[Market Madness] Edition 0099
The Moment We Waited For
Q2 blunders
Well folks, I’ll cut right to the chase today. The GDP and jobless claims hurt the markets today. Stocks dropped early and steady, with a recovery made into the middle of the day, and by the close.
More political news continues to muddy the water as experts begin to question high ranking officials if they’ll believe the election results in November as Donnie seeks to move the election (which is not in his powers, nor is supported by the Senate Majority Leader).
Elsewhere, overseas indices sold off last night, following the trend of souring global news. Crude oil is down, volatility is up, and gold is down on the day.
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Fundamentals
Thursday’s Close:
Dow Jones: -0.85%
S&P 500: -0.38%
NASDAQ: +0.43%
US 10 YR: 0.547%
Crude OIL: $40.24
Market Madness Portfolio: -0.26%
COVID 19 Global Cases: 17,116,702
Indices Overseas:
FTSE 100: -2.31%
Nikkei 225: -0.26%
Hang Seng: -0.69%
TEDRATE: 0.13
LIBOR (3 month): 0.26063%
GDP and jobless claims
Now, onto what everyone’s talking about: GDP. The change from the previous quarter resulted in a 9.5% drop in GDP, which comes to an annualized 32.9% drop. Economists were expecting a drop of over 34%, so the actual result, although completely horrible, was not as bad as was expected. Regardless, this drop was the worst seen on record and beckoned back to historic events like the Great Depression and the demobilization after WWII.
For the time being, stimulus is on hold as the two sides continue to butt heads. In the meantime, the unemployment benefits portion has been isolated into its own bill for vote, which failed its first vote in the senate earlier today.
Following suit with poor GDP results, consumer spending was down in Q2, but varied across the different economic sectors. This was also going to be expected because of income shrinkages (people moving onto unemployment because they were laid off or furloughed) and business closures. Largely speaking, we got through Q1 okay because January and February were mostly normal. Q2 is a whole different beast because April was bad and June was also bad — bad bookends. Any ground that was made up in May was either lost in June or is lost now moving into July where numbers outlooks are worsening.
Elsewhere, further increasing the bad mood on Wall Street, jobless claims increased for the second straight week. Analysts were predicting an increase of 1.45 million and the actual increase came in at 1.434 million. We discussed this trend last week, and if it indeed becomes a trend, then we are moving closer back to square one where we started.
Yesterday, the Fed detailed their analysis of the current economic condition and, you guessed it, its not great. Economic growth is still ‘well below’ pre-pandemic levels, and the overall recovery path has appeared to have been slowed down. Rates will remain at near-zero levels for the foreseeable future, and they will keep their lending windows open until the end of the year.
These two graphs are a good visualization of the historic GDP percent changes from quarter to quarter:
Quick Takes
Donnie floats idea of moving election. Firm “no” from McConnell. (via FT and via NY Times)
Herman Cain dies from complications resulting from COVID 19. (via NY Times)
Following the stimulus bill. (via CNBC)
More on school reopenings. (via WSJ)
J&J vaccine tests well early in development stages. (via FT)
Reader’s Corner
The reader will want to check out tomorrow’s special 100th edition of Market Madness!
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