central bank also kept key lending rates for one-year and five-year loans unchanged at low levels.

EU Breakthrough?: Such government efforts have become the global norm as economies continue to suffer as the virus accelerates in some countries. Reflecting the weak global demand, Japan’s exports remained down a larger-than-expected 26% from a year ago in June. In Europe, weekend negotiations for a major recovery fund dragged into Monday. However, a possible breakthrough on the mix of loans and grants in the package could mean a prolonged impasse over the structure of the stimulus may be nearing an end. Europe’s Stoxx 600 erased an opening loss and was up 0.4% at 7:20 a.m. CT and near its daily peak. The news of progress towards providing more than half of the 750 billion euros of funds as grants guided peripheral European yields lower, with Italy’s 10-year yield down 7.9 bps. Treasury yields had edged down ahead of U.S. trading with the 2-year yield 0.6 bps lower to 0.139%, matching its all-time low. The 10-year yield inched down 2.1 bps to 0.605% compared to its record low of 0.543%. Stock futures were mixed but little changed.


NOTEWORTHY NEWS

ICYMI – July 17, 2020 Weekly Market Recap: The S&P 500 posted its least impressive weekly performance of July and Treasury yields edged lower with the belly of the curve threatening all-time lows. Markets meandered as global data confirmed the historic depth of the recession and indicated the recovery may be slowing as the virus accelerates in the U.S. Retail sales, several manufacturing and housing reports, and small business confidence were all stronger than expected. However, the continued improvement in jobless claims showed signs of leveling off and consumer confidence fell more than expected in early July. The U.S. set a new record for daily infections and California rolled back some of the steps it took to reopen its economy. Nonetheless, positive progress on the vaccine front and bipartisan support for more fiscal support kept a sense of optimism amid the caution, supporting risk market pricing. The unprecedented stimulus already passed by Congress pushed the fiscal deficit to a record in June and lifted the deficit-to-GDP ratio to 13.8%, one of the highest levels ever recorded. For the week, the S&P 500 gained 1.3% and the 10-year yield inched 2.1 bps lower to 0.62%. Click here to view the full recap.


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