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Daily Commentary

Commentary prepared by Alloya Investment Services, a division of the wholly owned CUSO of Alloya Corporate Federal Credit Union. Alloya Investment Services is a leading broker/dealer consultant to credit unions.

Thursday, July 9, 2020 at 8:00 a.m. CST
Commentary prepared by Tom Slefinger, SVP, Director of Institutional Fixed Income Sales, Registered Representative of ISI*, Alloya Investment Services

Market Indications

Historic Treasury Curves July 6, 2020 - one year ago, 30 days ago, current

Other Market Indicators

Market Indicators  
2s/5s Tsy Spread0.13+0.01
2s/10s Tsy Spread0.50+0.02
2s/30s Tsy Spread 1.24+0.02
DJIA-30 26,067.28+177.10
NASDAQ 10,492.50+148.61
S&P-500 3,169.94+24.62
Dollar Idx 96.46-0.41
CRB Idx 141.95+0.39

Daily Commentary

Recap – U.S. equity markets were manically bid at the cash open, faded a bit, and then ramped all the way back to the highs again. All of the major indices closed higher on the day with the Dow and S&P gaining 0.68% and 0.78%, respectively. Once again, tech led the way as the Nasdaq (+1.44%) continued its ascent. Year-to-date the Nasdaq has now gained 16.94%. Gold spiked further (spot back above $1,800) pushing the barbarous relic to nine-year highs. Treasury yields were very modestly higher (two-year unchanged; 30-year +1 basis point), remaining lower on the week at the longer-end.

Graph from Bloomberg titled Gold Soars

Meanwhile, COVID-19 infections keep climbing at an alarming rate. More than 60,000 new daily infections were recorded in the U.S. yesterday to mark the single-largest total of any country since the coronavirus outbreak began in early January. In total, COVID cases have topped three million, more than a quarter of the global total.

In Texas, daily cases have exceeded 10,000 for the first time (with a record 60 fatalities yesterday) to 210,585. Los Angeles County’s public health director said the area was at a “critical juncture” as cases soared. Florida cases jumped 3.6% to 212,794. The top health official in Tulsa, Oklahoma is connecting a spike there to President Donald Trump’s recent rally in the city. New York’s Governor Andrew Cuomo added Delaware, Kansas and Oklahoma to the list of 16 states requiring a 14-day quarantine upon arrival in the Empire State (New Jersey and Connecticut have the same restrictions). Elsewhere, Hong Kong and Tokyo reported their biggest jump in cases since the start of the pandemic. Investors continue to largely look past news of rising virus infections, concentrating on the continued reopening of economies.

Add Brooks Brothers – founded in 1818 – to the recent retail bankruptcy list that includes Neiman Marcus, J. Crew and J.C. Penney. The company has been feeling some effects of a change in traditional business dress and shift towards casual. COVID could be the final nail in the coffin as dwindling demand will only become more pronounced as people continue to work from home.

Walt Disney World opens to annual passholders today and tomorrow, with the Magic and Animal Kingdom areas opening to the general public on Saturday, followed by Epcot and Disney’s Hollywood Studios four days later. Temperature checks, face coverings and extra sanitation efforts are included in your visit to the parks.

On the docket today the consensus is estimating 1.375 million new filings for unemployment benefits, while continuing claims are forecast to drop below 19 million. The data is released at 8:30 am ET. Jobless claims numbers follow at 10:00 am ET along with U.S. May wholesale inventories data. Also at that time, the Supreme Court will issue rulings on access to President Trump’s financial records. Atlanta Fed President Raphael Bostic speaks later, and presidential candidate Joe Biden speaks on the economy. Those hoping for a “New Deal” style stimulus proposal from Biden are likely to be disappointed.

Markets are higher with momentum in the tech sector continuing to be strong. Overnight, the MSCI Asia Pacific Index added 0.6%. But the real show is in Chinese equities. The CSI rose +1.4% for the eighth consecutive day of gains. Year-to-date, the CSI is higher by 17.78%. In Europe, the Stoxx 600 Index was 0.3% higher. S&P 500 futures pointed to a quiet open. The 10-year Treasury yield was at 0.65% and gold added to gains.

Economic Calendar

July 6 - 10, 2020: The Week Ahead

Economic Calendar July 6-10, 2020

 

Future Fed Expectations

Source: Bloomberg

070620 - Future Fed Expectations July 29, 2020 - November 1, 2021

Expected Fed Funds Path 070620 - July 1, 2020 - December 1, 2020

 

Select Probabilities based on the Futures 
Probability of Fed Funds rate CUT on July 29, 20202%
Probability of Fed Funds rate CUT on September 16, 20209%

**All quoted rates are indications and are subject to change without notice.
* ISI is a member of the FINRA/SIPC.

The information contained herein is prepared by ISI Registered Representatives for general circulation and is distributed for general information only. This information does not consider the specific investment objectives, financial situations or particular needs of any specific individual or organization that may receive this report. Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities. All opinions, prices, and yields contained herein are subject to change without notice. Investors should understand that statements regarding future prospects might not be realized. Please contact Alloya Investment Services to discuss your specific situation and objectives.