Read the 10 stories to remember from the week which ended August 7.
Story #1: The Equity bull market continues
The S&P 500 recorded its fifth positive week out of the past six, moving within 1% of its record high set less than six months ago, and the NASDAQ surpassed its record set in the previous week (see below). Strong earnings reports from healthcare and communication services companies provided a positive catalyst. Outside the US, the pan-European STOXX Europe 600 Index ended the week 2.03% higher while the Nikkei 225 Stock Average advanced 2.9%.
Story #2: NASDAQ 11,000 milestone
The NASDAQ topped the 11,000-point threshold for the first time on Thursday, driven by strong recent results from many technology stocks. The Tech-heavy index pulled back on Friday.
Story #3: US earnings positive surprises
Investors were prepared to experience the largest quarterly decline in earnings since 2009. Still, the earnings season is looking better than expected. Based on results through Friday, FactSet projected earnings decline of about 34% for companies in the S&P 500, compared with the 44% drop that was projected at the start of earnings season.
Story #4: Gold above $2,000
Spot Gold prices climbed above $2,000 per ounce on Tuesday for the first time and stayed above that threshold for the rest of the week. Concerns about the coronavirus pandemic, the global economy, the risk of a U.S. dollar debasement and the long-term consequences of central banks money printing have all been contributing to the gold bull market
Story #5: Silver is up 140% since March lows
Spot Silver prices have been surging as well and are up +140% since March lows amid a massive surge in volume. We also note that the Gold-to-Silver ratio is plunging due to the massive outperformance of Silver versus Gold.
Story #6: The collapse of volatility
While in the past the rise of precious metals often took place amid rising equity volatility, this is not the case this time. Indeed, on the equity side, the VIX index ended the week at around 22, which is the lowest level in nearly six months. While it is still above its historic average, it is far below the record closing high of nearly 83 that it set in mid-March. On the fixed income side, the MOVE index is close to its lowest level ever.
Story #7: Chinese Tech companies under US scrutiny
The Trump administration tightened restrictions on Chinese social media networks TikTok and WeChat in the U.S. In another sign of the growing tech rift between the U.S. and China, San Jose-based video conferencing company Zoom, which gained popularity during the pandemic, said that it would halt direct sales to China and only provide video conferencing services through third-party partners. While Chinese Internet companies tanked on Friday, we note that the Shanghai Composite Index posted solid gains last week.
Story #8: US job market is healing
The US economy added 1.8 million jobs in July, trailing the 4.8 million job creation in June and the 2.7 million increase in May. Those big gains came on the heels of a record loss of 20.8 million jobs in April.
Story #9: Washington gridlock
Stocks’ weekly gains came despite a rise in anxiety over the lack of conclusive progress toward an additional congressional package targeting the coronavirus and its economic impact. Talks between White House officials and Democratic leaders ended Thursday without a breakthrough, and the impasse appeared to deepen on Friday.
Story #10: Turkey woes
Turkish stocks, as measured by the BIST-100 Index, returned -5.9%. Shares extended the previous week’s weakness, and the lira fell sharply, as overnight lending rates in Turkey’s financial system spiked amid continuing concerns about the central bank’s depletion of its foreign exchange reserves and, thus, its ability to defend the lira in global currency markets. Long-term sovereign bond yields also climbed due to the inflationary implications of Turkish currency weakness (e.g., higher import prices).
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