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The Good Life Newsletter - Stocks Have Mixed Reaction

Stocks Have Mixed Reaction

Weekly Update - August 3, 2020

The Week on Wall Street

Stocks were mixed last week amid a busy week of earnings, some troubling economic data, and seemingly little progress on a new fiscal stimulus package.

The Dow Jones Industrial Average slipped 0.16%, while the Standard & Poor's 500 increased by 1.73%. The Nasdaq Composite Index surged 3.69% for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, dipped 0.75%.[1][2][3]


Stocks Buffeted by Crosswinds

Stocks rode a roller coaster last week, reacting to a conflicting stream of corporate events and economic data. 

Investors were optimistic on Monday about the ability of mega-cap technology companies to thrive in an uncertain economy, but worried on Tuesday about pending Congressional testimony involving the CEOs of these firms.

On the economic front, a strong June durable goods orders report on Monday bolstered investor sentiment. But the optimism faded on a disappointing jobless claims number and a troubling second-quarter GDP number that-while anticipated-was a bit unsettling.[4][5][6]

Following some exceptional earnings results from the mega-cap technology companies, stocks managed to rally in the final hour of trading on Friday.

U.S. Dollar Continues Its Decline  

Since peaking in mid-March, the U.S. dollar has dropped nearly 9%. Some of the potential beneficiaries of a weak dollar are global American businesses whose products and services become less expensive in overseas markets.[7]

Conversely, international companies may suffer lower sales in the U.S. as their products become more expensive. It's a mixed bag of potential outcomes, but Wall Street has become more and more focused on the dollar's trajectory.

Final Thoughts

August has historically been a particularly volatile month. For instance, in 2019, the S&P 500 posted moves of more than one percent in 22 trading days.[8]

One of the possible reasons is that many traders are away on vacation, resulting in light volume, which may amplify market volatility. But this year, it's uncertain whether traders will be away on vacation due to the pandemic. Should markets become volatile in the weeks ahead, investors may want to remind themselves of the seasonal trends that may be at work.

THIS WEEK: KEY ECONOMIC DATA

Monday: Purchasing Managers Index (PMI) Manufacturing Index. Institute for Supply Management (ISM) Manufacturing Index.

Wednesday: Automated Data Processing (ADP) Employment Report. Purchasing Managers Index (PMI) Services Index. Institute for Supply Management (ISM) Non-Manufacturing Index.

Thursday: Jobless Claims.  

Friday: Employment Situation Report. 

Source: Econoday, July 31, 2020
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THIS WEEK: COMPANIES REPORTING EARNINGS

Monday: The Clorox Company (CLX), American International Group (AIG).

Tuesday: The Walt Disney Company (DIS), Twilio (TWLO), Prudential Financial (PRU), Emerson Electric (EMR).

Wednesday: CVS Health (CVS), Humana (HUM), Regeneron Pharmaceuticals (REGN), Wayfair (W).

Thursday: Bristol Myers Squibb (BMY), Booking Holdings (BKNG), Becton Dickinson (BDX), T-Mobile (TMUS).

Source: Zacks, July 31, 2020
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

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International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia.
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[1] The Wall Street Journal, July 31, 2020
[2] The Wall Street Journal, July 31, 2020
[3] The Wall Street Journal, July 31, 2020
[4] CNBC.com, July 27, 2020
[5] CNBC.com, July 30, 2020
[6] BEA.gov, July 30, 2020
[7] Reuters.com, July 28, 2020
[8]  CNBC.com, August 31, 2019