Politics weighed heavily on Wall Street this week as investors’ uncertainty about the upcoming election grows. The first round of presidential debates was particularly vicious. That led many investors to worry about potential controversy extending well past the November 3 election day. Then, two events that happened late Thursday threw another wrench into the week.
The $2.2 trillion stimulus package presented by Speaker of the House Nancy Pelosi (D) was passed by a slim margin in the House with 18 Democrats opposing the plan. Pelosi and Treasury Secretary Steve Mnuchin have been continuing their discussions but have yet to find a compromise on key issues. There was optimism this week that a deal could be struck before election day, however with a lack of progress in discussions, plus Senator Majority Leader Mitch McConnell’s (R) outright opposition, it’s becoming less likely a deal will come together.
Finally this week, both President Trump and First Lady Melania Trump announced they tested positive for COVID-19. That shook up markets in early Friday trading, with Dow Futures slipping by more than 350 points.
Overall, September finished as the first losing month for Wall Street since March. Part of the drop was due to politics, but a correction in tech stocks dragged the markets down significantly. Even into Friday, both Apple and Tesla were down 3% and 5%, respectively.
The market was thrown another twist when the Labor Department released the final jobs report before the election. A paltry 661,000 jobs were added in September. That is much lower than the 800,000 expected by economists. However, the report also shows that the unemployment rate went down to 7.9%, much lower than the 8.2% prediction. That being said, the details in the report show that the number of people reporting being on a temporary layoff dropped by 1.5 million. Moreover, the number of people who reported holding part-time jobs for economic reasons went down by 1.3 million.
The private sector jobs added 749,000 jobs in September, according to ADP’s monthly report. Meanwhile, weekly unemployment claims also stayed below 1 million, coming in at a better-than-expected 837,000. The Labor Department’s continuing claims data showed another positive with claims of two weeks or more falling by nearly 1 million to sit at 11.77 million in total.
Meanwhile, the housing industry continues to steamroll through 2020. August’s pending home sales were up 8.8% over July, according to the National Association of Realtors. That is a record pace since the NAR began keeping the data in 2001. When you look at the numbers on an annual basis, pending home sales are up 24.2%.
Interest rates have continued to stay incredibly low and steady. This week’s Freddie Mac average on a 30-year fixed-rate mortgage is 2.88%. These rates are not only giving consumers more confidence in purchasing and refinancing, but they’re also giving people more spending power.
“Tremendously low mortgage rates, below 3%, have again helped pending home sales climb in August,” said Lawrence Yun, the NAR’s chief economist. “Additionally, the Fed intends to hold short-term fed funds rates near 0% for the foreseeable future, which should, in the absence of inflationary pressure, keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace.”
Low rates are important for buyers right now as low inventory and high demand have caused prices to heat up. According to the S&P CoreLogic Case-Shiller National Home Price Index, prices are up by 4.8% (YOY) nationally.