The US Major Averages Give Up Ground as Crude Oil Futures Trade Negative
Market recap week ending 4.24.2020
The US major averages gave up some ground last week as crude oil futures traded into negative territory for the first time in history. The S&P 500 lost 1.3% for the week while the Dow gave back 1.9%. The NASDAQ lost 0.2%, and the small-cap Russell 2000 bucked the trend gaining 0.3% for the week. The US yield curve flattened slightly last week with the 2-year note yield trading unchanged at .20%, and the 10-year bond yield losing five basis points to close at .60%. Gold gained back much of what it lost in the prior week, gaining $33.20 to close at 1734.90 an Oz. WTI had a wild ride with May futures contracts trading as low as -$37.63 a barrel on Monday, stay tuned on this front as the economically important energy sector tries to traverse a glut of oil and a weak demand environment. President Trump indicated that he would help back-stop the energy sector, although details on what the back-stop would look like were vague. Suggestions that the US would buy longer-dated futures contracts coupled with rumors that the Chinese Central bank was active in buying June and July futures contracts helped sentiment later in the week. June futures on WTI closed at $17.03 a barrel on Friday.
Congress passed another relief bill that will provide an additional $484 billion in stimulus. The funds are earmarked for small businesses, hospitals, and COVID-19 testing. The additional funds come after previous relief funds aimed at helping small companies were exhausted and as initial jobless claims continue to come in at historic levels. For the week, 4.427 million people applied for unemployment benefits, which is nearly 25 million in just a month.
Separately, the US congressional budget office estimates that the US unemployment rate to reach 14% in Q2 and announced that Q2 GDP would likely contract by 12% or 40% on an annualized basis. The office also estimates that the US deficit for fiscal 2020 will approach 3.7 trillion and that federal debt held by the public will be 101% of US GDP.
