The Market Today

Stimulus Negotiations Continue, At Least Through Tuesday

by Craig Dismuke, Dudley Carter

VS Coronavirus Chartbook (PDF) (Link)
Vining Sparks MarketWatch Video (CLICK HERE)


Fedspeak and Homebuilder Confidence: Today’s economic calendar will bring several Fed speakers and the October Homebuilder confidence index.  Builder confidence remains sky-high with mortgage rates falling and new home sales up 40% from pre-virus levels.

Chairman Powell Confirms Fed Considering Digital Payment System: Fed Chair Powell is discussing payment systems and digital currencies this morning on an IMF panel.  He has reaffirmed the general tone of a speech from Governor Brainard two months ago, indicating a seeming interest in digital currencies in the future.  He has not gone so far as to say that the central bank is committed to issuing one.  According to a survey from the Bank for International Settlements, 80% of the 66 total surveyed banks were considering issuance.  Speaking later today are New York’s Williams (8:00 a.m. CT), Vice Chair Clarida (10:45 a.m.), Minneapolis’ Kashkari (11:00 a.m.), Atlanta’s Bostic (1:20 p.m.), and Philadelphia’s Harker (2:00 p.m.).


Last Week’s Focus Points Remain Front and Center: The major focus points for investors last week remain front and center Monday as global markets move in different directions. Concerns about a reinvigorated rise of infections in Europe stirred anxieties in recent weeks that the new wave of social and business restrictions announced by local governments to slow the spread will cut off economic recovery. On Sunday, Italy, the first and worst hit country in Europe’s initial wave earlier this year, announced new measures after another daily spike in cases. The transatlantic concerns have come ashore stateside over the last several days as cases began to rise across many states. While another extreme nationwide lockdown is not likely, investors will monitor other metrics such as hospitalizations and fatalities to determine the severity of the second wave and the expected impact on the economic recovery.

Speaker Pelosi Provides Ultimatum for Pre-Election Aid: With signs showing the strong initial bounce for activity after April lockdowns has slowed, the resurgent virus has placed extra impetus on Republicans and Democrats to break the gridlock that has frozen talks for more fiscal stimulus. A flurry of headlines over the weekend included an ultimatum from Speaker Pelosi on pre-election aid and a comment from President Trump that, “I want at a bigger number than she wants,” a reference to House Democrats’ $2.2T revised HEROES Act. Speaker Pelosi said that negotiations will continue on Monday, but if any stimulus is to be pushed out into the economy before the election a deal must be reached by Tuesday. U.S. equity futures were up by more than 0.6% at 7:30 a.m. CT, nudging Treasury yields modestly higher ahead of U.S. trading. The 2-year yield had risen 0.6 bps to 0.15% while the 10-year yield had inched up 2.3 bps to 0.77%.


ICYMI – October 16, 2020 Weekly Market Recap: Yields were generally rangebound last week as stimulus talks persisted, daily COVID-19 cases hit new record highs, new restrictions were implemented, earnings season showed areas of strength and weakness, and the U.S. economic data were mixed. The outlook for additional COVID-19 stimulus deteriorated as the week progressed, but neither side appeared ready to walk away from the table keeping a glimmer of optimism alive.  The White House indicated it was willing to push for a deal larger than the previous week’s lid of $1.8 trillion, although Senate Leader McConnell pushed back against the idea.  The number of daily COVID-19 cases hit new highs in the U.S., in many U.S. states, and in countries across Europe.  European policymakers continued battling the second wave with new restrictions on mobility, which are sure to have negative economic consequences.  In the U.S. economic data, September’s retail sales report was surprisingly strong as the U.S. consumer continues to drive the recovery.  However, an increase in weekly jobless claims and a stalling out of the manufacturing recovery provided new reasons for concern.  Late Friday, Treasury reported a $124.6 billion deficit in September bringing the trailing-12-month deficit above $3.1 trillion for the first time on record, and to its highest level as a percent of GDP since WWII. Click here to view the full recap.

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