April 20, 2020

Weekly Market Commentary April 13th to April 17th 2020

The economic impact of shuttered businesses and consumers sheltering in place was evident in March data. U.S. Retail Sales dropped -8.7%, the largest one month decline since the government began tracking the data in 1992. Areas that were hit the hardest included sales from clothing (-50%), autos (-25%), and gasoline (-17%). Retail Sales ex Autos and Gas painted a less dire picture falling -3.1%. The top performing area, food and beverage (+25%) was largely driven by hoarders stocking up on essential items in preparation for the pandemic.

The Weekly Jobless Claims number marked the third consecutive week the figure was in the millions. Initial jobless claims totaled 5.25 million after the record setting 6.62 million posted last week. To put these numbers into perspective, since June 2009 the U.S. economy added over 20 million jobs. In just the last four weeks, first time unemployment claims have reached 22 million.

New U.S. Home Construction also posted declines in March with the index falling by the most since 1984. Residential Housing Starts fell -22.3% to a 1.22 million annualized rate, which returned to an eight- month low and below the median forecast of 1.3 million. New Building Permits, a proxy for future construction, fell -6.8% to a 1.35 million rate.

Weak economic data and corporate earnings did not slow the market’s recent strength. Instead, optimism regarding the prospects of a Covid-19 treatment (specifically positive results from Gilead’s Remdesivir drug), along with speculation that certain states may begin opening businesses back up soon, boosted markets late in the week. All major indices finished up on the week with the S&P 500 finishing at 2,874, up by 3.0%. Investors also showed an appetite for fixed income securities with strong demand sending the 10-Year U.S. Treasury prices higher and yield down by 7 basis points to 0.65%.

Key economic releases next week include Existing Home Sales, Markit PMI and Durable Goods Orders.