Market Recap - Stock Market Runs (and Rallies) On Recovery Hope.

It was a remarkable week of trading in the stock market, which is becoming almost cliche to say. Every week since February 19 has been remarkable, but this one ranks at, or near, the top of remarkable weeks.

Here is some of what was learned this week:

• The nation’s largest banks, including JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC), recorded huge increases in their provisions for credit losses as they readied themselves for a possible wave of charge-offs.

• The May contract for WTI crude futures plummeted 21.8% to $18.14/bbl.

• Retail sales declined 8.7% m/m in March, which is the largest drop on record.

• Industrial production declined 5.4% m/m in March, which was the worst downturn since 1946.

• The Empire State Manufacturing Survey plummeted to -78.2, which is its lowest level on record. The Philadelphia Fed Index dropped to -56.6, which was its lowest reading since July 1980.

• The NAHB Housing Market Index, which is a gauge of homebuilder sentiment, plunged to 30.0 for April (a record low) from 72.0 in March.

• Housing starts declined 22.3% m/m in March to a seasonally adjusted annual rate of 1.216 million units, marking the biggest drop since March 1984.

• The Leading Economic Index for March declined 6.7% m/m, which was the worst decline in the 60- year history of the index.

• The Paycheck Protection Program reached its $350 billion limit, leaving millions of small business owners in need of support

• Initial claims for the week ending April 11 totaled 5.245 million, bringing the four-week total for initial claims to 22.034 million. Continuing claims for the week ending April 4 hit a record 11.976 million.

Those were some remarkably unfortunate developments, underscoring the depth of the economic downturn that has been triggered by the shutdown measures aimed at curbing the spread of COVID-19. The stock market, however, didn’t trade so much on the depth of the downturn as it did on the perceived duration of the downturn. To that end, it rallied on the hope that local and state economies around the country, and economies in Europe, will be reopening soon as evidence is accumulating that the COVID-19 case curve is flattening, particularly in New York, which has been the epicenter of the U.S. outbreak. Separately, Germany said it will start to relax some of its shutdown restrictions beginning Monday, April 20.

The reopening hope went into overdrive on Friday following the White House’s release of guidelines states can adopt to begin reopening their economies. That news was joined by a Stat News article that suggested a clinical trial of Gilead Sciences’ (GILD) Remdesivir at the University of Chicago Medicine has shown some promising results in treating patients with severe cases of COVID-19. Scientists and analysts were quick to point out that this is only anecdotal information from one of 152 clinical trial sites. Nevertheless, market participants forged a rally anyway on the notion that there could possibly be an effective therapeutic on the horizon that could go a long way toward curbing fears about contracting COVID-19 and helping to boost economic activity as a result.

This perspective fueled a strong rally on Friday to close out the week, which had the semblance of squeezing investors off the sidelines out of fear that they might miss out on further gains. That squeeze was exacerbated by the realization that the stock market has taken such a cavalier attitude in the face of horrible economic news. That’s why there is a concurrent argument afoot that the stock market has gotten too far ahead of itself and is due for a setback.

The days ahead will provide some answers with respect to that argument, but the days left behind this week featured the outperformance of mega-cap issues, like Amazon.com (AMZN), Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOG), leadership from the health care and consumer staples sectors, and relative weakness in the small-cap and mid-cap stocks, as well as in both the financial and energy sectors. In brief, there was some passive-aggressive positioning unfolding throughout the week as market participants were moving toward stocks that presumably have the wherewithal to hold up better in a tough economic environment, and moving away from the stocks of companies that are perceived to be at increased risk of underperforming.

The energy sector was in the worst of ruts going into Friday, yet it finished with a major flourish. The energy sector gained 10.4% on Friday alone, but to give one a sense of how bad it had been doing, the sector still only managed to end the week up 0.2%. It was a small victory, though, in a remarkable week for the stock market, whose recovery hope went seemingly unmatched in the Treasury market. The 10-yr note yield ended the week down eight basis points at 0.65% in a move that was remarkable in its own right, because the gains there speak to a belief that the recovery from this deep economic downturn won’t be quick or easy. Time will tell, but the divergence between the stock market and the Treasury market will need to be watched carefully in the coming week, which will feature a pickup in earnings results.

Market Recap - S&P 500 Nears One-Month High.

The stock market rallied during the past week as investor sentiment continued improving while the Federal Reserve announced more aggressive action. The S&P 500 gained 12.1% while the Russell 2000 (+18.5%) outperformed.

The advance was interrupted by a pullback on Tuesday, but the next two days saw the S&P 500 climb to its best level in nearly a month. All eleven sectors recorded gains of more than 4.5% with real estate (+21.2%), materials (+20.7%), and financials (+19.1%) leading the way.

A lot of the market’s optimism of the past week was due to expectations that the peak of the coronavirus outbreak is imminent. However, the latter portion of the week saw more news regarding stimulus plans. House Speaker Nancy Pelosi told Democratic lawmakers that she wants the next spending package to be at least $1 trillion while Treasury Secretary, Steven Mnuchin, said that airlines will be the beneficiaries of the next aid package.

On Friday, the Federal Reserve introduce another $2.30 trln in emergency lending capacity for businesses and municipalities. The central bank will now begin purchasing junk bond ETFs and collateralized loan obligations.

Next week will bring the start of the Q1 earnings season with large banks like JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) set to report their results between Tuesday and Wednesday.

Market Recap - Market Retreats as COVID-19 and Growth Concerns Increase.

Market Retreats as COVID-19 and Growth Concerns Increase.

The stock market had its good days this week and its bad days. Unfortunately, the losses on the bad days outweighed the gains on the good days, so it was a losing week overall for the major indices.

The small-cap and mid-cap stocks were the hardest hit, yet the large-cap stocks also felt their share of pain as investors sold into recent strength, unnerved by the expanding economic, medical, social, and psychological impact of COVID-19, as well as misgivings about the U.S. economy’s rebound potential.

Oil prices jumped off the chart as one of the few winning standouts, soaring as much as 35% on the back of reports that Russia and Saudi Arabia could be close to agreeing to a production cut soon to stem the slide in oil prices. That speculation triggered a short-covering rally that translated into a rare week in which the energy sector (+5.4%) stood out as the best-performing sector.

The weakest areas were the utilities (-7.1%), financial (-6.8%), real estate (-6.2%), consumer discretionary (-4.7%), and industrials (-4.5%) sectors.

The stock market overall had a generally risk-averse mindset, evidenced by the outperformance of the consumer staples (+3.5%) and health care (+2.0%) sectors. The latter was underpinned by news out of Abbott Labs (ABT) early in the week that it has launched a point-of-care test that can detect COVID-19 in as little as five minutes and word from Dow component Johnson & Johnson (JNJ) that it identified a leading COVID-19 drug candidate that could be ready for human clinical studies as early as September.

Those positive developments notwithstanding, COVID-19 concerns soon ramped up again following a contention from members of the White House coronavirus task force that there could possibly be anywhere between 100,000 and 240,000 deaths in the U.S. linked to COVID-19. The latest data from Johns Hopkins show 6,921 deaths in the U.S. so far.

That sobering contention coupled with President Trump’s observation that the next two weeks could be a “very, very painful” time for the U.S. caused some mid-week pain for the market that culminated with a 7.0% decline in the Russell 2000 on Wednesday alone.

The real pain, though, was seen in the labor market.

Weekly initial jobless claims soared to a record 6.648 million, bringing the two-week total for jobless claims to 9.989 million. Those claims, however, were largely absent in the March employment report, which was based on the employment survey conducted the week of March 12. Even so, it was noted on Friday that nonfarm payrolls declined by 701,000 positions in March and that the unemployment rate increased to 4.4% from 3.5%.

In actuality, the unemployment rate is probably closer to 10% at this juncture. That thought kept the market in check on Friday along with increased concerns that the V-shaped economic recovery many are hoping for won’t be seen.

The arbitrary decision by states to issue stay-at-home orders, reports of confusion involving the application process for obtaining small business relief under the CARES Act, retailers extending store closures, airlines cutting capacity further, and reports discussing a second wave of COVID-19 cases popping up in China were other factors that exacerbated concerns about the U.S. economy’s rebound potential.

The underperformance of the small-cap and mid-cap stocks, which have a predominately domestic orientation, stood out as a manifestation of those concerns.

Market Recap - Stocks Rebound, Congress Approves Stimulus Bill, Jobless Claims Surge to Record Level

Stocks Rebound, Congress Approves Stimulus Bill, Jobless Claims Surge to Record Level.

The S&P 500 rebounded 10.3% this week, as investors stepped in to buy discounted shares of companies after Congress approved the $2 trillion stimulus package for households and businesses. The Dow Jones Industrial Average rose 12.8%, the Nasdaq Composite rose 9.1%, and the Russell 2000 rose 11.7%.

At one point this week, the S&P 500 was up 20% from its intraday low on Monday, largely due to stimulus expectations but also due to some short-covering activity, quarter-end rebalancing, and a fear of missing out on further gains.

The week did end on a lower note amid some profittaking interest, but all 11 S&P 500 sectors still finished noticeably higher. Seven sectors advanced at least 10%, including a 17.7% gain in the utilities sector. The communication services sector advanced “just” 5.5%.

Notably, initial claims for the week ending March 21 increased by 3.001 million to a record 3.283 million (Briefing.com consensus 525,000), which was above most expectations but also unsurprising given the slew of economic shutdowns aimed at slowing the rate of coronavirus infections. For the market, and Congress, it quantified how bad the situation has been for American workers.

The Fed, meanwhile, continued to ramp up its stimulus efforts. Specifically, the central bank lifted the $700 billion cap on its purchases of Treasury and agency mortgage-backed securities and said it will buy “in the amounts needed.” The Fed also established new credit facilities and said it will be buying investment grade corporate bonds, municipal debt, and U.S.-listed exchange ETFs for investment grade corporate bonds.

For good measure, Fed Chair Powell reiterated in an NBC “Today Show” interview that the Fed isn’t going to run out of ammunition and will continue to provide credit to places that need it.

Separately, President Trump set Easter (April 12) as a goal for when he would want the economy to reopen for business, which drew some criticism for it being too soon given that the number of coronavirus infections is still rising. This week, the U.S. surpassed China for the most confirmed cases of COVID-19. 

U.S. Treasuries advanced alongside equities this week. The 2-yr yield declined 14 basis points to 0.23%, and the 10-yr yield declined 19 basis points to 0.75%. The U.S. Dollar Index declined 4.4% to 98.32. WTI crude dropped 8.8%, or $2.08, to $21.65/bbl as little was done to aid the struggling oil industry.

Market Recap - Historic Sell‐off Steepens as Economy Continues to Shut Down

Wall Street endured wild swings this week, ultimately spiraling lower as the rapid spread of the coronavirus continued to lead to a shutdown of the economy.

The Dow Jones Industrial Average (‐17.3%) led the retreat with a 17% decline, followed by the Russell 2000 (‐16.2%), S&P 500 (‐15.0%), and Nasdaq Composite (‐12.6%).

No sector was spared in this week’s carnage with all 11 S&P 500 sectors losing more than 11%, including a 23.0% plunge in the real estate sector. Confidence was lacking among investors, businesses, and consumers despite additional stimulus efforts taken by central banks given the magnitude of the situation.

For instance, California and New York ordered stay‐at home restrictions; more companies withdrew guidance, suspended dividends, and temporarily closed operations, which led to many Americans without a job. The latter started to be quantified in the weekly initial claims, which increased by 70,000 to 281,000 (Briefing.com consensus 220,000) for the week ending March 14.

To support the financial system, the Fed slashed the target range for the fed funds rate to 0.00%‐0.25%, lowered the discount rate to 0.25%, announced a $700 billion quantitative easing program, increased its daily repo operations, established facilities for commercial paper funding and money market mutual fund liquidity, and coordinated with other central banks to enhance liquidity via standing U.S. dollar liquidity swap line arrangements.
A host of stimulus measures were also taken by other central banks, but investors continued to wait for a massive fiscal response.

Congress passed an $8.3 billion relief package that provides unemployment and sick leave benefits, and the FHFA suspended foreclosures and evictions for 60 days for enterprise‐backed mortgages. The $1 trillion+ fiscal stimulus package, which includes direct payments to Americans and aid for businesses, continued to be deliberated.

Oil prices tanked 24% one day, then rebounded 23% the next day after President Trump said he will get involved in the price war between Russia and Saudi Arabia at “the appropriate time.” The Wall Street Journal reported that Texas was also considering cutting oil production. For the week, WTI crude still declined 24.3% to $23.73/bbl.

Boeing went through a tumultuous week with shares losing more than 40%. The company asked for at least $60 billion of aid, including loan guarantees, for the aerospace industry; Nikki Haley resigned from the Board; and Reuters reported the company is mulling a production pause.

Even safe‐haven assets faced selling pressure this week in a move that suggested investors were raising cash, which contributed to the 4.1% surge in the U.S. Dollar Index (102.74). Gold futures declined 2.1% to $31.57/ozt, and although longer‐dated Treasuries were down big, they later recouped most losses. The 2‐yr yield declined 14 basis points to 0.37%, and the 10‐yr yield increased two basis points to 0.97%.

Market Recap - Another Volatile Week in the Books

Another Volatile Week in the Books.

This week featured the worst day since 1987, two-15 minute trading halts, stimulus/liquidity measures enacted from global central banks, and even an initial salvo in an oil price war. The S&P 500 (-8.8%), Dow Jones Industrial Average (-10.4%), Nasdaq Composite (-8.2%), and Russell 2000 (-16.6%) lost more than 8.0% apiece

The continued spread of the coronavirus around the globe prompted measures that are expected to reduce growth. Most sporting events in the U.S. were cancelled and a ban on most flights from Europe took effect at the end of the week. Lawmakers in Washington debated various options for fiscal stimulus, but it took the whole week to reach a tentative agreement on package that would allow for 14 days of paid sick leave, unemployment benefits, free virus testing, and small business tax relief.

The New York Fed conducted emergency liquidity operations at the end of the week after spreads on longerterm Treasury securities widened significantly. The ECB increased its asset purchases, the Bank of England made an emergency 50-basis points rate cut to 0.25%, and The People’s Bank of China lowered the reserve requirement ratio for some banks by 50-150 bps.

Separately, oil markets were facing a dual threat of weakened demand and oversupply after Saudi Arabia initiated a price war with Russia. Specifically, Saudi Arabia lowered its oil price for April delivery by $6-$8/ bbl and signaled production boosts for an oversupplied market after Russia failed to agree to production cuts last week. WTI crude collapsed 25.0% on Monday, surrendering 23.0% for the week.

In the U.S. Treasury market, the yield on the 10-yr note set a new all-time low at 0.40% but finished the week 24 basis points higher at 0.95%. The CBOE Volatility Index, which is commonly referenced as a fear gauge, surged almost 16 points to 57.83-- its highest level since the financial crisis -- as investors rushed for more protection against further equity weakness.

Market Recap -Weekly Advance Masks Bumpy Ride

The S&P 500 added 0.6% for the week. While that is technically true, the slight change masks the fact that the S&P 500 bounced around a 235‐point range since last Friday.

Coronavirus‐related fears remained top of mind, and the growing focus on new cases in the U.S. and abroad exerted pressure on the market’s expectations for growth. The Federal Reserve announced an emergency 50 basis point rate cut on Tuesday, but the fed funds futures market expected another imminent sharp cut the next day. Treasuries charged higher throughout the week, sending the 10‐yr yield lower by 42 basis points to 0.71%

Congress approved $8.50 billion in emergency spending measures while administration officials hinted at targeted stimulus. However, that did little to improve investor sentiment.

Countercyclical sectors like utilities (+7.9%), consumer staples (+6.2%), health care (+5.0%), and real estate (+4.8%) ended the week in positive territory with health care climbing after Joe Biden won the bulk of primaries on Super Tuesday, seizing the Democratic delegate count lead from Bernie Sanders.

Cyclical sectors bore the brunt of the pressure with energy (‐7.3%) and financials (‐4.1%) finishing at the bottom of the barrel. The energy sector fell as crude oil slid to its lowest level since mid‐2016 in the $41.00/bbl area. Reports from midweek suggested that OPEC would agree to a significant output cut, but Friday’s OPEC meeting failed to produce an agreement.

Market Recap- S&P 500 Endures Worst Week Since 2008

The stock market endured its worst week since 2008, as the S&P 500 fell 11.5% while the Dow Jones Industrial Average surrendered 12.4%.

Equities faced heavy selling pressure throughout the week as coronavirus-related fears caught up to the market, which appeared immune to these concerns just a week ago. The accelerating spread of the coronavirus outside of China was the main worry, leading to greater uncertainty about the viability of global supply chains. Intel (INTC) ordered its employees to avoid travel to China and several other countries, but on the bright side, Apple (AAPL) CEO, Tim Cook, said on Thursday that his company is working toward resumption of full production.

U.S. health officials acknowledged that the coronavirus is likely to spread through the U.S., which contributed to the pressure on stocks. The CBOE Volatility Index jumped more than 23 points to 40%, ending the week at its highest level since February 2018 when an inverse volatility ETN imploded.

The communication services sector (-9.5%) was the only group with a slimmer loss than 10.0% while the remaining sectors retreated between 10.4% (consumer staples) and 15.4% (energy). The growth-sensitive energy sector widened its Q1 loss to 24.7% while crude oil lost $8.54, or 16.0%, since last Friday, falling to its lowest level since late 2018.

Treasuries charged higher throughout the week, sending the 10-yr yield lower by 34 basis points to a fresh record low of 1.13%.

Market Recap - Stock Market Hits New Highs Mid-Week but Sells Off at the End

The S&P 500 (-1.3%) and Nasdaq Composite (-1.6%) set new intraday and closing records this week as investors remained unconcerned by the coronavirus, but stocks sold off to end the week amid a pervasively defensive tone. The Dow Jones Industrial Average lost 1.4%, and the Russell 2000 lost 0.5%.

The week started with Apple (AAPL), the world’s largest technology company by market cap, providing a revenue warning for the March quarter due to the coronavirus. Shares recouped initial losses a day later, as investors viewed the situation as temporary and China-specific, but it was hard to ignore the widening spread of the virus and the defensive positioning in the market.

U.S. Treasuries, gold ($1649.90, +67.20, +4.3%), and the CBOE Volatility Index (17.08, +3.40, +24.9%) advanced noticeably during the week, and barely moved even when the market hit new highs and momentum stocks like Tesla (TSLA) and Virgin Galactic (SPCE) extended their parabolic runs. Part of the defensiveness could be attributed to the elevated valuations in the market clashing with growth risks due to the coronavirus.

Cyclical sectors, and mega-cap stocks, underperformed, with the S&P 500 information technology (-2.5%), financials (-1.3%), and industrials (-1.2%) sectors leading the retreat. The defensive-oriented real estate sector (unch) was the lone group to avoid a weekly loss.

If one were to remain constructive on the market, one could point to this week’s upbeat economic data. Building permits climbed to a near 13-year high in January, weekly jobless claims remained at low levels, and the Philadelphia Fed Index surged to 36.7 in February (Briefing.com consensus 10.7) from 17.0 in January. The data wasn’t enough to prevent this week’s profit taking, though.

The 2-yr yield declined seven basis points to 1.35%, and the 10-yr yield declined 11 basis points to 1.47%. The U.S. Dollar Index closed 0.2% higher to 99.32 after setting a three-year high (99.61) during the week. WTI crude rose 2.8%, or $1.44, to $53.37/bbl.

Market Recap -Market Stays Bullish in February

It was another record-setting week, as the market remained undeterred by the coronavirus and stayed on its bullish trend. The Nasdaq Composite (+2.2%) and Russell 2000 (+1.9%) set the pace, followed by the S&P 500 (+1.6%) and Dow Jones Industrial Average (+1.0%).

Most of this week’s gains came on Monday as investors continued to pile into shares of mega-cap technology companies. Reports that highlighted the slowing rate of the coronavirus solidified the gains, and the market barely reacted to follow-up reports indicating a spike in new cases

All 11 S&P 500 sectors finished with gains, including four that rose at least 2.0% -- real estate (+4.8%), consumer discretionary (+2.6%), utilities (+2.4%), and information technology (+2.3%). The energy sector (+0.3%) underperformed despite a 3.1% bounce in WTI crude ($51.93/bbl, +1.58).

The Philadelphia Semiconductor Index regained momentum, rising 5.0% this week amid positive analyst recommendations and encouraging results and guidancefrom NVIDIA (NVDA). Shares of NVIDIA climbed 15% this week

The Philadelphia Semiconductor Index regained momentum, rising 5.0% this week amid positive analyst recommendations and encouraging results and guidancefrom NVIDIA (NVDA). Shares of NVIDIA climbed 15% this week

There was still a defensive tone, though, evidenced by the gains in the real estate and utilities sectors. U.S. Treasuries finished the week little changed from the prior week. The 2-yr yield increased three basis points to 1.42%, while the 10-yr yield remained unchanged at 1.58%. The U.S. Dollar Index advanced 0.4% to 99.12.