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Market Commentary: Week of July 13, 2020


Market-commentary-week-of-july-13-2020_bodyWhat Happened:

Despite worsening COVID news, stocks—particularly tech stocks—managed to explode higher for the week with the NASDAQ hitting another all-time high on Friday. Nationwide, daily COVID cases rose to 60,000 per day with Texas, Florida, Arizona, and California leading the way. If this looks familiar to last week’s market summary… it is! We just replaced “holiday-shortened week” and instead of 50,000 COVID cases a day, we are now at 60,000. As we got later into the week, more and more states reported surging case numbers. Fatality rates also increased. State officials began to openly discuss reinstating stay-at-home orders. The ability to open schools is a tremendous issue for the nation and right now it is a big unknown. So, all in all, a pretty terrible picture. Nevertheless, stocks did extremely well again. No economy? No problem! Electric car company Tesla is up 85% since the beginning of June! Amazon only managed a measly 31% while Google downright embarrassed itself by only increasing 8% during the same period. Corporate bond spreads tightened a bit and the Treasury yield curve flattened for most of the week before undoing much of the flattening on Friday when stocks staged a strong rally.

  • The S&P 500 increased 1.8% for the week. The average daily move for the week was 1.01%.

  • The NASDAQ increased 4.02% for the week. On Friday, the index printed another all-time high. The average daily move for the week was 1.14%.

  • The 2-year Treasury ended flat for the week, closing at .156% Friday.

  • The 10-year Treasury decreased 2.5 basis points for the week, closing at .646% Friday.

  • The VIX Index was roughly flat for the week closing at 27.29 Friday.

  • The MOVE Index fell 3%, closing at 49.19 Friday.

  • 5-year Investment Grade Corporates (as measured by Markit CDX) was flat for the week, closing at 74 basis points Friday (from March 1st; high 152 bps, low 65 bps). High-yield corporate debt (as measured by Markit CDX) tightened 5 basis points, closing at 499 basis points (from March 1st; high 871, low 364).

  • US Dollar Index lower by .48%, closing at 96.65 Friday.

  • WTI Crude was flat for the week using the August WTI Futures contract, closing at $40.55.

What’s Going to Happen?

The economic data calendar is pretty full this week. We will see inflation data, retail sales, industrial production, and consumer confidence. However, we think that with COVID cases surging and economic reopening schedules getting rolled back, rear-view window data doesn’t quite matter as much as it did just a few weeks ago. Jobless claims are probably the most important set of data, coming out on Thursday. There are a lot of deadlines approaching, such as the expiration of the CARES Act unemployment benefits bump and rent forbearance, to name two. We have not seen a big spike yet in consumer debt delinquencies, in large part due to the aforementioned policies (as well as mortgage loan forbearance, which has not yet run out of time). Absent mandated forbearance, things may start looking dire for consumer debt and financial institution balance sheets.

Market-commentary-week-of-july-13-2020_listing

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