A DOWN DAY

Equities were spooked by a resurgence in new virus infections, a rise that has slowed the reopening in several states. The markets were also frightened by the Federal Reserve dictum of banning bank stock buybacks through September and capping dividends around current levels.

The markets ignored data indicating the recovery in consumption got off to a solid start as many businesses reopened. Specifically, consumer spending surged a record 8.2% in May after falling the most on record in April. Spending however is below pre-pandemic levels.

Incomes declined 4.2%, just short of a record decrease after posting the largest ever increase in April that was driven mostly by household relief payments of $1,200 refundable tax credits. Economists had expected a 6% drop in May.

Wages and salaries rose 2.7% in May from the prior month, the largest increase since 1993, reflecting modest rehiring as businesses reopened. That followed a record 7.6% drop in April.

Cooper, a traditional economic indicator rose for the sixth consecutive weekly advance. Gold also traded higher and crude was nominally lower.

Most will agree government will or cannot again shutter the economy. Perhaps the most significant question at hand is whether there will be an increase in hospitalizations and ICU admissions.

What will happen this holiday shortened week? The economic data is crowded with top tier data including both ISMs, confidence data, FOMC Minutes, and employment statistics.

Last night the foreign markets were mixed. London was up 0.48%, Paris up 0.26% and Frankfurt up 0.49%. China was down 0.61%, Japan down 2.30% and Hang Sang down 1.01%.

The Dow should open flat as the markets are weighing additional stimulus against the acceleration spread of the virus. The 10-year is unchanged at 0.65%.

 

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.