After a choppy week of trading, U.S. stocks ended slightly higher for the week. The Dow Jones Industrial Average joined other major indices by rising into positive territory for the year. Better-than-expected retail sales and consumer sentiment data appeared to provide the positive catalyst for markets, outweighing concerning coronavirus-related health news and stubbornly high unemployment figures.
For the week, the S&P 500 Index closed up 0.2% while the Dow Jones Industrial Average advanced 0.1%. Year to date, the S&P is up 7.8% while the Dow has gained 0.2%. First-time unemployment claims unexpectedly rose this week to 898,000, even as continuing claims fell more than expected to 10 million. Recovery in the services side of the labor market continues to lag behind manufacturing as many businesses that depend on foot traffic and personal interaction continue to struggle to survive. Conversely, many manufacturing businesses have learned to thrive in the “new normal” of producing in the midst of the pandemic.
Virus-related health concerns weighed on markets this week. Pharmaceutical companies Johnson & Johnson (working on vaccine development) and Eli Lilly (antibody therapy) both had to pause drug trials due to patient issues.As coronavirus case numbers have risen in several U.S. states, several European countries have seen spikes significant enough to warrant serious consideration to more extensive curfew and lockdown restrictions in the United Kingdom, France, and Germany. This comes at a delicate time for Europe, as the negotiations between the U.K. and the European Union on a Brexit agreement continue to show minimal signs of progress. A return to more extensive lockdowns, paired with increased trade friction that could result from a “nodeal” Brexit, could pose headwinds for European stocks in the short term.
Some bright spots in U.S. economic data this week helped to propel stocks higher. Retail sales increased for the fifth month in a row in September, posting a better-than-expected 1.9% increase over August. Spending on vehicles and for home improvement projects were especially strong. The University of Michigan consumer sentiment index increased to its highest level since March, indicating rising expectations for a fuller recovery in 2021. On balance, we still hold a positive intermediate-term outlook for stocks based on worldwide support from central bank monetary policy and government spending, the extremely strong U.S. housing market, and continued low inflation.
As we continue to navigate through the pandemic, our commitment remains to be here for you each step of the way. As always, please contact us with any questions about the economy and your financial plan.
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