Sep 3, 2020

Axios Markets

By Dion Rabouin
Dion Rabouin

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🎙“The only place success comes before work is in the dictionary.” - See who said it and why it matters at the bottom.

1 big thing: The stock market keeps rising
Expand chart
Data: FactSet; Chart: Axios Visuals

U.S. stocks continue their surge, with the S&P 500, Dow Jones Industrial Average and the Nasdaq all finishing the day higher on Wednesday, as seemingly every sector of the market has rallied since the start of the third quarter.

What it means: The "buy anything" rally continues as reopening and stay-at-home stocks both remain bid and every sector of the S&P has seen a sizable jump since the quarter began on July 1.

Between the lines: U.S. economic data has been mixed in recent days, as private payroll processor ADP's jobs report missed expectations by more than 500,000 jobs and the Fed's Beige Book found the economic recovery slowed in August and “Continued uncertainty and volatility related to the pandemic, and its negative effect on consumer and business activity, was a theme echoed across the country.”

The state of play: The S&P 500 hit a new record high and rose by the most in nearly two months, closing higher for the ninth time in the past 10 sessions.

  • Defensive and value stocks led the gains, catching up after tech stocks boomed on Tuesday.
  • The Russell 1000 Value Index rose 1.7% and utilities and financial stocks — two of the three worst-performing sectors in 2020 — each rose nearly 1.4%.

The big picture: The Nasdaq has risen by 18.7% in just the third quarter. The S&P and Dow are trailing closely behind, having gained 15% and 13%, respectively, since July 1.

  • September has built on August's impressive numbers, when the S&P rose by more than 7%, for the best August since 1986, the Dow had its best August since 1984, and the Nasdaq recorded its strongest August since 2000.
2. Catch up quick

Facebook announced it will ban political ads the week before the election and will label any post declaring victory with a link to the National Election Committee's website in an attempt to prevent disinformation. (CNBC)

In its latest update, the CBO projects U.S. debt will eclipse the size of the economy next year, growing to 104% of GDP in 2021, and surpassing the all-time record to reach 109% of GDP, or $33.5 trillion, by 2030. (CBO)

The CDC told U.S. public health officials to be prepared to distribute a coronavirus vaccine to health care workers and other high-risk groups as soon as late October or early November. (NY Times)

The Trump administration is debating the scope and effective date of bans on Chinese social media apps WeChat and TikTok and will make decisions public later this month. (Bloomberg)

3. Americans less worried about tariffs

Reproduced from CivicScience; Chart: Axios Visuals

U.S. consumers are getting less concerned about the impact of tariffs on their daily lives, new data show.

What happened: After consumer concern about the tariffs rose to record highs in April and May, CivicScience noted a consistent decline that has pushed overall readings on concern down to nearly their levels before the pandemic began in the U.S.

By the numbers: For the full month of August, 65% of U.S. adults say they’re at least somewhat concerned about the impact of recent trade policies on their household expenses, down three points from 68% in the month of July.

Watch this space: Tariffs are still in place on most Chinese exports to the U.S. and on many Chinese imports from the U.S., so businesses and consumers are still paying duties on hundreds of billions of dollars of goods.

  • Both sides in the U.S.-China trade war have pledged their commitment to the "phase one" trade deal, though President Trump has said he has no plans to negotiate a phase two.
4. DOL admits seasonal adjustment distorted unemployment data

Today's initial jobless claims report will look a bit different as the Department of Labor announced it will change the methodology it uses to seasonally adjust data.

  • The seasonal adjustments will switch from multiplying by a seasonal factor to adding.

What they're saying: "[I]n the presence of a large level shift in a time series, multiplicative seasonal adjustment factors can result in systematic over- or under-adjustment of the series; in such cases, additive seasonal adjustment factors are preferred since they tend to more accurately track seasonal fluctuations in the series and have smaller revisions," DOL said in a statement.

The intrigue: The Bureau of Labor Statistics had already made this change to its reports, months ago, says former BLS head Erica Groshen, but the agency tasked with releasing the unemployment data, the Employment and Training Administration (ETA), had not until now.

  • "This is an example of the difference between having a statistical agency produce official economic indicators from administrative data and having an administrative agency publish aggregates that are used as economic indicators but do not have curation by national statisticians," she told Axios' Felix Salmon.
  • "BLS could and arguably should produce a weekly series of indicators based on UI Claims. Sadly, that can’t happen without funding—either through appropriations to BLS or to ETA for this purpose. So, ETA just stumbles along..."

Also intriguing: Over the last three weeks the average for seasonally adjusted initial jobless claims was 21% higher than the average for nonseasonally adjusted claims, notes DRW Trading rates strategist Lou Brien.

  • Last year at this time, he says, with about 1/10th as many claims, the seasonally adjusted three-week average for initial claims was 21.5% higher than the unadjusted claims.
5. Low-income Americans showing minimal increase in confidence
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Reproduced from Morning Consult; Chart: Axios Visuals

Differences in consumer sentiment by income are beginning to increase again as overall confidence picks up in the U.S., according to data from Morning Consult.

What's happening: While overall consumer confidence has returned to its mid-March levels, Americans who earn less than $50,000 a year are trailing badly compared to other income groups and to their earlier confidence levels.

  • Americans at the bottom income tier are still just six points above their lowest levels of confidence, plumbed during the tail end of the stock market crash in early April, and are 20 points below their mid-March levels.
  • Americans at the top income tier have bounced 19 points from their lowest levels of confidence and are just 12 points from the March highs as of Aug. 28.
6. Al Green powers Walgreens stock higher
A screenshot of a tweet from soul legend Al Green.

Walgreens' stock jumped 2% at the market open yesterday, as traders snapped up the pharmacy giant's shares because of this tweet and the speculation that legendary soul singer The Reverend Al Green endorsed a name change from Walgreens to algreens (Al Green's).

  • It finished the day up 1%.

Of note: This is likely not why Walgreens' stock rose. I am joking.

Dion Rabouin

Thanks for reading!

Quote: “The only place success comes before work is in the dictionary.”

Why it matters: On Sept. 3, 1970, Vince Lombardi, head coach of the Green Bay Packers who led the team to three straight and five total NFL championships in seven years, died at the age of 60. He is considered one of the best coaches in the history of sport.