May 18, 2020

Weekly Market Commentary May 11th to May 15th 2020

This was a week of more of the same as the fallout from the Covid-19 virus continues to batter our economy. On Tuesday, consumer prices for the month of April underwhelmed estimates as prices of goods and services not needed during a lockdown period fell. Then on Wednesday, producer prices followed suit and dropped the most since 2015. Don’t look for inflation to increase anytime soon as folks need to be out spending money in order to drive prices up.

Thursday brought more bad news on the employment situation as Weekly Jobless Claims came in at almost another three million. The coronavirus total now stands at a staggering 36.5 million out of work. Want the glass half-full view? The weekly amount has now dropped for six straight weeks.

The week closed out on Friday on an extra gloomy note when Retail Sales for April crushed estimates to the negative side by coming in at -16.4% when consensus called for -11.2%. For some perspective, during the Great Recession of 2008-09, Retail Sales never dropped 5% at any point. Clothing stores, electronics and appliances, home furnishings, sporting goods, and bars and restaurants all were large detractors.

Lastly, April’s Industrial Production numbers posted the worst drop in history. Production came in at -11.2% while manufacturing dropped -13.7%. Leading the way was the 70% drop in the production of cars, trucks, and auto parts. The downturn was expected but the scale of the collapse in the industrial sector has been stunning. The optimist will look for a rebound in these numbers as plants and factories begin to reopen.

Equity markets declined slightly on the week. Bad news about the possibility of an eventual virus resurgence weighed on investors’ minds, despite the administration’s rallying call to reopen businesses. The Dow Jones Industrial Average was down -2.7% on the week; the broader S&P 500 dropped -2.3%; and the NASDAQ declined -1.2%. In fixed income markets, the 10-Year U.S. Treasury rallied slightly with the yield ending the week at 0.64%. Look for continued market volatility as states begin their re-opening process while managing new cases of the virus.

Key economic data to be released next week includes Housing Starts, Building Permits, and Existing Home Sales; Markit Manufacturing and Services; and more Weekly Jobless Claims.

We hope you continue to stay safe and healthy.