Daily Market Color

Equities and Rates Rise as Reopening Process Begins in Some States


Major equity indices rangebound on Friday despite stimulus package approval. Signed into law by President Trump, the new $484B package is set to provide immediate funds to the PPP and help fund testing efforts. That positive news helped the DJIA and S&P 500 climb 1.1% and 1.4% higher respectively while treasury yields ticked up moderately across the curve, the 10-year closing at 0.60%. This morning, equities and other risk assets are opening higher as some states begin to allow select businesses to open.



Global manufacturing and services activity drops worldwide. Measures of economic activity have unsurprisingly dropped across the board in the US, Eurozone, and Asia since the outset of the COVID-19 pandemic and the social distancing measures that followed. US PMI’s dropped into the contractionary zone at 27.4 in April, the lowest reading on record since 2009. PMI’s are an often cited forward-looking indicator, the sharp downturn in manufacturing activity leading many analysts to call for a significant contraction in US growth. JPMorgan analysts estimate US GDP to contract at an annualized rate of 40% in the next quarter. Despite the forecasted drop, most economists expect growth to rebound once social distancing measures are eased. Treasury Secretary Steven Mnuchin added, “As businesses begin to open, you’re going to see [the] demand side of the economy rebound.”



Week ahead. President Trump will hold a videoconference with governors this afternoon to discuss reopening the economy. While no new data is scheduled for today, important economic indexes will be released throughout the week. In the coming days, GDP figures for Q1 will be released, with economists expecting a 3.5% contraction despite the coronavirus blowback hitting the US majorly only in March. Fed Chair Jerome Powell will hold a press conference to discuss the FOMC announcement after their scheduled meeting. Fed voters have indicated that they are comfortable with current monetary policy leading economists to believe no new rate decisions will be announced. Initial jobless claims on Thursday will be another data point to watch, with over 26.5M Americans filing in the past month. Consumer spending figures for March also released Thursday are expected to show a steep decline after widespread lockdowns were mandated in the US. This week will also be one of the busiest of this earnings season, with over 150 companies in the S&P reporting Q1 earnings.


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