Commentary

Buoyed by increasing hopes regarding a coronavirus vaccine and increasing expectations of economic recovery spurred by easing lockdown restrictions, the S&P 500 Index increased 2.7% through Wednesday. Concerns surrounding U.S.-China tensions, inflamed by China’s Hong Kong security restrictions, pushed the S&P 500 Index off Wednesday’s high on Thursday only to see those losses recouped on Friday after President Trump’s announcement of measures against China were less harsh and encompassing than originally feared. Markets all but ignored weak economic reports last week, including an almost 14% decline in consumer spending reported Friday, with investors focusing instead on increased hopes and expectations of economic recovery. Jerome Powell, speaking Friday, said the fundamentals of the U.S. economy remain strong but with the coronavirus posing risks to growth and said the U.S. Federal Reserve Bank continues to use its tools to support the economy. At week’s end the S&P 500 Index increased 3.0% to 3,044.31, the 10-year U.S. Treasury rate was unchanged at 0.66% and the U.S. dollar (as measured by the DXY Index) weakened 1.6%.

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Up over 3% Monday on positive news regarding Moderna’s development of a coronavirus vaccine, the S&P 500 Index zigzagged the rest of the week finishing very close to Monday’s level. Initial optimism over Moderna’s progress was partially offset by doubts and questions over the value of the initial results on Tuesday, pushing the S%P 500 Index about 1% lower on the day. Continued easing of restrictions throughout the U.S. with increasing expectations of stronger economic growth moved the S&P 500 Index higher by almost 2% on Wednesday only to see some of those gains reversed on Thursday with the weekly jobless claims report showing initial claims of 2.4 million. The S&P 500 Index closed the week up 3.2% at 2,955.46, the 10-year U.S. Treasury rate rose 1bp to 0.66% and the U.S. dollar (as measured by the DXY Index) gave up last weeks gains, weakening 0.6%.

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U.S. Federal Reserve Bank Chairman Powell’s “highly uncertain” economic outlook comments, larger-than-expected declines in both CPI and PPI and emerging concerns regarding reopening “too soon” pushed the S&P 500 Index almost 4% lower through Wednesday. Despite worse-than-expected jobless claims and a record decline in retail sales and industrial production, stronger-than-expected financial sector earnings reports helped moved the S&P 500 Index off its lows on Thursday and Friday. At week’s end the S&P 500 Index fell 2.3% to 2,853.70, the 10-year U.S. Treasury rate fell 4bps to 0.65% and the U.S. dollar (as measured by the DXY Index) strengthened 0.6%.

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Both Wednesday’s ADP and Friday’s BLS employment situation reports showed over 20 million job losses in April with Friday’s BLS report also showing an increase in the unemployment rate to 14.7%, a level not seen since the Great Depression. Nonetheless, U.S. stock markets moved higher last week, relegating the employment reports and Thursday’s jobless claims to history and instead focused on strong tech earnings reports, the continued re-opening of states and countries and an apparent easing of tensions between the U.S. and China. At week’s end the S&P 500 Index rose 3.5% to close at 2,929.80, the 10-year U.S. Treasury rate increased 7bps to 0.69% and the U.S. dollar (as measured by the DXY Index) was unchanged.

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