The Market Today

Senate Republicans to Release Plans for Fourth Round of Stimulus


by Craig Dismuke, Dudley Carter

CORONAVIRUS UPDATE

VS Coronavirus Chartbook (PDF) (Link)

Vining Sparks MarketWatch Video (CLICK HERE)

Monitoring the Virus Headlines – Stimulus: Senate Republican leadership is expected to release the details of its coronavirus stimulus plan sometime today.  The plan is expected to be in the ballpark of $1 trillion, significantly smaller than the $3.5 trillion plan passed by House Democrats.  Reconciling these two approaches to economic support will be challenging, particularly with Congress scheduled to go on recess sometime before August 10.

 

TODAY’S CALENDAR

Durable Goods Report Shows Strong Auto Sector, Business Investment Improving: Total durable goods orders edged out expectations in June as auto production ramped up and business activity proved to be more resilient than expected. Durable goods orders rose 7.3% last month, topping the expected 6.9% gain, and 3.3% when the strong gain for auto activity is removed. Auto-related production surged by a record 86%. More importantly, however, core capital goods orders and shipments both rose more than economists expected. Excluding another dreadful month for aircraft orders, gains across multiple categories helped capital goods orders and shipments rise 3.3% and 3.4%, respectively, easily outpacing forecasted gains of 2.2% and 2.4%. With Thursday’s first GDP estimate set to quantify the historic recession in the second quarter, this report provides some solace that business spending gained some momentum heading into July.

Regional Fed Index: At 9:30 a.m. CT, the Dallas Fed Manufacturing Activity Index is expected to inch up from -6.1 to -4.9.


OVERNIGHT TRADING

Equities Mixed to Start Important Week of Developments: Global markets have moved in different directions so far on Monday as investors monitor coronavirus developments, brace for a busy week of economic data and corporate earnings, and await the Republicans’ plan for another round of emergency stimulus. Stocks in China rose following economic data showing another improvement in industrial profits in June. Stocks in Hong Kong drifted lower as the government announced additional restrictions in response to its rising epidemic and after trade data showed an unexpected decline for exports in June. Europe’s Stoxx 600 has struggled to shake an opening loss. Germany’s DAX inched higher, with a sizable spike on the intraday chart lining up with a better-than-expected improvement in business expectations in July. Spain’s IBEX 35, however, dropped sharply as new cases climbed in certain regions within the country, leading the U.K. to join others in requiring anyone traveling from Spain to quarantine.

Gold Sets a New Historic High as Treasury Yields Fall Near New All-Time Lows: While U.S. equity futures had bucked the global trend and were earlier up at least 0.5%, other markets reflected the global caution. Gold prices surged nearly 2% to a new all-time high near $1,940 per ounce. Low rates, economic concerns, and a weaker Dollar have boosted the commodity. The U.S. currency extended its precipitous slide to its weakest level in more than two years. Treasury yields also pulled back with the belly of the curve either at (3-year and 7-year) or near (2-year and 5-year) a record low. The 10-year yield had dropped 1.0 bp to 0.58% at 7:30 a.m. CT.


NOTEWORTHY NEWS

ICYMI – July 24, 2020 Weekly Market Recap: Stocks slipped last week and Treasury yields tested record lows as rising tensions between the U.S. and China agitated investors already concerned that the recovery may be slowing. Trading started on a relatively upbeat note with reports of positive results in clinical trials of a couple of separate vaccine candidates. Adding to the optimism, the EU countries agreed to issue common debt for the first time ever to support a historic recovery package, a sign of solidarity for the fiscal union. The mood darkened, however, on Wednesday as tensions between the U.S. and China boiled up. The U.S. demanded China close its consulate in Houston with China responding Friday by telling the U.S. to vacate its consulate in Chengdu, each country blaming the other for nefarious acts that undermined its national security interests. Adding to the sense of caution, jobless claims rose for the first time since March, preliminary Markit PMIs signaled the U.S. services sector continued to contract unexpectedly in July, and stimulus negotiations in Washington put divided opinions about the next wave of aid on full display. Click here to view the full recap.


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