Economic Market/Portfolio Happenings
Hello and welcome to this week’s Jones Financial Blog! Our goal at Jones & Associates is to help keep you up to date with interesting current economic/market happenings as well as some proprietary portfolio happenings. Knowledge is power and thought we would share some of ours with you. Enjoy!
All data is for the week ended August 7, 2020.
Major equities indices rose across the globe with the S&P 500 rising 2.49%, the Russell 2000 adding 6.03% and the NASDAQ gaining 2.51%. Overseas, the developed markets (MSCI EAFE) increased 1.96% while the emerging markets (MSCI EM) added 1.00%. Within the U.S., the best performing sectors were industrials and financials while real estate and health care lagged. (1)
Interest rates rose and values fell, with the representative 10-year U.S. treasuries rate rising 2 basis points to 0.57%. The yield curve was unchanged. Mortgage rates were unchanged at 3.14%. (1)
West Texas crude oil prices rose 2.4% for the week after hitting a five month high following a report that inventories fell by a much larger-than-expected 7.4 million barrels in the week ended July 31. Oil’s gains appear to have been driven by growing hopes Congress and the White House will agree on another round of coronavirus fiscal stimulus, the fall in crude inventories, and the slide in the U.S. dollar (which has traded at more than two-year lows based on the ICE U.S. Dollar Index DXY). (2)
Gold continued to climb, reaching $2064 per ounce last Thursday and finishing the week up 2.3% at $2025 per ounce. The weakness of the U.S. dollar and geopolitical concerns continue to pressure the yellow metal price higher. (3)
Two jobs reports were ahead of expectations. Employment rose 1.8 million as the unemployment rate dropped 0.9 points to 10.2%.4 Separately, new jobless claims surprisingly dropped for the first time in three weeks, declining to the lowest level since the COVID-19 began to affect the workforce more than four months ago. (5)
A key services index rose to 58.1, up a point from the June report and ahead of expectations for 55. It marked the second consecutive monthly gain following drops in March and April preceded by a 122-month period of expansion. A sub-index tracking new orders showed the largest gain while inventories dropped dramatically. (6)
A key U.S. manufacturing index rose to 54.2 from a June reading of 52.6, marking two consecutive months of expansion despite economists’ concerns surrounding COVID-19 and beating consensus estimates 53.6. It was the highest mark in 15 months after hitting a low of 41.5 in April. A sub-index tracking new orders jumped to 61.5 in July, up from 5 points from June. (7)
Proprietary portfolio happenings:
BP Plc. (BP), a G40i and Energy Sector Focus holding, cut their quarterly dividend in half, with the new yield at 5.4%. Management of this global oil firm also set a target of profitable growth with 7-9% annual growth in operating earnings per share to 2025. Shares rose 6% on the news. (8)
eHealth Inc. (EHTH), a G33 holding, shares rose nearly 15% for the week after it was revealed that the CEO of this online health insurance exchange bought $3.6 million in stock on August 5. (9)
Square Inc. (SQ), a G33 holding, reported revenues and earnings that exceeded expectations for this fintech company featuring its Cash app software as this firm helps businesses and consumers switch from cash to online exchange of money. (10) Shares rose 13% for the week.
Teladoc Health Inc. (TDOC), a G33 holding, is planning to buy Livorno Health (LVGO) for $18.5 billion in cash and stock, in a deal combining digital providers of health advice. (11 The stock was down over 18% on the news. Our position is under review.
Did You Know? Thomas Edison’s lab in the 1920s was famous for having on hand “a stock of almost every conceivable material… 8,000 kinds of chemicals, every kind of screw made, every size of needle, every kind of cord or wire, hair of humans, hair & hoofs of horses, hogs, cows, rabbits, goats, minx, shark’s teeth, deer horns, tortoise shell, cork, resin, varnish, oil, ostrich feathers, a peacock’s tail, rubber, all ores…” The lab was moved lock, stock & barrel from New Jersey to Henry Ford’s Greenfield Village in Michigan in 1954.
Sources: (1) JP Morgan Weekly Market Recap 8-10-20, (2) Oilprice.com, (3) Apmex.com, (4) Bureau of Labor Statistics Unemployment Situation 8-7-20, (5) US Labor Dept. Unemployment Insurance Weekly Claims 8-6-20, (6) Institute for Supply Management Services Report 8-5-20, (7) Institute for Supply Management Manufacturing Report 8-3-20, (8) BP Inc. press release 8-4-20, (9) Gurufocus.com 8-5-20, (10) Square Inc. 8-4-20, (11) Teledoc Health press release 8-5-20