Steven Senne/Associated Press
After a historic two-week rally, its best since the 1930s, the Dow Jones Industrial Average ended the week down 1.9%, closing at 23,775.27.
As noted last week, equity markets appear to be buoyed by government spending and stimulus efforts made by the Fed- including additional legislation totaling $484 billion that is meant to provide more financial aid to small businesses that was signed by the president on Friday, after being approved by the House of Representatives on Thursday. This after the $349 billion loan program administered by the Small Business Administration (SBA) ran out of money on April 16.
These efforts are meant to help small businesses keep employees on their payroll and help curb the ever-increasing unemployment benefits number, which registered at 4.4 million claims last Thursday., and brought the total to 26.5 million since March 14.
So far about a quarter of S&P 500 companies have filed first-quarter earnings. FactSet, a financial data company, has used this information to project a 16% drop from a year earlier. Although steep, it’s important to note covid-19 was not taken seriously until early- to mid-March, so the effects of the lockdowns are not fully captured by first quarter earnings.
One clear indicator of the extent of the demand shock caused by the pandemic is the price of oil, which saw a historic drop on Monday- the contract for May delivery fell below zero for the first time as storage capacity across the world reached its max and producers began offering to pay buyers to take oil off their hands. Additionally, June futures contracts suffered losses of 30% for the week, the worst week for US crude futures ever. To illustrate the extent of the situation, dozens of tankers are now lining the Southern California coast with nowhere to go.
As stocks and oil dipped, US Treasuries continued inching upward- the 10-year note yield settled at 0.606%, compared to 0.643% one week prior.
Next up besides another slew of earnings releases is the multi-phase reopening of various states, which some believe may be premature as testing capacity is not yet where it needs to be, despite signs of a flattening curve. A resurgence of cases in these states would quell any hopes for a quick economic recovery in the US as a whole, but it may also be possible that, if done right with the appropriate social distancing and precautionary measures, we may indeed be able to plow ahead, even without a vaccine, proven treatments, or ample testing capacity, if this resurgence in cases does not materialize.
Upcoming Events:
About 140 companies, about a fifth of the S&P 500, are set to report earnings this week. Among them- PepsiCo, Caterpillar, 3M, Alphabet, Advanced Micro Devices, Starbucks, Boeing, McDonald's, Gilead Sciences and ExxonMobil.
Weekly unemployment claims on Thursday
Press conference at the conclusion of the Federal Open Market Committee (FOMC) meetings on Tuesday and Wednesday
First-quarter GDP data will be released Wednesday morning- it is expected to have contracted 3.7% after having gained 2.1% the previous quarter