Market developments and recovery progress for April 17

A perspective from E*TRADE Capital Management, LLC 04/17/20

The latest market and economic developments:

  • Despite more disheartening economic data, US stocks posted small gains on Thursday, and rallied in early trading Friday amid news of a potentially effective coronavirus treatment. 
  • An additional 5.2 million Americans filed for unemployment last week, bringing the four-week total to 22 million. The labor market has erased nearly all job gains since November 2009.1
  • The Federal Reserve’s Beige Book report—which surveys the economic activity of businesses across the US—showed the economy “contracted sharply and abruptly” as a result of the coronavirus pandemic. Leisure, hospitality, and non-essential retail were the hardest-hit sectors, and the majority of businesses surveyed still expect conditions to worsen.2
  • New York and New Jersey, two of the hardest-hit states, extended stay-at-home orders through May 15. 
  • While much of the market is still grappling with lockdown restrictions, some stocks have nonetheless managed to make new highs. Some streaming entertainment, discount retailers, biotech, and health care names have thrived in the new “stay-at-home” era. 

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

  • Preliminary clinical trial data indicated Gilead Sciences’ remdesivir was a potentially effective coronavirus treatment. According to a report from STAT News, nearly all patients with severe Covid-19 symptoms were released from the hospital within a week of being treated with the antiviral medicine.3
  • The White House announced new federal guidelines for states to relax social distancing measures and begin reopening their economies. The plan includes three incremental phases based on the scope of the outbreak and hospitals’ ability to treat patients in individual states.4
  • Germany will begin to reopen its economy next week, as the infection rate slows. Some small businesses will reopen on Monday, while schools will restart in stages beginning May 4.5

Food for thought:

This week we saw some of the economic realities the markets were foreshadowing when they accelerated into bear-market territory last month. Bank earnings tanked as they set aside billions for loan defaults, and earnings for companies in the S&P 500® are now expected to decline by double digits.6 In the US, Americans continued to file for unemployment in staggering numbers, while China reported its first GDP contraction in 28 years. 

All eyes now appear to be on viable testing and treatment options for the coronavirus, which are critical to reopening the economy. When the virus fades, markets will likely shift their focus to the economic data, pricing in the road to recovery over the coming weeks and months.

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

  1. CNBC, “The US economy has erased nearly all the job gains since the Great Recession,” 4/16/20, https://www.cnbc.com/2020/04/16/us-only-417000-jobless-claims-away-from-losing-gains-since-2009.html
  2. Federal Reserve, “The Beige Book,” 4/15/20, https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20200415.pdf
  3. STAT News, “Early peek at data on Gilead coronavirus drug suggests patients are responding to treatment,” 4/16/20, https://www.statnews.com/2020/04/16/early-peek-at-data-on-gilead-coronavirus-drug-suggests-patients-are-responding-to-treatment/
  4. The Wall Street Journal, “Trump’s Guidelines to Reopen Economy Put Onus on Governors,” 4/16/20, https://www.wsj.com/articles/trump-set-to-unveil-guidelines-for-lifting-coronavirus-restrictions-11587050541?mod=hp_lead_pos1
  5. The Wall Street Journal, “Germany to Begin Gradually Reopening Its Economy Next Week, 4/15/20,” https://www.wsj.com/articles/germany-to-begin-gradually-reopening-its-economy-next-week-11586989014
  6. FactSet Earnings Insight, 3/27/20, https://insight.factset.com/sp-500-projected-to-report-first-double-digit-decline-in-earnings-10-in-10-years-in-q2

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