Market Recap - Re-acceleration in Coronavirus Cases Takes Market Lower

The first few days of the week started off great, but the back half of the week saw heavy selling as governments and companies were forced to respond to a rise in new coronavirus cases with preemptive measures. The Dow Jones Industrial Average fell 3.1%, followed by losses in the S&P 500 (-2.9%), Russell 2000 (-2.8%), and Nasdaq Composite (-1.9%).

This week’s biggest decliners were the S&P 500 energy (-6.5%), financials (-5.3%), and communication services (-5.2%) sectors. The information technology sector declined just 0.5%.

There was an onslaught of negative-sounding developments that heightened concerns about the pace of a recovery, which ultimately put a stop to the Nasdaq’s eight-session winning streak. Notable headlines included the following:

• The U.S. reported daily highs in new coronavirus cases amid an acceleration in more younger people getting infected.

• New York Governor Cuomo announced that the tristate area will be imposing a 14-day quarantine on travelers coming from coronavirus hotspots.

• The EU was reportedly considering its own restrictions on U.S. travelers, banning them from entering when it relaxes its border restrictions on July 1.

• Texas and Florida scaled back reopening efforts.

• Apple (AAPL) re-closed stores in Houston and Florida, and Walt Disney (DIS) postponed the reopening date of Disneyland past July 17.

Re-thinking the reopening strategy could temper the rebounding economic data that have contributed to the market’s recovery. The latest May data showed new home sales rebound 16.6% m/m to a seasonally adjusted annual rate of 676,000 (Briefing.com consensus 635,000), durable goods orders rebound 15.8% m/m, and personal spending rebound 8.2% m/m (Briefing.com consensus +7.0%).

The re-acceleration of cases also threatens to undo some of the progress in the labor market that the government spent a lot of money to stabilize. Weekly jobless claims for the week ending June 20 decreased by just 60,000 to 1.480 million (Briefing.com consensus 1.250 million).

In the financials space, regulators relaxed some Volcker Rule restrictions, allowing banks to increase their investments in a broad set of venture capital funds. Out of an abundance of caution, though, the Fed will require banks to suspend share repurchases and cap dividend payments in the third quarter following its stress tests results.

Separately, social media stocks succumbed to heavy selling at the end of the week after more companies halted ad spending on Facebook (FB). Shares of Facebook fell 9.5% this week.

U.S. Treasuries finished the week with modest gains. The 2-yr yield declined three basis points to 0.16%, and the 10-yr yield declined six basis points to 0.64%. The U.S. Dollar Index declined 0.2% to 97.45. WTI crude fell 3.2% (-$1.35) to $38.49/bbl.

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Market Recap - Stock Market Recovers Some Losses this Week

The S&P 500 advanced 1.9% this week, recouping some losses from the prior week. The Nasdaq Composite outperformed again with a 3.7% gain, followed by the Russell 2000 (+2.2%) and Dow Jones Industrial Average (+1.0%).

Eight of the 11 S&P 500 sectors finished the week with gains, including the health care (+3.1%), information technology (+2.8%), consumer staples (+2.4%), and consumer discretionary (+2.3%) sectors. The utilities (-2.4%), energy (-1.0%), and real estate (-0.8%) sectors closed lower.

The week started with stocks extending last week’s sharp pullback, but investors quickly started buying the dip, accentuated by the Fed announcing on Monday that it will start buying individual corporate bonds through its Secondary Market Corporate Credit Facility.

Risk sentiment was later buoyed after retail sales rebounded 17.7% m/m in May (Briefing. com consensus 9.0%), Bloomberg reported that President Trump was preparing a $1 trillion infrastructure proposal, and the BBC reported on a steroidal treatment for COVID-19 in the UK that reduced deaths in severely ill patients.

The reopening narrative was back in play, evidenced by the 10% gain in WTI crude futures ($39.74/bbl, $3.50, +9.7%), but it did run into some resistance at the end of the week.

Boston Fed President Rosengren warned that economic rebound in the second half of the year will likely be slower than initially expected due to the continued spread of the coronavirus. Arizona, Florida, and California reported noticeable daily increases in coronavirus cases, and it was reported that Apple (AAPL) will temporarily re-close some stores again due to COVID risks.

In other developments, initial jobless claims for the week ending June 13 remained elevated at 1.508 million (Briefing.com consensus 1.350 million), and Fed Chair Powell provided his semiannual monetary policy testimony before Congress this week. Mr. Powell reminded lawmakers of their spending powers, reiterating they should do more to support the economy.

U.S. Treasuries traded in a relatively narrow range this week and closed near their starting positions. The 2-yr yield increased one basis point to 0.19%, and the 10-yr yield was flat at 0.70%. The U.S. Dollar Index gained 0.4% to 97.67.

Market Recap - Market Declines in Worst Week Since March

The stock market started the week hitting key milestone -- the S&P 500 turned positive for the year, and the Nasdaq Composite rose above 10,000 for the first time -- but succumbed to profit taking that handed it its worst week since March. The S&P 500 fell 4.8%, the Nasdaq fell 2.3%, the Dow Jones Industrial Average fell 5.6%, the Russell 2000 fell 7.9%.

A bulk of this week’s losses came on Thursday when the S&P 500 declined 5.9% (it reclaimed some losses on Friday). There was no specific news catalyst that contributed to the decline, but some blamed the Fed for its cautious June FOMC statement while others pointed to data showing increasing rates of coronavirus in many U.S. states.

The Fed didn’t suddenly change its tune, though, and the market had chosen to ignore the coronavirus threat in recent weeks. The market may have just gone up too much, too fast. At Monday’s high, the S&P 500 had gained as much as 48% from its March 23 low despite the uncertainty facing the economy.

All 11 S&P 500 sectors finished the week with losses ranging from 2.0% (information technology) to 11.1% (energy). The value, cyclical, and bankrupt stocks that exhibited strength early in the week were hit the hardest, while the mega-caps performed relatively well amid a slew of price target increases from brokerage firms.

At this week’s policy meeting, the Fed kept the target range for the fed funds rate unchanged at 0.00-0.25%, and its dot plot signaled rates will remain near zero through at least 2022. The Fed’s economic projections called for a 6.5% contraction in 2020 GDP, followed by 5.0% growth in 2021. Core PCE inflation is expected to remain below the Fed’s 2.0% target through 2020.

U.S. Treasuries ended the week with curve-flattening gains. The 2-yr yield declined three basis points to 0.18%, and the 10-yr yield declined 20 basis points to 0.70%. The U.S. Dollar Index increased 0.2% to 97.11. WTI crude fell 8.3% to $36.24/bbl. The CBOE Volatility Index spiked 47% to 36.09, which reflected increased hedging interest against further equity weakness.

Market Recap - Weekly Gains Boosted by May Employment Report

The S&P 500 rose 4.9% this week, closing just below the 3200 level on the back of improving economic data, recovery optimism, and a fear of missing out. The Dow Jones Industrial Average (+6.8%) and Russell 2000 (+8.1%) easily outperformed amid strength in value stocks and small caps. The Nasdaq Composite increased 2.1% and set a new intraday high.

For good reason, the May Employment Situation Report received the most attention this week, as it came in much better than expected. Nonfarm payrolls increased by 2.509 million (Briefing.com consensus -8.5 million), nonfarm private payrolls increased by 3.094 million (Briefing.com consensus -8.8 million), and the unemployment rate decreased to 13.3% (Briefing.com consensus 19.9%) from 14.7% in April.

The S&P 500 more than doubled its weekly gains on Friday (from +2.2% to +4.9%) following its release, as the data suggested that a recovery was happening faster than expected. All 11 S&P 500 sectors ended the week with gains, but it was the cyclical sectors, which stand to benefit the most from an increase in economic activity, that outperformed.

The battered energy (+15.4%), financials (+12.2%), and industrials (+10.5%) sectors rose more than 10%, while the health care sector (+0.2%) barely closed higher for the week. Every other S&P 500 sector rose at least 2.0%. Energy stocks were buoyed by the continued rise in oil prices ($39.50, +4.17, +11.8%).

Earlier in the week, investors continued to hear positive business updates from companies, including American Airlines (AAL), Visa (V), and Lyft (LYFT).

AAL shares surged 77% this week, most of which came after the company announced plans to increase its domestic flying schedule for the summer travel season due to improving demand. Boeing (BA) shares rose 41%.

The price action was described as a “pain trade” due to the market’s relentless gains that appeared to cause some chasing action from underallocated investors. The gains weren’t limited to just the U.S., though. The iShares MSCI Emerging Markets ETF (EEM) rose 8.5%, and the Europe Stoxx 600 rose 7.1%.

In Europe, the ECB increased its pandemic emergency purchase program by EUR600 billion to a total of EUR1.350 trillion. The euro continued to rise against the dollar on hopes for a stronger fiscal union, which contributed to another 1.4% weekly decline in the U.S. Dollar Index (97.00).

Longer-dated U.S. Treasuries sold off this week, which drove yields noticeably higher. The benchmark 10-yr yield rose 25 basis points to 90%, while the 2-yr yield increased six basis points to 0.21%.

Market Recap - Broad-Based Gains Lift S&P 500 Back Above Its 200- Day Moving Average

The stock market extended its rally this week on continued optimism about an economic recovery and a fear of missing out on further gains. The Dow Jones Industrial Average outperformed with a 3.8% gain, followed by the S&P 500 (+3.0%), Russell 2000 (+2.8%), and Nasdaq Composite (+1.8%).

Positive developments this week included the CEOs of JPMorgan Chase (JPM) and Bank of America (BAC) offering hopeful recovery commentary, Boeing (BA) observing some “green shoots” in its business, Merck (MRK) and Novavax (NVAX) joining the race for a COVID-19 vaccine, and Senate Majority Leader McConnell saying Senate discussions for a fifth COVID-19 relief bill will start in June.

All 11 S&P 500 sectors finished in positive territory and helped the S&P 500 close firmly above its 200 day-moving average (3001).

Value-oriented stocks within the S&P 500 financials (+6.6%) and industrials (+6.0%) sectors advanced the most on the view that these beaten-down stocks would outperform in an economic recovery. Defensive-oriented stocks within the utilities (+5.7%) and real estate (+5.8%) sectors, however, also outperformed.

There was a lot of uncertainty regarding U.S.- China relations this week after China approved legislation to tighten its control over Hong Kong. President Trump, in response, said the U.S. will eliminate special treatment for Hong Kong, will study practices of Chinese companies on U.S. exchanges, and will terminate its relationship with the World Health Organization.

What he didn’t say mattered more, though. He didn’t mention additional tariffs or anything about backtracking from the Phase One trade deal. President Trump also took aim at social media companies after Twitter (TWTR) flagged several of his tweets. Specifically, Mr. Trump signed an executive order to limit legal protections for social media companies that unfairly suppress free speech.

One of the more interesting data points this week showed personal income rise 10.5% in April (Briefing.com consensus -6.5%), boosted by the stimulus checks authorized by Congress, and the personal savings rate surge to a record 33.0%. What is done with those savings will be key to the recovery trajectory.

U.S. Treasuries posted small gains this week. The 2-yr yield declined two basis points to 0.15%, and the 10-yr yield declined one basis point to 0.65%. The U.S. Dollar Index declined 1.6% to 98.31. WTI crude rose 6.3% (+$2.08) to $35.33/bbl.

Market Recap - Market Bounces Back to Early March Levels

The stock market resumed its bullish demeanor this week, helped by a positive vaccine update and a prevailing reopening enthusiasm that lifted most sectors. The S&P 500 (+3.2%), Dow Jones Industrial Average (+3.3%), and Nasdaq Composite (+3.4%) rose slightly more than 3%, while the small-cap Russell 2000 climbed 7.8%.

A bulk of this week’s gains came at Monday’s open after Moderna (MRNA) said a Phase 1 study for its COVID-19 vaccine candidate yielded positive interim clinical results. A Stat News article later cautioned about the lack of critical data provided, but Moderna defended its results and NIAID Director Fauci said he was cautiously optimistic about the data.

Other contributing factors included having all 50 U.S. states now partially reopened and Fed Chair Powell reiterating that the central bank is still not out of ammunition. At its high this week, the S&P 500 was within 20 points of its 200-day moving average (3000) and traded at its best level since March 6.

Nine of the 11 S&P 500 sectors gained at least 3.0% this week, including the industrials (+7.2%), energy (+6.1%), and real estate (+5.6%) sectors. Transport stocks provided an extra lift for the industrials space, while energy stocks followed oil prices ($33.25, +3.87, +13.2%) higher. The health care (-0.8%) sector declined this week.

The market was also thrown more weak economic data and news that increased U.S.-China tensions, but none of it was enough to upset the market. U.S.-China news included:

• China indicating plans to implement national security laws on Hong Kong, while a bipartisan group of U.S. Senators planned to introduce legislation to sanction China in response.

• The Senate passing the Holding Foreign Companies Accountable Act, which requires certain foreign companies listed in the U.S. to certify that they are not owned or controlled by a foreign government.

• The White House issuing a report criticizing China’s economic and military policies, and President Trump accusing China of a “disinformation and propaganda attack” on the U.S. and Europe.

Separately, weekly initial claims decreased by 249,000 to 2.438 million (Briefing.com consensus 2.400 million), bringing the nine-week total to 38.636 million. Continuing claims increased to an all-time high of 25.073 million. Reopening efforts should hopefully bring these numbers down in the weeks to come.

It was a relatively quiet week for U.S. Treasuries. The 2-yr yield increased two basis points to 0.17%, while the 10-yr yield decreased two basis points to 0.66%. The U.S. Dollar Index declined 0.6% to 99.77.

Market Recap - Stocks Decline in Week when Fed Chair Cautions About Recovery, U.S.-China Tensions Increase

The stock market closed lower this week, as concerns about an economic recovery, U.S.-China tensions, and valuations weighed on sentiment. The small-cap Russell 2000 underperformed with a steep 5.5% decline, followed by more modest losses in the Dow Jones Industrial Average (-2.7%), S&P 500 (-2.3%), and Nasdaq Composite (-1.2%).

The weakest areas this week were the S&P 500 energy (-7.6%), real estate (-7.3%), industrials (-5.9%), and financials (-5.7%) sectors. The weakness in the energy space came despite strong gains in oil prices, which rose 18.8%, or $4.64, to $29.38/bbl.

The health care sector (+0.9%) was spared this week, helped by its defensive-oriented nature and by the medical progress being made against COVID-19. Quidel (QDEL), for instance, received FDA approval for its COVID-19 antigen test.

The real action this week started with the Fed on Wednesday. Fed Chair Powell said the economic outlook remained highly uncertain and subject to significant downside risks, adding that a recovery may take some time to gather momentum. Mr. Powell dismissed the notion of implementing negative interest rates but suggested additional fiscal stimulus might be needed to prevent long-term economic damage.

Accordingly, House Democrats unveiled a $3 trillion relief bill to start the conversation among lawmakers. Reports later indicated (after the release of another dismal weekly jobless claims report) that the White House was interested in a fourth coronavirus relief bill, but just not the plan outlined by House Democrats.

While the market continued to look past another round of weak economic data, including retail sales for April, it became increasingly difficult to ignore the rising U.S.- China tensions that have contributed to the economic uncertainty referenced by Fed Chair Powell. Elevated equity valuations amid this uncertainty, thus, helped tame buying interest.

U.S.-China tensions were fueled by the Trump administration moving to block semiconductor shipments to Huawei Technologies, the FBI confirming that China-affiliated cyber actors targeted U.S. organizations conducting COVID-19-related research, China reportedly mulling retaliation, and President Trump wanting U.S.-listed Chinese companies to abide by U.S. accounting rules.

U.S. Treasuries posted slim gains this week. The 2-yr yield declined one basis point to 0.15%, and the 10-yr yield declined four basis points to 0.64%. The U.S. Dollar Index increased 0.7% to 100.38.

Market Recap - Nasdaq Turns Positive in 2020 After Another Week of Gains

The stock market returned to its winning ways this week in a broad-based advance led by the megacap technology stocks. The Nasdaq Composite led the way with a 6.0% gain that lifted the tech index back into positive territory for the year. The Russell 2000 (+5.5%) was next in line, followed by the S&P 500 (+3.5%) and Dow Jones Industrial Average (+2.6%).

The market was presented with both good and bad news this week, but it was the good news that resonated more with the market as it fueled the reopening/recovery narrative it has been running along with as of late. It didn’t care so much for calls that the market has gotten ahead of itself in pricing in the good news or a statement from Warren Buffett that he hasn’t found any attractive investment opportunities.

The winners kept winning -- Apple (APPL), Microsoft (MFST), Amazon (AMZN), Alphabet (GOOG), and Facebook (FB) -- and the rest of the broader market simply followed along. Energy stocks did outperform, though, as oil prices continued to rebound on expectations that reopening the economy will boost demand.

From a sector perspective, the energy sector (+8.3%) advanced the most with an 8% gain, followed by the information technology (+6.6%), consumer discretionary (+4.4%), and communication services (+3.7%) sectors, which contain the aforementioned mega-cap stocks. The utilities (+0.5%) and consumer staples (+0.9%) sectors increased the least.

While the reopening process has had its challenges, many laid-off workers are expressing a similar view held by the stock market that things will get better. For instance, April nonfarm payrolls declined by 20.5 million (Briefing.com consensus -21.0 mln) and the unemployment rate rose to 14.7% (Briefing.com consensus 16.2%), but 78.3% of job losers in April categorized themselves as being on “temporary layoff.”

In addition, more companies this week talked about reopening plans and about the improving/stabilizing business conditions, Moderna (MRNA) received FDA approval to proceed to a Phase 2 trial for its COVID-19 vaccine candidate, and weekly initial jobless claims declined by another 677,000 to 3.169 million (Briefing. com consensus 2.900 mln).

Left out of this week’s advance were the airline stocks after Warren Buffett said Berkshire Hathaway (BRK.B) sold its entire stake in the companies, including Delta (DAL), United (UAL), American (AAL), and Southwest (LUV). While there might have been green shoots elsewhere, this was not one of those places.

The U.S. Treasury yield curve steepened this week. The 2-yr yield declined six basis points to 0.14%, while the 10-yr yield increased four basis points to 0.68%. The U.S. Dollar Index increased 0.7% to 99.78.

Market Recap - Stocks Post Best Monthly Gains Since 1987, but Falter Into Week’s End

The S&P 500 ended the week with a 0.2% decline, although it had been up as much as 3.9% midweek in a momentum trade fueled by reopening hopes and COVID-19 therapeutic progress. The Dow Jones Industrial Average (-0.2%) and Nasdaq Composite (-0.3%) posted comparable declines, while the Russell 2000 gained 2.2%.

Sentiment was boosted this week after Gilead Sciences (GILD) confirmed that remdesivir, an antiviral treatment for COVID-19, met its primary endpoint in an NIAID placebocontrolled study. The FDA approved it for emergency use on Friday. With states starting to reopen their economies (18 states as of May 1), the market was hopeful that things could return to normal soon.

The normal as of late, unfortunately, has been an onslaught of weak economic data that has painted a disconnect between the economy and the stock market. Notably, the ISM Manufacturing Index for April declined to its lowest level since 2009; Q1 GDP contracted at a 4.8% annualized rate (Briefing.com consensus -4.3%); and personal spending dropped 7.5% in March (Briefing.com consensus -3.6%).

There has been a prevailing expectation, though, that the data will only get better moving forward. Initial jobless claims, for instance, did decrease by 603,000 to 3.839 million (Briefing.com consensus 3.050 million) for the week ending April 25.

At the same time, central banks remained committed to supporting the financial system. Notable actions this week included the following:

• The Fed unanimously voted to maintain the target range for the fed funds rate at 0.00-0.25%, signaled rates will stay there for much longer, and expanded the scope and eligibility for its Main Street Lending Program.

• The ECB said it will conduct net asset purchases under its EUR750 billion pandemic emergency purchase program through at least the end of the year.

The Bank of Japan lifted the cap on its JGB bond purchases said it will increase its purchases of corporate bonds and commercial paper.

Ultimately, after an unprecedented rally off the March 23 low, valuation concerns reined in the initial enthusiasm.

Five of the 11 S&P 500 sectors closed lower, while six closed higher in a week that featured earnings reports from Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG), and Facebook (FB).

The energy sector (+2.9%) saw the biggest weekly advance amid a 16.1% gain in WTI crude futures ($19.77/bbl, +2.74), while the utilities sector (-4.3%) declined the most.

U.S. Treasuries traded mixed, causing some minor curve-steepening activity. The 2-yr yield was unchanged at 0.20%, while the 10-yr yield increased four basis points to 0.64%. The U.S. Dollar Index declined 1.3% to 99.03.

Market Recap - Stocks Decline in Week Where Oil Briefly Goes Negative.

The large-cap indices declined for the first time in three weeks, as risk sentiment was kept in check by the intense volatility in the oil futures market and valuation concerns. The losses weren’t that great, though, with the Dow Jones Industrial Average losing 1.9%, the S&P 500 losing 1.3%, and the Nasdaq Composite losing 0.2%. The Russell 2000, however, gained 0.3%.

The big news item this week was when the price for the May WTI futures contract collapsed to -$37.63/bbl on Monday. The negative print was the first time in history the market saw oil below zero, as no one wanted to take physical delivery given the well-documented storage constraints and lack of demand. The contract expired at $10.01/bbl on Tuesday.

The rest of the WTI crude futures curve was dragged noticeably lower, too, with the June WTI contract touching $6.50/bbl at its low before snapping back to $17.03/ bbl by week’s end. On a related note, President Trump may have alleviated some worries regarding potential job losses in the industry after vowing to protect energy companies with appropriate funding.

The rebound in oil, and President Trump’s comments, helped the S&P 500 energy sector (+1.7%) close in positive territory this week. In fact, it was the only sector to close higher, with the real estate (-4.4%), utilities (-3.8%), and consumer staples (-3.2%) sectors declining the most.

Valuation concerns likely contributed to the week’s decline, based on a general observation that the S&P 500 was up 31.2% from its March 23 low coming into the week. That rally was primarily driven on hope that the economy, and coronavirus, will not be worse than the data seen in March and April.

It was this same hope, though, that perhaps explained why the market barely declined. Notably, weekly initial claims showed signs of easing with claims for the week ending April 18 decreasing by 810,000 to 4.427 million (Briefing.com consensus 4.0 million).

In addition, the economy will be buttressed by another $484 billion in stimulus after the White House passed a relief bill for small businesses, hospitals, and COVID-19 testing. Separately, some therapeutic hopes were somewhat dampened after a report that Gilead’s (GILD) remdesivir drug flopped in its first randomized clinical trial in China. Note, this was different from the trial in Chicago that showed promising signs.

U.S. Treasuries saw limited action this week. The 2-yr yield was unchanged at 0.20%, and the 10-yr yield declined five basis points to 0.60%. The U.S. Dollar Index advanced 0.5% to 100.25.