Weekly Talking Points 6/22/2020

From Gradient Investments

Gradient Investments Weekly Talking Points 06/22/2020

All data is for the week ended June 19, 2020


Equity markets ended the week with positive returns after starting the week with good news for treatment of the most serious cases of Covid-19 with an existing generic medication. Economic data was also supportive of the stock markets (see below). The S&P 500 added 1.88%, the Russell 2000 rose 2.25% and the NASDAQ grew 3.74%. Overseas, the developed markets (MSCI EAFE) rose 2.06% while emerging markets (MSCI EM) increased 1.55%. In the US the best performing sectors were health care and technology while energy and utilities were the worst performers.

Fixed Income
Interest rates and bond values were virtually flat last week, with the benchmark 10-year U.S. treasuries ending the week with a 0.70% yield.1 The Federal Reserve chair appeared (virtually) before Congress, unveiling plans to start buying a broad and diverse assortment of corporate bonds in an effort to continue to support liquidity of the overall bond market.2


Oil prices rose sharply 9.6% last week as traders became more hopeful that global fuel demand will rebound more quickly than previously expected as road traffic picked up while producers curtail supply. West Texas crude oil contracts which expire in July closed at $39.75 per barrel.1 The number of active oil rigs decreased by 10 rigs last week by, bringing the total to 189, the lowest in 30 years. It also compares to 789 this time last year.3

Economic Data

Weekly new jobless claims edged lower to 1.51 million, slowing for the 10th consecutive week but higher than consensus expectations. Continuing jobless claims barely fell to 20.54 million in the prior week, remaining stubbornly high as the economy slowly reopens.4

Record retail sales for May were reported, even better than anticipated, rising 18% month over month (excluding autos and gas) versus expectations of an 8% gain. This follows a record drop of 14.7% in April. The gains in May were led by clothing +188%, furniture +90% and sporting goods +88%. Motor vehicles leaped by 46%.5

Permits to build new houses jumped 14.4 %. Construction on new houses, however, rose just 4.3% in May as a reopening U.S. economy and low mortgage rates drew more buyers and encouraged builders to gradually speed up work following some impact from Covid-19. The large increase in permits signifies accelerating growth in home construction in June and July.6

Business activity in New York State, a leading economic indicator, steadied in June after two months of record contractions versus expectations for a major decline. This index climbed nearly 80 points over the past two months, as factory activity has stopped falling after the lockdown due to the coronavirus pandemic. The state’s business conditions index rose 48 points to negative 0.2 in June. A reading close to zero indicates steadying conditions. Firms were optimistic that conditions would be better in six months, with the index for future conditions rising to its highest level in more than 10 years.7

Company News

Eli Lilly & Co. (LLY), a G50 holding, had another positive development in its drug group with success in its late-stage breast cancer study using Verzenio for early breast cancer. The company plans to submit their data for global approval. Shares rose 11% for the week.8

Martin Marietta (MLM) a Core Select and Contrarian Choice holding and United Rentals (URI), a Contrarian Choice holding, rose 7% and 8%, respectively, following reports that the Trump administration is preparing a nearly $1-trillion infrastructure proposal.9

Teledoc Health Inc. (TDOC), a G33 holding, rose 17% last week as fears rose of a second wave of coronavirus while daily testing has expanded dramatically.10 Teledoc provides virtual access to health care professionals with a range of services and solutions.

Did you know …
Minnesota has one recreational boat per every six people, more than any other state.

1 JP Morgan Weekly Market Recap 6-22-20
2 Federal Reserve Semiannual Monetary Policy Report to Congress 6-16-20
3 Baker Hughes Oil Rig Count Summary 6-19-20
4 US Department of Labor 6-18-20
5 US Census Bureau 6-16-20
6 US Commerce Department 6-17-20
7 New York Federal Reserve Empire State Survey 6-16-20
8 Eli Lilly & Co. press release 6-16-20
9 Bloomberg.com “Trump Team Weighs $1 Trillion for Infrastructure” 6-15-20
10 Time.com “America is Done with Covid-19. Covid-19 Isn’t Done with America” 6-15-20