Indications of COVID-19 Recovery Lead to Market Uptick
Market Recap Week ending 4/17/2020
It was another epic week on Wall Street. First-quarter earnings started with the financials front and center. Federal stimulus checks began to post in individual banking accounts, while PPP funds were entirely exhausted. The White House also introduced guidelines for state and local officials to assess opening up their respective economies. Positive results from a drug made by Gilead Sciences, Remdesvir, which showed rapid recovery from COVID-19, helped sentiment, but the study is still in the very early stages. Economic data announced throughout the week painted a very dim picture of the economy with many data sets posting record lows. The energy sector continued to be in focus as the May contract for WTI crude fell over 21% on the week closing at $18.14 a barrel. The S&P 500 gained 3.04% on the week while the Dow increased by 2.21%, and the NASDAQ outperformed with a gain of 6.09%. The small-cap Russell 2000 lagged with a loss of 1.4%. The US Treasury curve flattened a bit with the 2-year note yield falling two basis points to .20% and the 10-year bond yield decreasing by eight basis points to close at .65%. Gold lost $49.20 on the week to close at 1701.70 an Oz. There were no changes to our models last week.
The start to first-quarter earnings season started with a lackluster showing from the financials. The major banks all have taken huge loan loss provisions on their balance sheets, foreshadowing the troubles that lie ahead for many of their clients. Stimulus checks did start hitting many American’s checking accounts this week. Unfortunately, the Payroll Protection Plan PPP ran out of funds this week, which has fallen short of the needs of many small businesses. Congress is working through the weekend to try and come to an agreement that would provide the program with more funds.
Separately, the White House introduced guidelines for state and local officials to assess in reopening their respective economies. The guidelines offer three different stages with various protocols in place to open up certain parts of the economy. Governors and local officials will make the final decisions on when to reopen. The announcement helped send markets higher on Friday on hopes that the US economy is on track to open up sooner rather than later. The news also coincided with an article that suggests that test being conducted by the University of Chicago using Gilead’s Remdesvir has shown rapid recovery in coronavirus patients. Optimism around these success stories may help induce workers back to work if there appears to be a viable cure to the virus- this is still in very preliminary stages but also helped to propel markets higher on Friday.
Economic data announced for the week was dismal on most fronts. Jobless claims continued to show significant layoffs of the workforce. For the week, 5.245 million people applied for new claims bringing the four weeks total to 22.34 million. Retail sales had its worst month over month decline ever with an 8.7% drop. Similarly, Leading Indicators, Housing Starts, Empire State Manufacturing, and Industrial Production had their worst readings ever.
