Telemus Weekly Market Review March 30th - April 3rd

March 30 – April 3 Week in review

After a strong start to the week investors turned cautious mid-week and sought cover, unnerved by the expanding economic, medical, social, and psychological impact of COVID-19, as well as misgivings about the U.S. economy's rebound potential. The S&P500 lost 2.1%, the Dow Jones 2.7%, and the Nasdaq 1.7%. Small cap stocks, which are more sensitive to the domestic economy, lost 7.1% and are now down 37% for the year.

Oil prices jumped 35% last week, closing at $29 a barrel, on the back of reports that Russia and Saudi Arabia could be close to agreeing to a production cut soon. That speculation triggered a short covering rally that translated into a rare week in which the energy sector stood out as the best performing sector. The weakest were the utilities, financial, real estate, consumer discretionary, and industrials sectors.

The stock market overall had a generally risk averse mindset, evidenced by the outperformance of the consumer staples and health care sectors. The latter was evidenced by news out of Abbott Labs early in the week that it had launched a point-of-care test that can detect COVID-19 in as little as five minutes and an announcement from Johnson & Johnson that it identified a leading COVID-19 drug candidate that could be ready for human clinical studies as early as September.

Those positive developments notwithstanding, COVID-19 concerns soon ramped up again following an assertion by the White House coronavirus task force that there could possibly be anywhere between 100,000 and 240,000 deaths in the U.S. linked to COVID-19.

That sobering contention coupled with President Trump's observation that the next two weeks could be a "very, very painful" time for the U.S. caused some mid-week pain for the market that culminated with a 7.0% decline in the Russell 2000 on Wednesday alone.

The real economic pain, though, was seen in the labor market. Weekly initial jobless claims soared to a record 6.648 million, bringing the two week total for jobless claims to 9.989 million. Those claims, however, were largely absent in the March employment report announced on Friday, which was based on the employment survey conducted the week of March 12. Even so, it was noted that nonfarm payrolls declined by 701,000 positions in March and that the unemployment rate increased to 4.4% from 3.5%.

In actuality, the unemployment rate is probably much higher. That notion kept the market in check on Friday along with increased concerns that the V-shaped economic recovery many are hoping for won't be seen.

The arbitrary decision by states to issue stay at home orders, reports of confusion involving the application process for obtaining small business relief under the CARES Act, retailers extending store closures, and airlines cutting capacity further were other factors that exacerbated concerns about the U.S. economy's rebound potential.

Interest rates fell last week as investors sought a safe haven and the Fed continued to buy large amounts of bonds. The 2 year Treasury ended at 0.225% and the 10 year Treasury closed at 0.596%.

In other markets U.S. Dollar index closed at 100.68 a slight increase from the previous week. Gold closed at $1,648.80 an ounce up 1.5% for the week.

April 6 – April 10 Economic Calendar