March 16, 2020

Weekly Market Commentary March 9th to March 13th 2020

On Monday we saw U.S. stocks sink -7.5%, the most since December 2008. Energy companies were hit particularly hard with Russia and OPEC waging a full-blown oil price war. Stocks rebounded modestly on Tuesday, but Thursday brought the worst day for stocks since 1987, driven by COVID-19 fears. Reports on Friday that G-7 governments would coordinate virus responses and President Trump’s declaration of a national emergency eased investor fears for the time being. The S&P 500 finished the day up 9.3% while the DJIA and Nasdaq were both up 9.4%. Despite a positive day Friday, the S&P 500, DJIA and Nasdaq finished the week down -8.8%, -10.4%, -8.2%, respectively.

Further optimism came in the form of the Federal Reserve announcing it was buying $37 billion of Treasury bonds across maturities in a bid to keep markets functioning normally. Central banks around the world have also taken action including follow on rate cuts to bolster liquidity and mitigate global economic risk.

CPI was little changed in February coming in at 0.1% for the month and 2.3% for the year. Coronavirus effects in February appear to have been limited in the U.S. aside from some pre-buying of groceries indicated by a 0.5% jump in food prices. Producer prices fell sharply by -0.6%, mostly attributable to the 3.6% decline of energy prices. The headline number was the largest drop in five years. PPI less food and energy, declined -0.3%, the sharpest drop since September. Year-on-year numbers contracted to 1.3% which is near a 3-year low.

Key economic releases next week include retail sales and housing numbers. Headlines concerning the Covid-19 pandemic will continue to dominant the news cycle.