Commentary

Yet another volatile week for bond and stock markets, though this time U.S. stock markets ended the week higher. Monday’s FOMC announcement of unlimited Treasury and mortgage backed securities buybacks along with three new lending programs to support consumer and corporate credit did little to buoy U.S. equity markets with the U.S. Senate’s inability to pass a $2 trillion coronavirus stimulus package Sunday and again on Monday weighing heavily on market sentiment. Reports on Tuesday that the Senate was close to approving the stimulus package reversed market sentiment pushing U.S. stock markets significantly higher despite sharply lower Europe and US PMI composite flash indexes. (The Dow Jones Industrial Average increased over 11%, its largest one-day gain since 1933, and the S&P 500 Index increased over 9%.) U.S stock markets moved sharply higher again on Thursday, despite record high jobless claims, after the Senate finally approved the stimulus package and as a result of the ECB restarting its debt buyback programs. Emerging concerns that central bank action and government stimulus packages may not be sufficient to forestall a recession helped move the S&P 500 Index over 3% lower and the 10-year U.S. Treasury rate down by 17bps to 0.68% on Friday. At week’s end the S&P 500 Index increased 10.3% to 2,541.47, the 10-year U.S. Treasury rate fell 16bps to 0.68% and the U.S. dollar (as measured by the DXY index) weakened by 4.3%.

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Another very volatile week for U.S and global stock and bond markets. Despite the U.S. Federal Reserve Bank’s emergency 100bp rate cut on Sunday evening, U.S. and global stock markets fell sharply on Monday with the S&P 500 Index falling 12%. Extremely weak Chinese economic numbers combined with California’s shelter-in-place order on Monday, greatly increased concerns of the effect of the coronavirus on the U.S. and global economy, pushing U.S and global stock markets significantly lower while also causing the 10-year Treasury rate to drop 23bps to 0.73%. Tuesday’s U.S. Federal Reserve announcement of its lending program to support the short-term commercial paper markets to relieve corporate funding stress, helped push the S&P 500 Index up 6% and the U.S. 10-year Treasury Rate to over 1% only to see the S&P 500 Index gains reversed and U.S 10-year Treasury rates move even higher on Wednesday as increased coronavirus concerns resurfaced and investors sold into strength. Thursday’s action by the ECB along with announcements of global fiscal stimulus programs, pushed U.S stock markets off their intraday lows and helped them finish slightly higher for the day. Market sentiment reversed on Friday, however, perhaps spooked by another sharp selloff in crude oil prices with the S&P 500 Index dropping over 5% but this time with 10-year U.S. Treasury rates falling over 30bps to 0.85%. At week’s end the S&P 500 Index was 15% lower at 2,304.92, the 10-year U.S. Treasury rate fell 11bps to 0.85% and the U.S. dollar surged 4.1%.

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Rapidly growing fears regarding the strength of global economic growth resulting from government measures to counteract the spread of the coronavirus as well Saudi Arabia’s desire to greatly increase oil output, moved U.S stock markets sharply lower and 10- and 30-year interest rates sharply higher while greatly increasing the volatility of both markets. WTI crude oil prices plunged over 30% intraday on Monday driving U.S. and global stock markets significantly lower (the S&P 500 Index closed down 7.6%) and triggering a trading halt on U.S. exchanges. Though 10-year U.S interest rates fell sharply Monday, they moved higher the rest of the week increasing 26bps on Tuesday alone. U.S. stock markets rallied on Tuesday after Monday’s sharp drop but lost a combined 13% Wednesday and Thursday (falling close to 9% on Thursday) after the WHO officially declared the spread of the coronavirus a pandemic and despite the BOE lowering interest rates 50bps and adopting stimulus measures with the UK government and despite the U.S. Federal Reserve injecting $1.5 trillion into the U.S. funding markets. President Trump’s declaration of a national emergency late Friday afternoon reversed U.S. stock market losses on the day with the S&P 500 Index closing 8.5% higher on Friday. At week’s end the U.S. dollar strengthened 2.9%, 10-year interest rates increased 20bps to just under 1% and the S&P 500 Index lost 8.8% to close at 2,711.02. The VIX Index closed at 57.83, increasing almost 15 percentage points, but well of its recent high of 75.47 on Thursday.

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Volatile week for U.S. stock markets. Increasing 4.6% on Monday following Chairman Powell’s Friday statement reassuring the markets that the Fed will act to maintain the expansion, the S&P 500 Index fell 2.8% on Tuesday on increasing coronavirus concerns despite the U.S. Federal reserve bank unexpectedly cutting the Fed Funds target rate by 50bps that same day. Wednesday’s news of an $8 billion emergency spending bill moving through Congress and increased expectations of further rate cuts combined with global central bank accommodation and global fiscal stimulus pushed the S&P 500 Index up 4.2% only to see those gains and more reversed on Thursday and Friday after reports of increased coronavirus cases in California, Seattle and New York. Down almost 10bps through Wednesday, 10-year U.S. Treasury rates fell close to another 30bps through Friday with increasing expectations of more U.S. Federal Reserve rate cuts. At weeks end the 10-year U.S. Treasury rate was 39bps lower at a record low of 0.76%, the S&P 500 Index increased 0.6% to 2,972.37 and the U.S. dollar weakened over 2.2% (as measured by the DXY Index).

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