Hello, I’m Marcie Wright, Managing Director of Private Bank Portfolio Management at Fifth Third Bank, with this week’s Economic Beat.
U.S. COVID-19 cases declined last week, vaccine development continued to progress, and economic releases were favorable—all supportive of a good outcome in equity markets last week. The S&P 500 topped intraweek highs and closed the week at another record high last Friday following the March 23 market low—marking four successive weeks of gains—the longest stretch of gains for the S&P 500 in 2020. Technology stocks led the S&P 500 higher and the Nasdaq Composite Index benefited from big tech stocks as well, closing higher by 2.7 percent on the week. The benchmark 10-year treasury yield declined to 0.63 percent and West Texas Intermediate Crude Oil gained on the week. All eyes were on the Federal Reserve to gain insight into the path forward.
The Federal Reserve’s minutes from the July meeting were released on Wednesday. The notes reflected increased concern over the prospects for growth. Our central bankers disappointed market expectations as there was little discussion of an expected new strategy that would extend the commitment of monetary support. At Fifth Third, we still believe that new framework will be coming soon, possibly as early as Thursday, when Fed chair Powell speaks in Jackson Hole. More complete guidance may come at the September Fed meeting.
In other economic news, U.S. housing skyrocketed in July. Housing Starts beat estimates, advancing over 22% above the median forecast and posting the largest increase since October 2016. Existing Home Sales jumped to the highest reading since December 2006. The Building Permits release, an important data point that give us insight into future construction of new homes, joined in exceeding expectations as well—reaching further back in history to post the largest increase in Building Permits in over three decades. We’ll be watching for the New Home Sales release this week.
Finally, weekly unemployment claims went up unexpectedly by 135,000 for the week ending August 15th to a seasonally adjusted 1.1 million. That is not good news, however, the positive news is that continuing claims moved lower to 14.8 million claims, better than consensus and reaching the lowest level since early April.
In the week ahead, the Republican National Convention begins following the Democratic National Convention last week where Joe Biden accepted the Presidential nomination. There is a full slate of economic reports this week, spanning big ticket Durable Goods Orders, data that gives us insight into the health of consumer balance sheets and how they feel about it through personal income, consumer spending and confidence readings. Second quarter revised GDP and core inflation data will be released later in the week. As always, we’ll be watching and reporting back to you. Thank you.