Hi Everyone,
The stock market finished slightly lower following a hectic session that saw a bearish intraday reversal due to the mounting economic worries. The Dow was down 26 or 0.1%, to 22,654, the Nasdaq lost 26, or 0.3%, to 7,887, while the S&P 500 fell by 4, or 0.2%, to 2,659. Advancing issues still outnumbered decliners by a 3-to-2 ratio on the NYSE, where volume remained heavy.
Traders said that while today’s reversal was not pretty, and safe-haven assets remained weak, despite the last-minute plunge, the major indices held most of their gains from yesterday. As one trader explained, “Yesterday’s short-covering rally ran out of steam this afternoon, but there was no sign of panic on the Street, even though the grim economic outlook weighed on sentiment in the second half of the session.”
The virus-related news flow remained mostly positive today, but the U.S. situation is still only stable, at best, even as Europe and Asia continue to report encouraging numbers. With still no major secondary outbreaks in Asia, the global economy might survive the pandemic without a full-blown recession. Despite the positive news, the pressure on the most-affected sectors will likely remain throughout the year, and according to most analysts, a V-shaped recovery is highly unlikely.
Bond markets remained mixed today, as even though Treasury yields ticked higher, high-yield bonds remained shy of their highs from last week, and credit spreads widened slightly. Systemic risk continues to be high, with a lot of key European banks trading near their bear market and all-time lows. A common Eurozone bond program is still in the works, but the plan faces stiff opposition in Germany, which could lead to another global risk-off shift, as investors turn their attention to the risks of the pandemic’s economic fallout.
On a positive note, the dollar pulled back slightly today, but the global dollar shortage is still an issue, despite the Fed’s efforts. The calls for further stimulus in the U.S. are getting louder. Since the currency is still among the strongest globally, the Fed and the Trump Administration might have more room to intervene without risking a surge in inflation. Down the road, this could lead to a quicker recovery in the U.S. and, in turn, to relative strength among the more domestic-focused companies, especially in light of the decline in global trade.
We will have a relatively calm day in terms of economic releases, but the minutes of the latest FOMC meeting and the weekly crude oil inventories data could both have an impact on financial markets. The price of oil fell substantially today, amid the mounting economic worries, even as a historic supply cut by OPEC and Russia will likely be confirmed later this week. U.S. crude oil inventories surged higher last week due to the lockdowns, and as some analysts suggest that storage capacities will run out, and oil prices will hit rock bottom.
As always, have a great evening, stay calm, stay home, stay healthy, do your part to flatten the curve and stay tuned!!!
Joe
Marketing Research Commentary