The Markets (as of market close May 22, 2020)
The major benchmarks opened the week on a high note, led by the Russell 2000, which gained more than 6.0%. The large caps of the Dow (3.85%) and S&P 500 (3.15%) posted notable gains, as did the Global Dow (3.67%). The tech-heavy Nasdaq climbed nearly 2.5%. Investors were buoyed by positive COVID-19 news. Data showed new cases of the virus were growing at the slowest rate in months. Monday morning, biotech company Moderna reported encouraging results from human testing of a vaccine. This followed Sunday night’s remarks from the Federal Reserve Chair that more monetary stimulus may be on the way.
Stocks couldn’t keep up with the pace set on Monday, as gains were relinquished by the close of trading Tuesday. Investors seemed to ride the wave of information on a possible COVID-19 vaccine from Moderna. While Monday’s report was upbeat, another article on Tuesday questioned the sufficiency of the study’s data. Crude oil prices continued to rise, reaching $32.36 by late Tuesday afternoon.
Wednesday saw stocks rebound, led by the small caps of the Russell 2000, which jumped 3.0%, followed by the tech-heavy Nasdaq, and the large caps of the S&P 500 and the Dow. Once again, investors got encouraging news about a vaccine from another biotech firm. As more states relaxed restrictions, investors gleaned hope of an economic restart. Finally, oil prices rose for the fifth consecutive day. Many consumers are noticing higher gas prices at the pumps just in time for Memorial Day and the unofficial start of summer.
Thursday saw stocks dip on news of an additional 2.4 million claims for unemployment insurance last week, pushing the total number of claimants past 25 million. Adding to investor angst is rising trade tension between the United States and China. Energy, tech, and utilities sectors took hits, and gold prices fell while crude oil climbed for the sixth straight trading day. Of the benchmarks stock indexes, only the Russell 2000 grew, while the remaining indexes ended the day in the red.
Friday was a mixed bag of information and returns in the market. The Dow and Global Dow each fell less than a point while the S&P 500, the Nasdaq, and the Russell 2000 each ticked up less than a point. Trouble between Hong Kong and Beijing sparked protests and drove Asian securities lower, adding to the tensions between the United States and China. On the other hand, states continued to gradually relax stay-at-home orders. The price of crude oil fell for the first time in several days yet closed the week ahead.
Overall, the stock market posted solid weekly returns, led by the small caps of the Russell 2000, which climbed nearly 8.0%. The remaining indexes ended the week with gains of over 3.0%, respectively. Long-term bond yields remained about the same as bond prices were relatively stable.
Last Week’s Economic News
- New home construction took a historic dip in April, according to the latest report from the Census Bureau.
- Sales of existing homes plummeted for the second consecutive month in April, falling 17.8% from the March sales pace. Overall, sales of existing homes are down 17.2% from a year ago.
- For the week ended May 16, there were 2,438,000 claims for unemployment insurance, a decrease of 249,000 from the previous week’s level.
Eye on the Week Ahead
The last week of the month brings with it the remaining key economic reports for April. Two reports that will warrant particular attention are the gross domestic product report for the first quarter and the personal income and outlays report. This is the second iteration of the first-quarter GDP and is based on more complete data. The initial reading last month saw the economy regress by 4.8% from the fourth quarter of last year. The April report for personal income and outlays is expected to show notable drops in consumer income, spending, and prices for consumer goods and services.
Robert G. Carpenter