April 6, 2020

Weekly Market Commentary March 30th to April 3rd 2020

Sobering projections from the White House regarding U.S. deaths related to COVID-19 turned markets negative earlier in the week. Known global cases of the virus reached 1 million on Thursday. Meanwhile oil markets had a wild week with crude oil prices jumping 40% in just minutes on Thursday after President Trump tweeted that oil producing nations would agree to reduce output by 10 million barrels or more. Friday’s reports that OPEC+ will meet on Monday and that Russia is ready to cut production added another 8% to prices.

Tuesday marked the end of the first quarter with the Dow suffering its worst performance in a quarter since 1987 and the S&P 500 since 2008. After a few days of choppy trading, the S&P 500 finished the week at 2,488, a decline of -2.1%. The DJIA and Nasdaq finished at 21,052 and 7,373, respectively. The Fed remains diligent in their mission to quell volatility in the Treasury market. This week they opened a temporary repo facility for foreign central banks. The 10-Year Treasury yield finished the week at 0.60%, while the 2-Year finished at 0.23%.

Consumer Confidence fell but not as sharply as estimated. February’s number was revised upwards to 132.6 from 130.7, while March came in at 120 vs the expected 110. It’s important to note the cutoff date for the survey was March 19, when lay-offs were already happening across the country but before the 3.3 million initial jobless claims number was reported.

Speaking of initial jobless claims, this week’s number came in at a staggering 6.7 million. Last week’s number was also revised upward from 3.3 to 3.7 million. Economists are already expecting an upward revision to this week’s number based on reports that many people are having difficulty with online applications and systems. Nonfarm payrolls fell by 701,000, while private payrolls fell by 713,000, both much higher than expected. The bulk of lost jobs were in leisure and hospitality, mainly in food and beverage services. The unemployment rate jumped up from 3.5% to 4.4% although early estimates suggest that figure is now likely closer to 10% given this week’s jobless claims.

The March ISM manufacturing index fell from 50.1 to 49.1, which was better than the consensus of 44.5. Under the surface, this result reflected a large increase in supplier delivery times, suggesting supply chain problems. The ISM Non-manufacturing index remains in expansionary territory at 52.5 for the time being.

As a nation we’ve been warned the next couple weeks will be rough. Headlines will be consumed by death tolls and medical supply needs. Economic data set to release includes PPI and CPI numbers. We will also be watching consumer sentiment, the weekly jobless report, and the FOMC meeting minutes.

Stay healthy and stay home.