Hi Everyone,
The stock market finished slightly lower following a choppy and nervous session, as investors mulled the possible impact of the diplomatic skirmish between the U.S. and China. The Dow was down 102, or 0.4%, to 24,474, the Nasdaq lost 91, or 1.0%, to 9,285, while the S&P 500 fell by 23, or 0.8%, to 2,949. Advancing issues outnumbered decliners by a 5-to-4 ratio on the NYSE, where volume was lighter than it has been of late.
Traders said that despite the morning pullback, stocks remained stable throughout the session, and investor sentiment is still upbeat on the Street. As one trader explained, “Small-caps showed relative strength today, and the key breadth measures were not confirming the morning selloff, so while cyclical issues lost some ground, bulls are still in control of the stock market.”
Rumors have been circulating about the possible de-listing of some of the largest Chinese companies, such as Baidu (BIDU, +1.4%) and Alibaba (BABA, -2.1%), from the U.S. exchanges in the wake of the regulatory changes that Senate passed yesterday. The two mega powers also exchanged statements regarding Hong Kong and Taiwan this week. President Trump’s tweets criticizing the top Chinese leadership also added to the fears of further escalation. The tension clearly weighed on stocks and other risk assets today, but with the reopening push going well in Asia and Europe, equities could still enjoy tailwinds in the coming weeks.
While today’s over 2.4 million new jobless claims means that over 38 million people filed claims since the start of the pandemic, the number of continuing claims is already hinting at improvements in the job market. The raw – not seasonally adjusted – number of continuing claims rose much less than what we saw during the full lockdowns, and that already reflects the reopening efforts. This month’s unemployment rate will likely be the highest of the COVID crisis, and we could see swift improvements during the summer, should the number of new cases remain contained.
With Brazil quickly becoming the epicenter of the pandemic, the country’s health care system and economy are on the verge of a major crisis. Despite President Bolsonaro’s controversial handling of the crisis, most of the country remains under lockdown, and major cities like Sao Paolo recently extended their lockdowns. The Brazilian real inched higher from its all-time low this week, but since the country will likely soon take over Russia as the second-hardest-hit country, investors should keep an eye on Brazilian assets for signs of weakness.
We might be in for another choppy session tomorrow, ahead of the long weekend, as the domestic economic calendar will be empty and we will not get many important overseas indicators either. The British retail sales could make waves in pre-market trading, and the European Central Bank’s (ECB) monetary meeting minutes will also be released before the bell. The Dollar Index (DXY) hit an almost three-week low yesterday, but should the ECB’s minutes hint about further monetary easing, the euro could lose more ground.
As always, have a great evening and stay tuned!!!
Joe
