Market Recap for Week Starting 4/27/2020
This week has seen continued volatility in the stock market, but the major averages are all higher at the time of writing.
On Monday, the Q1 GDP reported a decline at a 4.8% annualized pace, which was worse than the expected 3.9%. Consumer spending also fell at a 7.6% annual pace, which is the largest retreat since 1980. Despite this news, the S&P, NASDAQ and DJIA were all up over 2%.
Wednesday, the FOMC announced their decision to leave the federal funds rate unchanged at 0.00%- 0.25%. The Fed also stated that it will continue to purchase Treasury and agency mortgage-backed securities in whatever quantities that are needed to help support the economy.
President Trump signed an executive order on Tuesday that compels meat-processing plants to remain open. According to the White House, the closure of these plants would threaten the function of the national meat and poultry supply chains. The government will provide additional protective gear, as well as specific social distancing measures for employees.
Interest rates fell through the week from a Monday 10-year Treasury yield of 0.67% to 0.63% intraday on Thursday. The short-end rates also fell with 3-month bills hitting 0.110%. On the mortgage front, 30-year fixed mortgage rates fell slightly from 3.27% to 3.22%, and 15-year rates slightly dropped from 2.86% to 2.77% according to Freddie Mac statistics.
Thursday’s initial unemployment claims came in at a seasonally adjusted 3.8 million, a drop off from the 4.4 million reported one week ago. The Department of Labor has reported that over 24.1 million unemployment claims have been filed in the last 6 weeks.
Things to watch as we move into next week will be changes in the hospitalization rates for COVID-19 patients primarily. The pandemic has been the major driver of markets in recent weeks and will likely continue to be so in May. In addition, the Total Nonfarm Payroll numbers from April will be released next week on Friday, May 8th. This will provide insight on the amount of new nonfarm payroll jobs that were created in the month of April.
One upshot from a market perspective is that multiple states are ramping up their economies, which should have an immediate impact on unemployment and consumer confidence. Additionally, Attorney General William Barr has directed his prosecutors to be vigilant to ensure states and municipalities do not overstep their constitutional authority regarding forced business closures. While we aren’t out of the woods yet, seeing early stage re-openings offers a glimmer of hope that we will indeed push through this trying time.
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