The Market Today
Virus Headlines Remain Focus with Cases Rising
by Craig Dismuke, Dudley Carter
Tracking Case Count: The number of cases continues to rise significantly globally (slide 3) and in the U.S. (slide 5). With only a handful of exceptions, every state in the U.S. is now averaging faster daily growth over the past seven days than they have over the past fourteen days (slide 8). Some of the increase in reported cases appears to be the result of increased testing (slide 20). The U.S. is now averaging over half-a-million tests per day. As a result, it appears that some cases which would not have previously risen to the level of concern to be detected, now are being detected. In determining the impact to the economy and the consumer psyche, it will now be critical to differentiate between cases and hospitalizations. Thus far, the number of hospitalizations has not seen the same acceleration as the case count has (slide 21). Hospitalizations may lag new cases given that cases are now likely being diagnosed earlier in the infection’s onset and bears watching closely.
Virus Headlines, Pending Sales, Regional Fed Index: The focus is expected to remain on the virus-related headlines. The May Pending Home Sales report (9:00 a.m. CT) is expected to show a 18.8% rebound in homes going under contract after falling 21.8% in April and 20.8% in March. There will also be one more June regional Fed report, the Dallas Fed Index, expected to show another partial rebound. The other regional Fed manufacturing reports have shown convincing evidence of stabilization in June activity.
Fedspeak: San Francisco Fed Bank President Daly and New York Bank President Williams are both scheduled to speak today.
Mixed Global Markets as Cases Continue to Climb: Global investors have lacked a consensus conviction in whether to buy or sell riskier assets on Monday after piling up losses last week in response to accelerating outbreaks across U.S. states. Asian markets closed sharply lower following steep declines last Friday in the U.S. spurred by announcements from Texas and Florida that they were closing bars in response to the spike in cases. European equities, however, were higher after fluctuating in and out of positive territory several times during morning trade. Despite a continued rise in U.S. infections over the weekend and California announcing that it too would close drinking establishments in some major cities, U.S. futures rebounded and were higher shortly after 7 a.m. CT.
Longer Treasury Yields Tick Up amid Uncertain Risk Recovery: The uneven performances reflect uncertainty about whether the rise in cases could cause local governments to reimpose restrictions that could cut short reopening of economies and signs of recovery. While both were slightly weaker than expected, retail sales rose in Japan in May and economic confidence improved across the European Union in June. A slate of important U.S. economic reports scheduled for this week are expected to show continued improvement across multiple sectors of the economy in May and June. Firmer risk sentiment was also evident in the weaker Dollar and higher oil prices, although Treasury yields were mixed and little changed. At 7:30 a.m. CT, the 2-year yield had declined 0.2 bps to 0.16% while the 10-year yield had added 1.1 bps to 0.65%.
ICYMI – June 26, 2020 Weekly Market Recap: Treasury yields and equities pulled back last week as accelerating outbreaks in major U.S. states led to a couple taking a step back from reopening and raised questions about the sustainability of broader recovery. On the economic front, the housing data was mixed while broader activity surveys showed some continued improvement in June. Jobless claims offered mixed signals about the status of the labor market while a spending recovery combined with lower federal recovery payments pulled the savings rate down from stratospheric levels. Reports on inventories and trade weighed on 2Q growth estimates However, the focus was on accelerating cases in the U.S. Arizona, California, Texas, Florida, and Oklahoma were among the states which set multiple daily records for new infections as focus shifted to testing positivity and hospitalizations. On Friday, governors from Texas and Florida shut down bars and paused any further reopening plans. For the week, the S&P 500 fell 2.9 % while the 10-year yield dropped 5.2 bps to 0.64%. Click here to view the full recap.