Stock markets in the United States retreated a bit last week.
U.S. stocks have been trending higher for months. Last week, they gave back some gains. The Nasdaq Composite dropped 3.3 percent, while the S&P 500 Index fell 2.3 percent, and the Dow lost 1.8 percent, reported Ben Levisohn of Barron’s.
August has been a good month for stock investors. At the end of last week, the S&P 500 Index was up 6.8 percent for the month. The Index is poised to deliver its best returns for the month since 1986, when it gained 7.1 percent, reported Financial Times.
The performance of U.S. stock markets is remarkable, in part, because, so far, company earnings – the profit that publicly-traded companies earn and report each quarter – haven’t been great in 2020. Earnings were down 31.9 percent during the second quarter of the year, reported FactSet. The decline in earnings reflected the impact of coronavirus closures.
The shortest bear market in history is over.
The Nasdaq Composite and Standard & Poor’s 500 Indices finished at new highs last week. The stock market is considered to be a leading economic indicator, so strong stock market performance suggests economic improvement ahead.
There was a caveat to last week’s gains, though.
The Standard & Poor’s (S&P) 500 Index finished the week within a whisker of its February high, reported Randall Forsyth of Barron’s.
It’s a remarkable feat. The stock market has recovered in just 175 days. Historically, comparable recoveries (those following market drops of 20 percent or more) have taken about four years, reported Vildana Hajric, Lu Wang, and Claire Ballentine of Bloomberg Quint.
“The sharpness and speed of the downturn – and the immediacy of the overwhelming liquidity and fiscal response from the Federal Reserve and Congress – forestalled the kind of grinding, purgative action of typical bear markets, which wrings out excesses and resets valuations lower. There was also not the shift in market leadership that usually occurs in the crucible of a bear market,” reported Michael Santoli of CNBC.
There was good news and bad news in last week’s employment report.
The good news was the U.S. Bureau of Labor Statistics delivered better-than-expected data about employment. In July, the U.S. economy added about 1.8 million new jobs.
That’s about 300,000 more than the Wall Street consensus forecast, according to Jeff Cox of CNBC, who reported, “…there were wide variations around the estimates as the pandemic’s resurgence dented plans to get the shuttered U.S. economy completely back online. Forecasts ranged from a decline of half a million jobs to a rise of 3 million…”
The flip side of employment is unemployment. The U-3 unemployment rate, which reflects unemployed people who are actively seeking a job, declined in July.
Where are we on vaccines and treatments? During 2020, the United States government has spent more than $13 billion on Operation Warp Speed (OWS), which is focused on accelerating the development of vaccines and treatments for COVID-19, according to The Economist. The United States is not alone. Governments around the world are funding similar research. […]
Is the United States economy recovering or faltering?
It depends on who you ask and which data you consider. For example, last week, the Department of Labor reported fewer people applied for first-time unemployment benefits during the week of July 11. That could be a tick in the positive data column. Week-to-week the number declined from 1.31 million to 1.30 million. The lackluster decline could be a tick in the negative data column since the long-term weekly average is about 20 percent of that number.
Please don’t scream inside your heart.
Last week, a reopened Japanese theme park asked patrons to wear masks to help reduce the spread of coronavirus. It also asked them not to scream while riding the rollercoaster. “Please scream inside your heart,” park management urged.
During 2020, stock markets in the United States have taken investors on an emotional rollercoaster ride. By late March, the Standard & Poor’s 500 Index had lost more than 30 percent. The Index has since regained most of those losses, although there have been many ups and downs along the way.
Who could have guessed a global pandemic would produce outsized stock market returns? Near the end of last quarter (March 23), the Standard & Poor’s 500 Index was down 30.75 percent for the year, and it looked like 2020 was going to be a disappointing year for many investors.
Since then, the S&P 500 has gained 39 percent, reported The Economist. It rose 20 percent from March 31 to June 30. The Dow Jones Industrial Average also did well, delivering its second best quarterly showing since 1938. The Nasdaq Composite finished the quarter in positive territory.