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August Market Preview: Earnings Season, More Stimulus, Unemployment Are in Play

By David Butler – Aug 1, 2020 at 6:30AM

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Alas, we're heading into the tail end of summer. August is primed to be interesting, with debate over further economic aid and a slew of earnings releases on the table.

July was positive overall for the market. The S&P 500 gained 5%, despite the continuing rise in COVID-19 cases. Going into August, we're in the midst of earnings season. Some of the numbers being reported have been a sobering reminder of the economic hit that we've been dealt this year. There are some key economic moves to pay attention to this month, as well as a host of stocks to keep an eye on. 


Friday August 7-Unemployment rate

With the latest unemployment figures coming out August 7, we're going to see the continued progression of how the workforce is faring, as COVID-19 rates continue to rise. While the unemployment rate declined by 2.2% to 11.1% in June, the July numbers will likely factor in more business closures, and the subsequent layoffs. The Washington Post reported that 1.3 million additional workers filed for unemployment the week of July 6.

It goes without saying that high unemployment rates are detrimental for an economy.

$100 bill with Ben Franklin Wearing a Mask

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The pumping of trillions of dollars into the economy always has a significant impact on markets. With the newest relief package being haggled over between Republicans, Democrats and the White House, the outcome could have a significant impact on key economic data going into the rest of the year.

For the economy to keep any sort of footing, consumer spending has to remain strong. Investors are going to pay attention to what is happening here. For instance, another round of stimulus checks will have an effect on both consumer saving and consumer spending. Another major factor is the $600 unemployment benefit that expired on July 31. Should that benefit not be renewed as businesses continue to face hurdles, it could crunch consumer demand for goods and services. It could also increase default risk on many bank loans. 

The Continuing Earnings Season

We're in the thick of it for the second quarter earnings reports. The first half of August is going to include reporting from some pretty big names. The following companies carry some weight in terms of showing us the damage from the shutdown.

Disney reports August 4, and is likely to show us some pain, given the closure of its theme parks.

Moderna reports on August 5. The pharmaceutical company has been in the news for its edge in the hunt for a coronavirus vaccine. The stock was up around 300% at one point this year, though it's worth noting that Moderna has lost money four years in a row.

The Wendy's Company reports on August 5. The fast food company will likely follow McDonald's (MCD 1.07%), which reported a big decline in revenues.

Penn National Gaming on August 6. The company's casinos dealt with closures, and that will show up in the earnings.

Zillow will give us a look at real estate on August 6.

Toyota on August 7. This has been a good year for car sales. It will be interesting to see what Toyota management provides in terms of commentary on expectations moving forward.

COVID-19 Vaccine Developments

Of course, the other major piece to continue to watch in August, is the progress made on the COVID-19 front. Case counts continue to rise, making it hard to predict what kind of measures will be taken going into the fall. Will states like Florida, which is seeing record deaths, shutter businesses again?

If states are forced to reimplement more restrictions on certain activities, that is going to hinder the economic rebound that we've all been hoping to see.

2020 certainly hasn't been boring. With the combination of earnings, stimulus debate, COVID-19, and the nearing election, August could be just as volatile. 

David Butler has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney and Zillow Group (A shares). The Motley Fool recommends Marriott International and recommends the following options: long January 2021 $60 calls on Walt Disney and short October 2020 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.

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