The Market Today
Markets Focused on Walter Reed; Optimism for Stimulus
by Craig Dismuke, Dudley Carter
Vining Sparks 4Q Economic Outlook Webinar – The Winding Road to Recovery from the Covid Pandemic: We will host our 4Q Economic Outlook Webinar Tuesday October 6 (tomorrow) at 10:00 a.m. CT. In the presentation, we will look at the two-speed nature of the economy’s recovery from COVID-19. While the 3Q rebound has been sharper than some expected, we will highlight a few headwinds that we expect to prolong a full recovery. In addition, we will discuss the looming election and its expected implications. To register for the webinar, please click here. Participants can earn up to one hour of CPE credit.
Service Sector PMIs Expected to Show Continued but Slowing Pace of Improvement: Amidst a relatively quiet week, today’s calendar will bring a couple of important reports on the health of the service sector. The ISM Services Index is scheduled for 9:00 a.m. CT and the Markit Services and Composite PMIs are scheduled for release at 8:45 a.m. Both sets of reports are expected to show continued gains for the sector, albeit at a slowing pace of recovery.
Fedspeak: At 9:45 a.m. CT, Chicago Fed Bank President Evans is scheduled to speak at NABE. Atlanta Bank President Bostic is scheduled to speak at 2:15 p.m.
Markets Focused on Stimulus and Walter Reed: Most important to the markets, however, are the President’s health and continuing talks on stimulus, with a little more optimism coming into this morning on both fronts.
Risk Assets Rise as President Trump’s Prognosis Improves: Risk assets are rebounding Monday following a weekend of uncertainty regarding President Trump’s progress in his recovery from COVID-19. U.S. equities declined last Friday after the President confirmed he and the First Lady had contracted the coronavirus. The President was moved to Walter Reed military hospital later in the day, compounding the uncertainty and creating a weekend news cycle built around changes in his condition. Mixed reports about the severity of his case stirred anxieties while video messages to the American people released on the president’s Twitter account appeared to show he was recovering. The latest reports indicate his symptoms have waned and his prognosis improved, creating the potential for doctors to discharge him as soon as today.
Treasury Yields Move Higher and Steeper: Equities in Asia closed up 1.2% and Europe’s Stoxx 600 had risen 0.7% through Monday’s midway point. U.S. futures had also recovered by around 0.7% shortly after 7 a.m. CT. The S&P 500 dropped 1% on Friday to pare its weekly gain. Crude prices were up strongly ahead of U.S. trading with Brent and U.S. WTI higher by more than 4%. U.S. crude tumbled nearly 8% last week to a more than three-week low. While any updates on President Trump’s health will be breaking news, the ongoing search for a compromise on another stimulus aid bill will also be a key for markets this week. Tweeting from Walter Reed, the president typed, “OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE.” House Speaker Pelosi said on Sunday, “We’re making progress,” when asked about a new bill, but also noted there was still more work to be done. Treasury yields were moving higher at 7:30 a.m. amid the improved market sentiment with the 10-year yield adding up 2.5 bps to 0.73%.
ICYMI – October 2, 2020 Weekly Market Recap: The market’s focus last week, expected to be overwhelmingly centered on a data calendar packed with important economic reports, was ultimately diverted by the resumption of uncertain stimulus negotiations and news that President Trump and the First Lady had contracted the coronavirus. Signs of progress in negotiations between the White House and Democrats on an aid compromise were tainted multiple times by reports that significant points of division remained. The House passed a revised version of the HEROES Act, lowering the total money requested from $3.5 trillion to $2.2 trillion. Even after the White House raised its offer from $1 trillion to $1.6 trillion, a glaring gap remained. The volatility those weekly developments stirred up intensified Thursday just before midnight. After a top adviser tested positive, President Trump announced on Twitter that he and the First Lady had also been infected. The news set an uncertain stage for trading ahead of the mixed September payroll report released Friday morning showing the labor market recovery has continued to slow. Except for another stellar housing report, with pending home sales hitting a new record, the remainder of the economic data also, on balance, signaled a slowing recovery. For the week, the S&P 500 gained 1.5% and the 10-year yield added 4.6 bps. Click here to view the full recap.