Telemus Weekly Market Review May 4th - May 8th, 2020

May 4 – May 8 Week in review

The stock market returned to its winning ways last week in a broad based rally led by the mega-cap technology stocks. The Nasdaq Composite led the way with a 6.0% gain that lifted the tech index back into positive territory for the year. The Russell 2000, up 5.5%, was next in line, followed by the S&P 500, up 3.5%, and bringing up the rear was the Dow Jones Industrial Average, up 2.6%.

The market was presented with both good and bad news, but it was the good news that resonated more with the market as it fueled the reopening/recovery narrative that has been key to this rally. The market ignored calls that it has gotten ahead of itself in pricing in the good news or a statement from Warren Buffett that he hasn't found any attractive investment opportunities.

The winners kept winning – Apple, Microsoft, Amazon, Alphabet, and Facebook – and the rest of the broader market simply followed along. Energy stocks did outperform, though, as oil prices continued to rebound on expectations that reopening the economy will boost demand.

From a sector perspective, the energy sector advanced the most with an 8% gain, followed by the information technology, consumer discretionary, and communication services sectors. The utilities and consumer staples sectors increased the least.

While the reopening process has had its challenges, many laid-off workers are expressing a similar view held by the stock market that things will get better. For instance, April nonfarm payrolls declined by 20.5 million and the unemployment rate rose to 14.7%, but 78.3% of job losers in April categorized themselves as being on "temporary layoff."

There was some other hopeful news. More companies this week talked about reopening plans and about the improving/stabilizing business conditions. Moderna received FDA approval to proceed to a Phase 2 trial for its COVID-19 vaccine candidate. Lastly weekly initial jobless claims declined by another 677,000 to 3.169 million.

Left out of the last week's advance were the airline stocks after Warren Buffett said Berkshire Hathaway sold its entire stake in the companies, including Delta, United, American, and Southwest. While there might have been green shoots elsewhere, this was not one of those places.

On the interest rate front the U.S. Treasury yield curve steepened last week. The 2 year yield declined six basis points to 0.14%, while the 10 year yield increased four basis points to 0.68%.

In other markets last week WTI crude oil closed at $24.63 a barrel, the U.S. Dollar Index increased 0.7% to 99.78 and gold closed at $1,704.80 an ounce.

May 11 – May 15 Economic Calendar