Commentary

With guarded optimism surrounding the re-opening of some states, positive news regarding Gilead’s Covid-19 treatment remdisivir and the FOMC declaring the U.S. Federal Reserve would maintain its unprecented accomodative monetary policy to support the economy, the S&P 500 increased 3.6% through Wednesday. The increase came despite a larger-than-expected 4.8% decline in Q1 GDP. Thursday’s reports showing a large drop in U.S. consumer spending and intial jobbless claims of 3.84 million pushed the S&P 500 Index off its highs of the week while disappointing earnings reports from tech and oil companies and a much larger-than-expected decline in the ISM manufacturing index erased all gains on the week with the S&P 500 index dropping 2.8% on Friday. The U.S. dollar, affected by both disappointing economic reports and earnings and the FOMC’s announcement on Wednesday, weakened significantly, At week’s end the S&P 500 Index decreased 0.3% to close at 2830.71, the 10-year U.S. Treasury rate increased 1bps to 0.62% and the U.S. dollar (as measured by the DXY Index) weakened 1.7%.

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Plunging oil prices early last week moved U.S stock markets significantly lower, strengthened the US dollar and moved 10-year U.S. Treasury rates lower. Down nearly 5% through Tuesday, the S&P 500 Index moved higher the remainder of the week as oil prices rebounded off their lows (see oil comments). A slew of more-negative-than-expected economic data – including the PMI Composite Flash Index, durable goods orders and jobless claims – seemingly did little to move U.S. stock markets last week. At week’s end the S&P 500 Index fell 1.3% to close at 2,836.74, the 10-year U.S. Treasury rate fell 4bps to 0.61% and the U.S. dollar (as measured by the DXY Index) strengthened 0.5%.

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A see-saw week for U.S stock markets, pushed and pulled by competing pressures of extremely weak economic data and poor earnings reports on the one hand and growing optimism surrounding re-opening the economy and substantive progress in the development of COVID-19 treatments on the other. A much weaker-than-expected retail sales report on Wednesday and another large jobless claims number along with a large decline in new homes sales and in the Philadelphia Fed manufacturing index on Thursday worked to offset reduced coronavirus fears leaving U.S. stock markets almost unchanged through Thursday. President Trump’s announcement of plans to re-open the economy Thursday night followed by news of promising results for a COVID-19 treatment pushed U.S. stock markets up 2% -3% on Friday. At week’s end the S&P 500 Index increased 3.0% to close at 2,874.56, the 10-year U.S. Treasury rate fell 9bps to 0.64% and the U.S. dollar (as measured by the DXY Index) strengthened 0.3%.

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U.S. stock markets surged (despite 6.6 million initial jobless claims) , longer-term U.S. Treasury rates rose and the U.S. dollar weakened last week on the back of the U.S. Federal Reserve Banks’ $2.3 trillion program to finance bank loans made through the emergency small-business lending program and on hopes the toll of the coronavirus would be lower than anticipated. At week’s end the S&P 500 Index surged 12.1% to close at 2,789.82, the 10-year U.S. Treasury rate increased 13bps to 0.73% and the U.S. dollar (as measured by the DXY Index) weakened 1.1%.

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An up-and-down week for U.S. stock markets with all major U.S. broad market stock indexes ending lower on the week. U.S stock markets moved higher on Monday despite the Trump administration extending social distancing guidelines through the end of April. The continued increase in reported coronavirus cases and fatalities and the Trump administrations statement that there may be as many 240,000 U.S. coronavirus fatalities combined with a much larger-than-expected increase in jobless claims on Thursday and a worse-than-expected payroll report on Friday pushed U.S. stock markets lower for the week (though President Trump’s announcement on Thursday that Saudi Arabia and Russia would implement large oil production cutbacks helped boost not only the price of oil but also moved U.S. stock markets momentarily higher). At week’s end the S&P 500 Index lost 2.1% to close at 2,488.65, the 10-year U.S. Treasury rate fell 9bps to 0.60% and the U.S. dollar (as measured by the DXY Index) strengthened 2.4%.

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