E US Stock Market Weekly Review Aug. 23-28

A fourth consecutive week with gains for the US stock market, with the S&P 500 index and Nasdaq Composite making new record highs and Dow Jones Industrial Average turning positive in 2020. The Fed has mentioned that it would seek to relax the 2% target for the inflation with a more accommodative monetary policy, and low-interest rates which are supportive for stocks. But the valuation of stocks at these new record highs are of major concern. Especially for the reaction of investors towards earnings results of growth or tech stocks propelling them to higher prices after reporting better than expected results but yet losses, compared to other non-tech stocks which reported again better than expected results, and yet plunged. To me, this shows a disconnection of the stock prices with their valuation to a very large extent and is worrying me for a potential stock market correction.

Economic News

The Conference Board (CB) Consumer Confidence Index fell showing less consumer optimism with a figure of 84.8 less than the forecast of 93. This could lead to lower consumer spending and lower economic growth. The housing market shows strength with New Home Sales coming at 13.9% beating the estimate of 1.3%, and also Durable Goods Orders were better than expected with a figure of 11.2% higher than the estimate of 4.3%. The GDP Growth Rate QoQ 2nd Estimate came in at -31.7%, marginally better than the estimate of -32.5%. Still, the labor market continues to show signs of weakness. Both Initial Jobless Claims and Continuing Jobless Claims came in at worse than expected with figures of 1006K and 14535K respectively. The estimates were for a figure of 1000K for the Initial Jobless Claims and 14450K for the Continuing Jobless Claims. The Core PCE Price Index YoY came in at 1.3%, higher than the forecast of 1.2% but still well below the target of 2% that until recently the Fed had set. Most probably the Fed wants to create more inflation.

The United States Durable Goods Orders

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Disclosure: I have no position in any stock mentioned

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William K. 8 months ago Member's comment

Thanks for a summary that gets past the "sunshine" and shows some reality.

Stavros Georgiadis 8 months ago Author's comment

Thank you too for the comment, kind regards.