Market week: Markets flat in summer doldrums

Crude oil outlook weighs on TSX energy issues

The major North American stock indexes put in an uninspiring week, neither gaining nor losing much ground, as the summer doldrums kicked in full time. The biggest contributor to negative sentiment in the U.S. markets was the continuing congressional deadlock over Covid-19 relief funding. While Congress remained stalled on extending the $600 per week unemployment support measure that expired on July 31, President Donald Trump last week signed an executive order that would partially fill the gap if various legal obstacles to such a move were overcome.

Consumers continue to rein in spending as uncertainty prevails about both the income support measures and the duration and severity of the Covid-19 pandemic pending the development of a vaccine. U.S. retails sales rose 1.2% in July, less than the consensus estimate of 2%, as the early reading on the University of Michigan’s August consumer sentiment index came in at 72.8, up only slightly from July’s 72 reading.

Adding to background anxiety, virtual trade talks between the U.S. and China to assess the progress of the Phase 1 deal, which had been scheduled for this weekend, have been put on hold indefinitely.

The S&P 500 Composite Index edged up a marginal 0.6% on the week, while the Nasdaq Composite Index remained essentially flat.

In Canada the S&P/TSX Composite Index reflected the investor disinterest displayed in the big U.S. indexes, and ended the week virtually flat. The price of crude oil remained below US$45 per barrel, as the International Energy Agency cut its oil demand forecast for 2020, and traders remained pessimistic about the outlook for global economic recovery this year. That weighed on the energy sector, which failed to make any headway in the week. Gold lost 4.5% on the week and retreated from its record high above US$2,000 per ounce. So investors didn’t find anything exciting in metals and mining issues either during the week, which together with energy kept the S&P/TSX from going anywhere interesting.

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