US Equity Markets tried to stabilize last week but ultimately lost a little ground as the sobering news around the spread of COVID-19 and the significant impact it has caused in the labor market hit investors. Declines on Friday caused the S&P 500 to drop 2.1% for the week, bringing losses for the year to 23.0%. The Nasdaq fell 1.7% for the week and is now down 17.8% for the year, while the Russell 2000 (small-cap stocks) suffered significant losses of 7.0% for the week as fears about the US economy weigh on this domestically-focused asset class. For the year, the Russell 2000 is down 37.0%.
Global equity markets posted declines despite a strong bounce in oil prices, as rising coronavirus cases in Europe combined with weakness in Japan to weigh on shares. Developed Markets decreased 3.5% for the week and are now down 27.3% for the year. Emerging Markets held up better thanks to outperformance in China and the rising oil prices, down 1.3% for the week to bring its losses for the year to 25.4%.
US interest rates moved lower last week, as the credit markets are working more smoothly following the various actions taken by the Federal Reserve. US Treasuries remain the safe haven among nervous investors, though the Fed's announcement that it will also buy corporate bonds has helped that market. There are growing concerns in municipal bond markets about some hard-hit municipalities' ability to pay their bonds, causing muni bond yields to increase. The yield on the US 10-Year Treasury fell to 0.60% from 0.68% the prior week.
Of Interest to Us
The combined monetary and fiscal stimulus from the Fed and the recently enacted CARES Act is estimated at a stunning 24% of the US economy. While this is an unprecedented amount of stimulus, more may actually be needed, as new data from the US labor market suggest that the hit to the US economy in the second quarter could approach 25%. Indeed, Initial Jobless Claims totaled 6.648 million last week, bringing the two-week total for jobless claims to 9.989 million. Putting that into perspective, the previous high in weekly jobless claims had been 695K back in October 1982. This data suggest the Unemployment Rate for April could spike to 15% or higher.
for the week ending 4/3/2020
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