Market developments and recovery progress for April 13

A perspective from E*TRADE Capital Management, LLC 04/13/20

The latest market and economic developments:

  • The S&P 500® gained 12.1% for the week ending April 10, the index’s best weekly performance since 1974. Small-cap stocks had their largest one-week gain in history, with the Russell 2000 rallying 18.5%.
  • The Organization of the Petroleum Exporting Countries (OPEC) and other top oil-producing nations agreed to cut production by 9.7 million barrels/day to help support falling prices.1 Demand plummeted as a result of the coronavirus, and the Saudi Arabia–Russia oil-price war put further downside pressure on the market. After steep losses on Friday, crude oil was trading higher early Monday.
  • US equities were modestly lower in early trading Monday at the outset of Q1 earnings season.
  • Last week’s jobless claims showed an additional 6.6 million Americans filed for unemployment, bringing the three-week total to nearly 17 million—or roughly 10% of the US workforce.2

And here are the most recent updates on our path towards recovery:

  • Parts of the US economy may begin to reopen next month. During a task force briefing over the weekend, White House health advisor Dr. Anthony Fauci said there are some indications the virus is slowing, and he was “cautiously optimistic” the US could start relaxing social distancing guidelines next month.3
  • Hospitalizations in New York City, the world’s current epicenter, appear to be slowing. On Sunday, Mayor Bill de Blasio said the number of hospitalizations in the city dropped by 17%.4
  • The Federal Reserve announced another round of stimulus measures on April 9, providing $2.3 trillion in loans to small and mid-sized businesses and state and local governments. The Fed will also expand its corporate lending to below-investment-grade-rated corporate debt. Chairman Jerome Powell said the Fed “will continue to use these powers forcefully, pro-actively, and aggressively until we are confident that we are solidly on the road to recovery.”5
  • Spain and Italy are easing lockdown measures on some sections of their economies. Starting today, Spain is allowing some factories and construction sites to resume work. Italy will allow bookstores and children’s shops to reopen this week, although the rest of the country remains under stay at home orders through May 3.6

Some food for thought:

Earnings season kicks off this week, with results from several big banks expected to show the extent of the coronavirus impact to first-quarter results. Earnings from pharmaceutical and health care companies will also be closely watched for any news of progress on the testing and treatment fronts. And with China reporting first quarter GDP on Friday, we’re likely going to round out the week with more dismal economic numbers.

While there’s much uncertainty around Q1 earnings, investors should consider that markets have likely stabilized on the heels of an extraordinary amount of monetary and fiscal measures enacted to counter the economic blow of the coronavirus. Stocks have come a long way from their March 23 lows (the S&P 500 is higher by 21%), but don’t be surprised to see some of those gains given back.

Bottom line: Stay the course and keep investing decisions focused on individual timelines, goals, and risk tolerance.

  1. CNBC, “OPEC and allies finalize record oil production cut after days of discussion,” 4/12/20, https://www.cnbc.com/2020/04/12/opec-and-allies-finalize-record-oil-production-cut-after-days-of-discussion.html
  2. Business Insider, “More than 10% of American workers have filed for unemployment in just 3 weeks as the coronavirus puts the economy in a deep freeze,” 4/11/20, https://www.businessinsider.com/record-unemployment-filings-jobless-claims-coronavirus-recession-economic-slowdown-2020-4
  3. CNBC, “Fauci expresses ‘cautious optimism’ coronavirus outbreak is slowing, US could start reopening in May,” 4/12/20, https://www.cnbc.com/2020/04/12/coronavirus-fauci-says-signs-outbreak-slowing-us-could-start-reopening-in-may.html
  4. The New York Times, “Coronavirus Live Updates,” 4/13/20, https://www.nytimes.com/2020/04/13/nyregion/coronavirus-new-york-update.html?module=STYLN_live_tabs&variant=1_menu&region=header&context=menu&state=default&pgtype=Article
  5. Bloomberg, “Fed to Buy Junk Bonds, Lend to States in Fresh Virus Support,” 4/9/20, https://www.bloomberg.com/news/articles/2020-04-09/fed-unleashes-fresh-steps-for-as-much-as-2-3-trillion-in-aid
  6. CNBC, “Spain lifts some coronavirus lockdown measures; Italy records lowest daily deaths since March,” 4/13/20, https://www.cnbc.com/2020/04/13/coronavirus-spain-lifts-some-lockdown-measures-fewer-deaths-in-italy.html

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