S&P 500 Moves Sideways in Tumultuous News Week

By far and away, the biggest story of the tumultuous trading week ending on Friday, 2 October 2020 was the news that President Trump had tested positive for a coronavirus infection. The news sent U.S. stock prices down on Friday by as much as 2% during the course of the day, but the market recovered somewhat to only close down by about 1%.

That rare occurrence of a non-major tax change-related political event moving stock prices however did little to change stock prices for the week. The S&P 500 (Index: SPX) ended the week about 3 points lower than the level at which it closed the previous trading week.

That change puts the level of the S&P 500 well within the redzone forecast range on our alternative futures charts, which assumes that investors are focusing on 2020-Q4 in setting current day stock prices.

We’ll present an alternative futures chart projecting the dividend futures-based model;s potential trajectories of the S&P 500 for the fourth quarter of 2020 in our next edition. Meanwhile, here are the past week’s market-moving headlines, where we find the Fed’s minions making multiple appearances to very little apparent effect….

Monday, 28 September 2020

• Daily signs and portents for the U.S. economy:

• Oil up 1% on economic hope; virus fears check price gains
• U.S. income inequality narrowed slightly over last three years – Fed
• The $4 trillion U.S. government relies on individual taxpayers

Fed minion spends time pondering Dickens, central bank failures, ending legacy of racist policies:

• Fed’s Mester says economic recovery is split into ‘tale of two cities’
• Fed’s Mester: U.S. still far from central bank’s inflation and employment goals
• Fed’s Mester says inclusion important for achieving strong economy

ECB minions attempt putting lipstick on pigs:

• Exclusive: Lagarde’s peace at risk as ECB splits over virus response – sources
• ECB’s Lagarde says dissent among policymakers is healthy
• ECB’s Schnabel floats radical ideas for green stimulus
• Negative real yields on sovereign debt here to stay – Reuters poll

Wall Street closes higher as energy, financials lead broad rally

Tuesday, 29 September 2020

• Oil falls over 3% as virus cases mount and U.S. debate looms
• Bigger trouble seen in Asia, but signs of post-coronavirus rebounds:

• Pandemic to keep Asia’s growth at lowest since 1967, warns World Bank
• China’s factory activity accelerates at solid pace in September on boost from overseas demand
• Japan’s factory output rises for third month in August

Fed minions sees long recovery, indicates Fed’s new inflation targeting policy will be made up as it goes:

• NY Fed’s Williams sees about three years for full U.S. recovery

• NY Fed’s Williams says flexible inflation targeting not based on a formula
• NY Fed’s Williams stresses importance of financial markets resilience

Philadelphia Fed’s Harker: Recovery ‘should continue’ if new virus outbreaks limited

• Fed’s Harker says economic recovery will be bumpy

Fed’s Kaplan sees costs to pinning rates at zero

Wall Street closes lower, ending three-day rally ahead of U.S. presidential debate

Wednesday, 30 September 2020

• Daily signs and portents for the U.S. economy:

• Brent pares losses, U.S. crude up on stimulus hopes
• Mnuchin reports movement on COVID-19 relief as House heads toward vote
• U.S. Senate aims to pass government funding bill Wednesday, avoiding shutdown
• U.S. private payrolls accelerate in September; many challenges loom

Fed minions agree, economic recovery from COVID will be bumpy:

• Fed’s Daly says U.S. economy needs more fiscal support: CNBC
• Fed’s Bowman sees bumpy recovery, warns on asset prices
• Barkin: U.S. challenge is finding jobs for ‘last 5%’ displaced by crisis – BBG

Bigger trouble developing in Eurozone, Argentina:

• Spain to lock down capital, angering regional government
• France’s new COVID-19 cases above the 10,000 threshold again
• Czech government limits gatherings to combat COVID surge
• Nearly half of Argentina in poverty as pandemic deepens crisis, researchers say

ECB minions moving to synchronize with Fed policies, but face internal divisions:

• ECB’s Lagarde sets scene for Fed-like strategy overhaul
• Euro zone deflation risks balanced, ECB’s Kazimir says
• ECB’s Weidmann warns against large-scale bond buys

Wall Street closes higher as stimulus talks progress

• U.S. Fed to extend big bank buybacks, dividend curbs through end of year

Thursday, 1 October 2020

• Signs and portents for the U.S. economy:

• End of third-quarter shows bright spots, holes in U.S. economic recovery

• U.S. auto sales stay on recovery path despite tight inventory

Oil drops 4% on weak demand outlook and higher OPEC supplies

Big U.S. banks to report profit plunge as pandemic recession takes hold

U.S.’s Mnuchin offers $1.6 trillion in stimulus: Bloomberg News

• U.S. Senate’s Schumer says Pelosi, Trump administration not in agreement on coronavirus aid

Bigger coronavirus trouble developing in India and Poland, potential nightmare for insurers developing in Germany:

• India’s coronavirus infections rise to 6.31 million
• Poland reports record number of new daily coronavirus infections
• German court rules insurer must pay restaurant’s lockdown claim

Positive signs developing in Eurozone, world’s schools:

• Euro zone factory recovery continued in September as Germany boomed
• No clear link between school opening and COVID surge, study finds

ECB minions see bad news coming for Eurobanks, want higher inflation, trademark ‘Digital Euro’:

• Euro zone banks must brace for profit hit: ECB
• ECB won’t cut inflation target: de Cos
• ECB Applies for ‘Digital Euro’ Trademark Amid Feasibility Study

Wall Street ends choppy session higher as stimulus hopes ebb and flow

• From hungry squirrels to cyberattacks, exchange outages roil markets

Friday, 2 October 2020

• Daily signs and portents for the U.S. economy:

• Trump’s positive COVID test throws markets pre-election curveball
• U.S. adds 661,000 jobs in September and unemployment rate falls to 7.9%
• Oil loses 4% after Trump gets coronavirus and economies wobble

• U.S. oil producers on pace for most bankruptcies since last oil downturn

Racial gap in U.S. jobless rate narrows for first time in five months

• Fed’s Harker says equitable workforce recovery is a moral necessity

U.S. factory orders miss expectations; business spending improving

ECB minions worries about deflation, ready plan to flood markets with “digital euro”:

• Euro zone inflation will remain negative this year: ECB’ de Guindos
• ECB must prepare to issue a digital euro, Panetta says

Wall St retreats as Trump tests positive for COVID-19

Barry Ritholtz presents both a broader and more succinct summary of the week’s headlines with his weekly presentation of the positives and negatives he found in the past week’s economics and markets news.