The markets are turning, but what data came during the week to cause the shift?
Monday
Monday brought the end of a robust August for the stock markets. They ended in a more blah tone, markets barely moved, capping a great month with a “meh” response. This left many questions as to what September could bring. Historically a weaker month for markets, especially in election years, it should be interesting to see how it unfolds.
Tuesday
ISM Manufacturing set the tone for the day as markets rose. ISM Manufacturing increased in August to 56.0 from 54.2. As a reminder, 50 marks the line between contraction and expansion. In addition, Apple and Tesla helped drive optimism as both of their stocks split.
Wednesday
Markets rallied broadly again on Wednesday. In a changing tone, NASDAQ did not lead, but rather trailed the rally. Optimism over the recession being in its late phases pushed value shares higher. This happened as stocks in general rallied to new heights.
Thursday
The celebration from Wednesday was short lived as markets ripped away much of their September gains. Interestingly, the moves were focused on stay at home assets. Also, a bid for assets that signal the end of a recession, such as energy and financials. This may have been on jobs data from that morning, but likely, on hopes of mass inoculation by year’s end. While the dip may happen hard and fast, it may not be long lived.
Friday
The monthly Jobs report showed the unemployment rate dropping to 8.4%, its lowest level since the start of the pandemic. The economy added 1.371M jobs, missing expectations of a 1.7M add. Unemployment data was not enough to deter a market that seems bent on repricing. The S&P 500 lost a full percentage point on Friday and was down 2.3% for the week. The true loser for the week was the tech heavy Nasdaq, down 3.3%.
Conclusion
The route in domestic equities began the morning after it was leaked that States should prepare to deliver vaccines in October. This sent a message that was bad news for the stay at home tech stocks–the industry that has been the darling of the current recession. As this route has begun, things like Gold and Intermediate-Term bonds have also not seen a substantial bid up. Rather, leisure and retail have seen a bit of a rally. This sends the message that investors are not running to the hills, but rather are running out of their houses. The current temperature is that this is not the start of something bad, but a repositioning for a positive ending.
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