Weekly Recap | October 26, 2020

October 19-23, 2020 Recap

Equities Snap Three-Week Rally

Stocks Little Changed
U.S. stocks ended the week fractionally lower, snapping a three-week rally as investors weighed mostly upbeat earnings and economic data while monitoring prospects towards an additional fiscal stimulus package. Sentiment was however overshadowed by an acceleration in new COVID-19 infections. Equities rose Friday after White House Chief of Staff Mark Meadows said he expects a stimulus deal in the coming days. However, Meadows and House Speaker Nancy Pelosi have since blamed each other for “moving the goalposts” with their respective proposals.

Weekly Performance
For the week, the S&P 500 declined 0.51%, and the tech-heavy Nasdaq Composite fell 1.06%. The Dow Industrials declined by 0.95%. Through Friday’s close, the S&P 500 broad-market benchmark index is now down 3.2% from its 3,580.84 all-time high on September 2. 

Fewer Jobless Claims
787,000 initial jobless claims were filed for the week ending October 17, beating consensus expectations for 860,000. Jobless claims declined by 55,000 versus the week prior. Continuing claims, which include individuals that have filed jobless claims for two or more consecutive weeks, declined by 1.02 million for the week ending October 10. Though jobless claims remain elevated, it is an encouraging sign to see claims below 1 million for an eighth straight week. 

Industrials Gain the Most
Sector performance was again uneven, with seven of the 11 major sector groups posting weekly declines. Among gainers, Communication Services (+2.13%), Utilities (+1.18%), and Financials (+1.03%) outperformed, while Technology (-2.21%), Real Estate (-1.29%), and Consumer Staples (-1.27%) fell the most. On a year-to-date basis, Technology (+30.56%) and Consumer Discretionary (+27.72%) remain this year’s top winners.  

Treasury Yields Jump
Treasury prices eased last week amid lingering hopes for another coronavirus relief stimulus package and generally upbeat earnings and economic data. The yield on benchmark 10-year Treasury notes gained ten basis points last week to end at 0.84%. U.S. WTI crude oil futures gave back recent gains, retreating $1.27 (-3.09%) to $39.85/barrel on weakening demand prospects and increased supply fears. Libya’s recently restarted production is seen quickly ramping up toward 1 million barrels/day.  

What We’re Reading 

Fiscal Stimulus Deal Creeps Nearer

Commercial Property Prices Plunge

Highest COVID-19 New Daily Cases

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Economic Calendar

Monday, October 26
New Home Sales, Chicago Fed National Activity.

Tuesday, October 27
Durable Goods Orders, Consumer Confidence, Home Prices.

Wednesday, October 28
No Major Economic Releases.

Thursday, October 29
GDP, Initial Jobless Claims, Pending Home Sales.

Friday, October 30
Personal Income, Consumer Spending, Core Inflation, Consumer Sentiment.

Recent housing data has been strong, including the V-shaped recovery in housing starts since the shutdown ended in May. This is good news because the supply of existing homes for sale is at a multi-decade low. In September, existing home sales climbed 9.4% to a seasonally adjusted annualized rate of 6.54 million. Unfortunately, the recent strength in home sales has driven the supply of existing homes to only 2.7 months of supply. The combination of low supply and record low mortgage rates has accelerated the pace of housing price growth.

^{This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on Twitter.}

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^{All economic and performance information is historical and not indicative of future results. The market indices discussed are not actively managed. Investors cannot directly invest in unmanaged indices. Please consult your financial advisor for more information.}

^{Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards.}

^{Glossary
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 S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping (among other factors) designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.}

^{The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index}

^{The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.}

^{The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.}

^{The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 companies.}

^{The Bloomberg Barclays US Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P.  Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 8.25 years. This total return index, created in 1986 with history backfilled to January 1, 1976, is unhedged and rebalances monthly}

^{The Bloomberg Barclays US Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years. This total return unhedged index was created in 1986, with history backfilled to July 1, 1983 and rebalances monthly.}

^{The Bloomberg Barclays US Municipal Bond Index covers the USD-denominated long-term tax exempt bond market.  The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Many of the subindicies of the Municipal Index have historical data to January 1980. In addition, several subindicies based on maturity and revenue source have been created, some with inception dates after January 1980, but no later than July 1, 1993. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 12.8 years. This total return index is unhedged and rebalances monthly.}

^{The MSCI All-Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The SMCI ACWI consists of 46 country indexes comprising 23 developed and 23 emerging market country indexes. The developed country indexes include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The emerging market country indexes included are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.}

^{The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.}

^{The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.}

^{The MSCI Europe Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe.}

^{The MSCI Pacific Index captures large and mid-cap representation across five Developed Markets (DM) countries in the Pacific region. With 470 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.}

^{The Bloomberg Commodity Index is a broadly diversified index that measures 22 exchange-traded futures on physical commodities in five groups (energy, agriculture, industrial metals, precious metals, and livestock), which are weighted to account for economic significance and market liquidity.  No single commodity can comprise less than 2% or more than 15% of the index; and no group can represent more than 33% of the index. However, between rebalancings, group weightings may fluctuate to levels outside the limits. The index rebalances annually, weighted 2/3 by trading volume and 1/3 by world production.}

^{The S&P GSCI Crude Oil Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.}

^{The S&P GSCI Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold futures market.}

^{West Texas Intermediate (WTI) is a crude oil stream produced in Texas and southern Oklahoma which serves as a reference or "marker" for pricing a number of other crude streams. WTI is the underlying commodity of the New York Mercantile Exchange's oil futures contracts}

^{The Cboe Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.}

^{The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000. It has since reached a February 1985 high of 164.720 and has been as low as 70.698 in March 2008.}