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  • Alex Pettee, CFA

Volatility's Back | Tech Trouble | Jobs Return

Updated: Sep 10, 2020

Daily Recap

  • U.S. equity markets ended lower Friday amid a volatile 48-hour-stretch in the markets as a sharp sell-off in the high-flying technology names continued despite a relatively strong employment report.

  • After dipping 3.4% yesterday and snapping a six-week winning streak, the S&P 500 finished lower by another 0.8% today to end the week lower by 2.3%.

  • Real estate equities were again among the relative safe-havens today amid the broader sell-off as Equity REITs finished lower by 0.4% today with 9 of 18 property sectors in positive-territory.

  • The BLS reported this morning that the U.S. economy added 1.37 million jobs in August - slightly better than economists' estimates for gains of 1.35 million. Most notably the unemployment rate ticked down to 8.4%.

  • There may some more "low-hanging-fruit" left in the employment rebound as roughly 60% of recent job losers continue to classify themselves as on "temporary layoff."

Our Real Estate Daily Recap discusses the notable news and events in the real estate sector over the last trading day and highlights sector-by-sector performance. We publish this note every afternoon at HoyaCapital.com and occasionally on Seeking Alpha to cover significant news and events. Subscribe to our free mailing list to make sure you never miss the latest developments in the commercial and residential real estate sectors. You can also follow our real-time commentary on Twitter and LinkedIn.

U.S. equity markets ended lower Friday amid a volatile 48-hour stretch in the financial markets as a sharp sell-off in the high-flying technology names continued despite a relatively strong employment report. After dipping 3.4% yesterday and snapping a six-week winning streak, the S&P 500 ETF (SPY) finished lower by another 0.8% today to end the week off by 2.3%. Real estate equities were again among the relative safe-havens today amid the broader sell-off as the Equity REIT ETFs (VNQ) finished lower by 0.4% today with 9 of 18 property sectors finishing in positive territory. The Mortgage REIT ETF (REM), meanwhile, higher by 0.1% after yesterday's 1.4% dip.

The "unofficial end" of summer saw one final "splash" in its final days as the Nasdaq 100 (QQQ) dipped nearly 7% over the last two trading days. Under the surface, however, the trading action was relatively less notable as the Small-Cap (SLY) and Mid-Cap (MDY) stocks outperformed the large-cap indexes for the second-straight day, while the 10-Year Treasury Yield (IEF) bounced higher following the better-than-expected jobs data throughout the week. 8 of the 11 GICS equity sectors finished lower today, but the Financials (XLF) and Commerical Real Estate (XLRE) delivered solid outperformance amid the end-of-week volatility. The recently high-flying homebuilders dragged on the broader Hoya Capital Housing Index despite another solid slate of housing and economic data, which we'll discuss in full detail in our Real Estate Weekly Outlook report published on Saturday morning. 

This week's declines came despite an encouraging slate of employment data. The BLS reported this morning that the U.S. economy added 1.37 million jobs in August - slightly better than economists' estimates for gains of 1.35 million. Most notably, however, the "headline" unemployment rate ticked down to 8.4% from 10.2% in the prior month. Even with the rebound over the last three months, however, total nonfarm payrolls are still roughly 11.5 million below pre-pandemic levels. This follows ADP data earlier in the week which showed that 428k jobs were added in August - below expectations of 950k - but prior months were again revised higher.

We've remained quite a bit more optimistic than consensus on the employment and economic outlook, urging investors not to underestimate the "unstoppable force" of WWII-levels of fiscal stimulus and the unprecedented levels of monetary support, both of which we expect to continue despite the stalemate in fiscal talks over the last week. There may be quite a bit more "low-hanging-fruit" left in the employment rebound as roughly 60% of recent job losers continue to classify themselves as on "temporary layoff" totaling over 6 million, which is down from a peak of 18 million back in April.

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