Telemus Weekly Market Review April 27th - May 1st, 2020

April 27 – May 1 Week in review

The major indexes pulled back again last week. The S&P 500 fell 0.2%, although it had been up as much as 3.9% mid-week fueled by hopes of the economy reopening soon and COVID-19 therapeutic progress. The Dow Jones Industrial Average lost 0.2% and the Nasdaq Composite fell 0.3%. The small cap Russell 2000 was once again the sole bright spot, gaining 2.2%.

Sentiment was boosted early in the week after Gilead Sciences confirmed that Remdesivir, an antiviral treatment for COVID-19, met its primary endpoint in an NIAID placebo controlled study. The FDA approved it for emergency use on Friday. With states starting to reopen their economies, the market was hopeful that things could return to normal soon.

Ultimately valuation concerns reined in the week’s initial enthusiasm. Five of the 11 S&P 500 sectors closed lower, while six closed higher in a week that featured earnings reports from Apple, Microsoft, Amazon, Alphabet, and Facebook. The energy sector saw the biggest weekly advance, while the utilities sector declined the most.

Last week featured an onslaught of weak economic data that helped highlight the disconnect between the performance of the economy and the stock market. Notably, the ISM Manufacturing Index for April declined to its lowest level since 2009, Q1 GDP contracted at a 4.8% annualized rate, and personal spending dropped 7.5% in March.

There is a prevailing expectation, though, that the data should only get better moving forward. Initial jobless claims, for example, decreased by 603,000 to 3.839 million for the week ending April 25th.

At the same time, central banks remain committed to supporting the global financial system. The Fed unanimously voted to maintain the target range for the fed funds rate at 0.00% - 0.25%, signaled rates will stay there for much longer, and expanded the scope and eligibility for its Main Street Lending Program. The ECB said it will conduct net asset purchases under its 750 Euro billion pandemic emergency purchase program through at least the end of the year. The Bank of Japan lifted the cap on its JGB bond purchases and said it will increase its purchases of corporate bonds and commercial paper.

On the interest rate front U.S. Treasuries traded mixed last week, causing some minor curve steepening. The 2 year yield was unchanged at 0.20%, while the 10 year yield increased four basis points to 0.64%.

In other markets WTI crude oil closed at $19.77 a barrel, a gain of over 16% for the week. The U.S. Dollar Index declined 1.3% to 99.03. Gold ended the week at $1,710.20 an ounce.

May 4 – May 8 Economic Calendar