The week in review – US financial markets
  • Read Time: 6 mins

Economic and political backdrop

Last week’s corporate earnings reports demonstrated that some major companies are benefiting from the pandemic’s impact on consumer patterns. This was on clear display Thursday evening, when Facebook,, Apple and Alphabet (parent company of Google) – which together account for almost one-sixth of the market capitalisation of the S&P 500 – reported mostly healthy gains in revenues despite the pandemic. On Wednesday, the CEOs of all four companies testified in defence of their growing market power in front of a congressional antitrust subcommittee. Investors seemed generally relieved with the tone of the questioning, with the shares in all four holding steady or rising slightly in its aftermath.

Investors also kept a close eye on negotiations in Congress over a new stimulus package. Futures were higher before trading started Monday in expectation of the release of a plan from Senate Republicans, rumoured to include new direct payments to lower-income Americans, as well as a revised supplemental unemployment package designed to replace 70% of an individual’s lost wages. However, sentiment wavered later in the week as negotiations appeared to stall, even as current supplemental unemployment benefits of USD 600 per week were set to expire Friday. Political matters also took an unexpected turn Thursday morning, when President Trump tweeted out the suggestion that the November elections might be delayed because of the alleged possibility of voting irregularities – an idea quickly rejected by Republican congressional leaders.

The week’s economic data seemed to generally weigh on sentiment. The biggest headline was the initial estimate of second-quarter GDP, showing the economy contracting at an annualised rate of 32.9%, slightly less than consensus forecasts but by far the largest retrenchment in modern history. The number of Americans seeking unemployment benefits for the first time ticked up for the second straight week – to 1.43 million – and continuing claims rose for the first time in two months. The housing market was a bright spot, with pending home sales rising in June for the first time in four months. The manufacturing sector also seemed to remain on the road to recovery, with durable goods orders expanding by 7.3% in the month, slightly above expectations.

Equity markets

The S&P 500 recorded a gain of 1.8% (2.7% YTD), as investors reacted to a flood of quarterly earnings reports and some prominent economic data. Large-caps and growth stocks outperformed, putting at least a temporary end to the rotation into small-caps and value shares over the previous two weeks – Russell 1000 Growth returned 3.8% (18.5% YTD), Russell 1000 Value -0.2% (-12.6% YTD) and Russell 2000 0.9% (-10.3% YTD).

Within the S&P 500, real estate investment trusts fared best as longer-term bond yields fell, making their dividends more attractive in comparison. The much larger technology sector was also strong. Energy stocks recorded the largest declines. The price of a barrel of Brent was stable last week, ending the week at USD 43.3. Materials shares were also weak.

Corporate earnings were in the spotlight during the week, with 189 of the S&P 500 companies slated to post second-quarter results, according to Refinitiv. The imprint of the pandemic was clearly visible, with diversified industrial and materials companies reporting sharp declines in revenues. Analysts polled by FactSet are predicting overall earnings for the S&P 500 to have declined by roughly 36% versus the year before, the biggest drop since the end of 2008. FactSet reports that more companies than usual have been beating estimates, however.

Fixed income markets

The economic data, election worries, and the uncertain fiscal backdrop pushed the 10-year Treasury yield to its lowest level of 0.53% since early March. At its midweek meeting, the Federal Open Market Committee left the federal funds rate at its target range of 0.00% to 0.25%, as expected, and extended its emergency lending facilities through the end of the year.

Overall volumes in the investment-grade corporate bond market were light as month-end buying drove most of the trading, but primary market activity picked up following two weeks of modest issuance. Credit spreads drifted marginally wider across most segments.

The high yield market was mostly focused on earnings releases, and there were few negative headlines. ETFs were active buyers, although modest new issuance made putting money to work a challenge. According to J.P. Morgan, the number of high yield issuers suffering downgrades has declined markedly over the past three months after spiking in March and April. The energy industry has experienced the most downgrades in 2020.


Sign up for US Equity insights from T. Rowe Price

Share this article:

Share on linkedin
Share on email

For Investment professionals only. Not for retail distribution.


All data and index returns cited herein are the property of their respective owners, and provided to T. Rowe Price under license via data sources including FactSet, Frank Russell, MSCI and S&P. All rights reserved. T. Rowe Price seeks to cite data from sources it deems to be accurate, but it cannot guarantee the accuracy of any data cited herein. Neither T. Rowe Price, nor any of its third-party data vendors make any express or implied warranties or representations and shall have no liability whatsoever with respect to any data and index returns contained herein. The data and index returns cited herein may not be further redistributed or used as the basis for other indices, as a benchmark or as the basis for any other financial product.

Financial data and analytics provider FactSet. Copyright 2020 FactSet. All Rights Reserved.

London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2020.  All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

MSCI and its affiliates and third-party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein.  The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products.  This report is not approved, reviewed, or produced by MSCI.  Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction.  None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

The S&P 500 Index is a product of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”) and T. Rowe Price has been licensed for use by T. Rowe Price.  Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by T. Rowe Price. T. Rowe Price’s US Financial Markets – The Week in Review is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.


Important Information

The specific securities identified and described are for informational purposes only and do not represent recommendations.

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. 

It is not intended for distribution to retail investors in any jurisdiction.

DIFC – Issued in the Dubai International Financial Centre by T. Rowe Price International Ltd. This material is communicated on behalf of T. Rowe Price International Ltd by its representative office which is regulated by the Dubai Financial Services Authority. For Professional Clients only.

EEA ex-UK – Unless indicated otherwise this material is issued and approved by T. Rowe Price (Luxembourg) Management S.à r.l. 35 Boulevard du Prince Henri L-1724 Luxembourg which is authorised and regulated by the Luxembourg Commission de Surveillance du Secteur Financier. For Professional Clients only.

Switzerland – Issued in Switzerland by T. Rowe Price (Switzerland) GmbH, Talstrasse 65, 6th Floor, 8001 Zurich, Switzerland. For Qualified Investors only.

UK – This material is issued and approved by T. Rowe Price International Ltd, 60 Queen Victoria Street, London, EC4N 4TZ which is authorised and regulated by the UK Financial Conduct Authority. For Professional Clients only.

© 2020 T. Rowe Price. All rights reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc.

You might be interested in…

See our comprehensive range of US equity funds

Thank you for registering for US equities updates. The latest insights will be sent straight to your inbox, in the meantime access our latest thinking:

Important Legal Information

This site is intended for financial intermediaries in the United Kingdom. I have read the terms detailed below and confirm that I am a financial intermediary and that I wish to proceed. By accessing this website, you consent to T. Rowe Price collecting information by way of cookies.

Information contained in the T. Rowe Price website is not intended for investors in any jurisdiction in which distribution or purchase is not authorised, including the jurisdiction of the reader of this information, where applicable. For example, the information herein is not for distribution to and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States of America to or for the benefit of United States persons.

Information obtained from this site is intended specifically for the individuals who have agreed to these Terms and Conditions and may not be redistributed without prior consent from the T. Rowe Price Legal department.

The information is designed for professional investors, including financial intermediaries or members of the media, and is published for informational purposes only. In particular, the information is directed at only informing persons falling within one or more of the following categories:

(a) A government;
(b) A bank or insurance company;
(c) A pension fund or charity;
(d) Persons whose ordinary activities involve them, as principal or as agent, in acquiring, holding, managing or disposing of investments for the purposes of a business carried on by them or whom it is reasonable to expect will, acquire, manage or dispose of investments for the purpose of such a business;
(e) Persons whose ordinary business involves the giving of advice, which may lead to another person acquiring or disposing of an investment or refraining from so doing;
(f) Representatives of the media for corporate and background information about T. Rowe Price.

Persons who do not fall into one of the above categories should not act upon the information contained herein.

Certain persons may have access to information regarding the T. Rowe Price Funds SICAV, an investment company incorporated as “Société d’Investissement à Capital Variable” (‘SICAV’) under the laws of Luxembourg and the T. Rowe Price Funds OEIC, an open-ended investment company (‘OEIC’) incorporated in England and Wales. The sub-funds referred to on the site are only offered by the current prospectus. The prospectus contains more complete information about the sub-funds, including investment objectives, charges and expenses. However, the prospectus and other information relating to the sub-funds will not be intentionally distributed to persons in any country where such distribution would be contrary to local law or regulation.

Past performance is not a guide to future performance. The value of securities and any income generated from them might decrease as well as increase. Changes in rates of exchange may also have an adverse effect on the value, price or income of securities. Investors should also be aware of the additional risks associated with investments in emerging markets, high yield securities and smaller companies.

This information herein does not constitute investment advice and the products described may not be available to or suitable for all investors. You should consider, if appropriate, obtaining independent professional advice before making an investment decision.

Unless otherwise noted, the content appearing in this Section of the T. Rowe Price website has been issued by T. Rowe Price International Ltd, 60 Queen Victoria Street, London EC4N 4TZ, which is authorised and regulated by the U.K. Financial Conduct Authority with the reference number 194667.