Overview: Major U.S. stock indices finished lower for the week after hitting all-time highs this past Wednesday. Market vacillation was driven by conflicting factors of mixed economic data, rising COVID-19 cases, and vaccine optimism. Investors are balancing indications of an improving labor market at a slower pace in the recovery. The S&P 500 index ended the week -2.3% lower, with international stocks posting similar negative returns for the week. In bonds, investors turned to safe-haven assets following a bout of volatility, with the U.S. 10-year Treasury yield ending the week at 0.72%. In economic news, the U.S. unemployment rate dropped to 8.4% in August as the economy added 1.4 million jobs during the month. The latest data showed that more than 22 million jobs lost since March have been recovered so far. New weekly jobless claims totaled 881,000, below consensus, for the week ending August 29.
Virus update: Concern is mounting in the United Kingdom (UK) as the country’s new daily case rate on Sunday hit the highest level since May. The new increase coincides with children going back to school along with a government effort to convince people to return to work. Around Europe, hot spots are spiking again, with the virus spreading in France at a worrying pace. Meanwhile, India, the world’s new Covid-19 epicenter, surpassed Brazil as the second-worst hit country. The nation’s virus curve is showing no signs of flattening out, with infections rising at a record pace of more than 90,000 a day. India, Brazil, and the U.S. account for more than half the world’s cases, which have now topped 27 million. (Bloomberg)
Upcoming: The next Brexit negotiating round begins this week with discussions between the UK and the European Union in London. Monetary policy will be under review in Europe. As the European Central Bank is expected to hold rates steady on Thursday while indicating that those downside risks have intensified. This would suggest that further easing is possible before the year-end. U.S. consumer price (CPI) data is due Friday, with consumer prices expected to rise in August for a third straight month. Finally, markets will be keenly focused on the upcoming September 15-16 Federal Reserve meeting. At this meeting, the Fed is expected to revise their economic outlook, given their forecast is currently for unemployment to be 9.3% at year-end (with the latest number reported at 8.4%). Any ensuing policy shift by the Fed will be scrutinized for potential market ramifications.
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