April 13 – April 17 Week in review
It was another surprising rally week for the markets last week. The blue chip Dow Jones Industrial Average rose 2.2%, extending its rally over the past two weeks to 15% – its best performance since 1938. The S&P 500 climbed 3%, while the Nasdaq Composite surged 6.1% as investors piled into highflying technology stocks. The Dow and S&P 500 are still down more than 10% for the year, while the Nasdaq’s losses have now been cut to 3.6%.
The markets rallied on the hope that local and state economies around the country, and economies in Europe, will be reopening soon as evidence is accumulating that the COVID-19 case curve is flattening, particularly in New York, which has been the epicenter of the U.S. outbreak. Separately, Germany said it will start to relax some of its shutdown restrictions beginning Monday, April 20th.
The reopening hope went into overdrive on Friday following the White House's release of guidelines states can adopt to begin reopening their economies. That news was joined by a Stat News article that suggested a clinical trial of Gilead Sciences' Remdesivir at the University of Chicago Medicine has shown some promising results in treating patients with severe cases of COVID-19.
Scientists and analysts were quick to point out that this is only anecdotal information from one of 152 clinical trial sites. Nevertheless, market participants forged a rally anyway on the notion that there could possibly be an effective therapeutic on the horizon that could go a long way toward curbing fears about contracting COVID-19 and helping to boost economic activity as a result.
This perspective fueled a strong rally on Friday to close out the week, which had the semblance of squeezing investors off the sidelines out of fear that they might miss out on further gains. That squeeze was exacerbated by the realization that the stock market has taken such a cavalier attitude in the face of horrible economic news. That's why there is a concurrent argument afoot that the stock market has gotten too far ahead of itself and is due for a setback.
Despite how the markets performed the economic news last week was pretty grim. The Leading Economic Index for March declined 6.7% month over month, which was the worst decline in the 60 year history of the index. Retail sales declined 8.7% in March, which is the largest drop on record. Industrial production declined 5.4% in March, which was the worst downturn since 1946. The Empire State Manufacturing Survey plummeted to -78.2, which is its lowest level on record. The Philadelphia Fed Index dropped to -56.6, which was its lowest reading since July 1980. The NAHB Housing Market Index, which is a gauge of homebuilder sentiment, plunged to 30.0 for April (a record low) from 72.0 in March. Housing starts declined 22.3% in March to a seasonally adjusted annual rate of 1.216 million units, marking the biggest drop since March 1984.
In other news the Paycheck Protection Program reached its $350 billion limit, leaving millions of small business owners in need of support. Initial jobless claims for the week ending April 11 totaled 5.245 million, bringing the four week total for initial claims to 22.034 million. Continuing claims for the week ending April 4th hit a record 11.976 million.
On the interest rate front the 2 year Treasury note yield was virtually unchanged at 0.20%. The 10 year Treasury note yield ended the week down eight basis points at 0.65%.
In other markets WTI crude futures plummeted 21.8% last week to close at $18.14 a barrel. The U.S. Dollar index ended the week at 99.72, down 0.3% on the week. Gold closed Friday at $1,694.50, down a little more than 2% for the week.
April 20 – April 24 Economic Calendar