The Markets (as of market close May 8, 2020)
Investors seem to be continuing to move toward stocks despite unfavorable economic data. New scientific and medical developments in the battle against COVID-19 offer some hope. Last Monday saw stocks rebound from losses earlier in the day to close on a high note. Surging oil prices gave a boost to the typically cyclical energy shares, which helped drive the overall market higher.
The stock market continued to rally on Tuesday. Favorable earnings reports from some major companies, coupled with more states and foreign countries easing restrictions, offered encouragement to investors.
Stocks fell for the first time in three days on Wednesday as investors were hit with mixed earnings reports and worsening economic data. Treasury yields increased as bond prices fell. Crude oil prices, which had climbed following a decrease in production, also dropped for the first time in several days.
Despite claims for U.S. unemployment insurance benefits soaring past 22 million, stocks continued to climb last Thursday. The three major indexes gained at least 1.5% for the day. In particular, the Nasdaq pushed ahead of its year-end value for the first time since early March.
Friday saw the release of the latest employment figures for April, which produced several historic statistics including the highest unemployment rate in almost 100 years. That news didn’t stop investors from forging ahead as stocks rose again on Friday, closing the week on a sweet note.
The major benchmark indexes posted solid weekly gains, led by the Nasdaq, which is now more than 1.5% in front of its year-end value. The small caps of the Russell 2000 finished the week right behind the Nasdaq, followed by the S&P 500, the Dow, and the Global Dow. Despite sour economic news and the ongoing rise in COVID-19 cases and deaths, states continued to slowly reopen economies.
Last Week’s Economic News
- April saw employment fall by 20.5 million after falling 870,000 the previous month. Job losses in April were widespread, with the largest employment declines occurring in leisure and hospitality, education and health services, professional and business services, retail trade, and arts, entertainment, and recreation.
- The goods and services trade deficit expanded by $4.6 billion, or 11.6%, in March over February. The March declines in imports and exports were, in large part, attributable to the response to the COVID-19 pandemic, as many businesses were operating at a limited capacity or ceased operations altogether, and traveling was restricted.
- The response to the virus also throttled the services sector. According to the latest Non-Manufacturing ISM® Report On Business®, the non-manufacturing sector contracted in April. Business activity dropped to its lowest level in the history of the survey. New orders and employment also fell dramatically.
Eye on the Week Ahead
More corporate earnings reports are available this week, the results of which are of definite interest to investors. Also, inflation indicators for April are available with the latest information on prices at the consumer and retail levels.
We could likely experience market volatility for the foreseeable future as the economic impact from COVID-19 effects business activity worldwide. Given that we were experiencing good markets and solid economic conditions before the global outbreak of COVID-19, we will look toward stock market and economic recovery as the health crisis abates.
Robert G. Carpenter