May 11, 2020

Weekly Market Commentary May 4th to May 8th 2020

The U.S. economy continues to be negatively impacted by the safety protocols enacted in response to the spread of Covid-19. Nonfarm Payrolls declined by an unprecedented 20.5 million jobs in April. The Unemployment Rate in the U.S. reached a staggering all-time high of 14.7%. Labor Force Participation continued to pull back and now stands at 60%, while Average Hourly Earnings surged to 7.9% on a year-on-year basis, more than double the previously reported level.

Weekly Unemployment Claims rose by 3.2 million, bringing the total since the pandemic-related lock down to over 33 million. While the number has been moderating on a week-over-week basis, indicating layoffs may have peaked, the cumulative level is extreme.

Factory Orders for March were weaker than already dour expectations, declining -10.3%. Final Durable Goods Orders were lowered from the estimate released last week to -14.7%.

Equity markets rose during the week despite the gloomy economic data. Investors were feeling optimistic about the prospects of various states loosening restrictions on stay-at-home orders and allowing certain businesses to reopen with added safety protocols and capacity limitations. (A link to a detailed communication on the current state-by-state reopening situation is available on our website homepage.) The S&P 500 was higher by 3.5% for the week, closing at 2,929. The NASDAQ advanced by an impressive 6.0% to 9,121. Large Cap technology companies have led the rally off market lows and the index now stands back in positive territory for the calendar year.

The yield on the bellwether 10-Year US Treasury finished the week close to where it started at 0.67% after trading in a range of 0.73-0.60%. Short-term rates in the U.S. remain unappealing, although they are holding in positive territory, unlike other parts of the world.

Key economic data to be released next week includes consumer and producer price inflation, and Retail Sales – expected to have pulled back considerably as well.

We hope you continue to stay safe and healthy.