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S&P Adds 2.5% Amid Better than Expected Jobs Report and Enthusiasm for Tech and Communication

Weekly Update – August 07, 2020

  • The S&P 500 index rose 2.5% this week, marking a strong start to August amid earnings-driven gains and better-than-expected July jobs data.
  • The market benchmark ended the week at 3,351.28, up from last week’s closing level of 3,271.12. It is now up 3.7% for the year to date.
  • The strong weekly advance came amid continued enthusiasm for technology and communication-services stocks thanks to better-than-expected earnings for many companies. Investors also were encouraged by the lowest number of weekly jobless claims since March while monthly nonfarm payrolls came in better than expected.
  • The monthly jobs data reported Friday by the Labor Department showed employers added 1.8 million jobs in July while the unemployment rate declined to 10.2% from 11.1% in June. These figures were better than Econoday’s consensus estimates for an increase of 1.7 million jobs and an unemployment rate of 10.5%.
  • This week’s gain in the S&P 500 also came on optimism for another pandemic relief package. However, as of Friday afternoon, talks between White House officials and Democratic leaders for additional pandemic relief appeared at a standstill.
  • Every sector of the S&P 500 was in the black for the week. Industrials had the strongest percentage increase, up 4.7%, followed by a 3.4% rise in financials and a 3.2% increase in energy. Other strong sectors included communication services, up 3.1%, and technology, up 3.0%.
  • The industrial sector was boosted by strong gains in the shares of US airlines as a group of Republican senators supported a new six-month extension of the $25 billion payroll assistance program that would help keep airline jobs through March 2021 as surging COVID-19 cases negatively impact travel demand. Among the gainers, shares of American Airlines (AAL) jumped 17.2% this week.
  • Among financial stocks, shares of Assurant (AIZ) rose 13.7% this week as the company posted Q2 net operating income that was up from the year-earlier period and analysts’ mean estimate.
  • The energy sector’s gains came as crude oil futures rose on the week. Shares of Devon Energy (DVN) rose 15.4% on the week as the oil-and-gas producer reported a narrower-than-expected Q2 core loss and cut its guidance for 2020 capital spending while raising its full-year forecast for oil production. The company’s board also declared a $100 million special dividend.
  • In communication services, shares of Walt Disney (DIS) jumped 11.1% amid its report of a surprise adjusted profit when an adjusted loss had been expected. While the company’s Parks, Experiences and Products segment took a $3.5 billion hit to operating income from closures related to the pandemic, Disney benefited from a surge in subscriptions to its streaming service.
  • Apple (AAPL) shares gave a strong boost to the technology sector as investors and analysts continued to cheer the consumer technology company’s fiscal Q3 earnings beat reported last week. The consumer technology company is benefiting from increased demand for its products at a time when many have been working or schooling at home. The stock jumped 4.6% this week.
  • Next week’s economic calendar features the release of the July producer price index on Tuesday and the July consumer price index on Wednesday. Friday, the market will get July readings on retail sales, industrial production and capacity utilization. August consumer sentiment is also set to be posted Friday.

CPWM Weekly Market Monitor (2020.08.07)

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