Market developments and recovery progress for April 20

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

The latest market and economic developments:

  • The US stock market delivered consecutive up weeks for the first time since mid-February—and just the third time this year—encouraged by discussions to reopen the economy and hope for a potential coronavirus treatment. 
  • Equities moved lower in early trading Monday, as oil prices tumbled amid nearly non-existent demand and near-capacity storage. The roughly 10 million barrel/day production cut agreed to by the Organization of the Petroleum Exporting Countries (OPEC) and its allies goes into effect on May 1, although some analysts believe it’s not enough to offset falling demand.
  • Nearly a fifth of S&P 500® companies report earnings this week, providing a look at how various sectors of the economy have been impacted by the pandemic. So far, earnings have declined 14.5%. If that were the final loss for the quarter, it would mark the biggest year-over-year profit decline for the index since the third quarter of 2009, according to FactSet.1
  • The White House and Congress are working on a deal to provide billions more in financial aid to small businesses. The deal would also include aid for hospitals and expanded testing.2 The Paycheck Protection Program, which provides loans to small businesses to keep employees on payroll, ran out of funding last week.

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

  • Deaths dropped significantly in the New York, New Jersey, and Connecticut tri-state area on Sunday. All three states reported the lowest number of deaths in the past several days, and the lowest one-day total since April 2. In New York, reported deaths fell for the fifth-straight day.3
  • New York will roll out aggressive antibody testing this week to help determine how much of the population has been exposed to the coronavirus. The testing detects whether individuals have the antibodies that fight the disease and thus may be immune, and is required under the federal government’s guidelines to relax lockdown measures.4
  • New coronavirus cases in Italy declined, even as a record number of people were tested. The number of recovered patients hit a record high as well.5

Food for thought:

After the big banks kicked off earnings season last week, markets will be tuning into reports from a much wider spectrum of companies, including airlines, tech, and consumer staples. And while the S&P 500 is expected to post steep losses for the quarter, not all businesses are suffering to the same extent. Some health care companies, for example, have actually beat forecasts.

Many observers will be looking past the numbers, though, and focusing on what companies are saying about the future. As discussions around reopening the economy take shape, investors will be looking for clarity on how companies plan to operate in the weeks and months ahead, including when they may begin to restaff and when they will be fully operational.

Bottom line: While earnings will certainly show significant pockets of weakness in the market, investors should bear in mind this is only one quarter. Stay the course, and keep focused on a diversified portfolio aligned with long-term goals.

  1. The Wall Street Journal, “Airline, Tech Earnings to Give Look Into Crisis,” 4/19/20, https://www.wsj.com/articles/airlines-and-tech-to-headline-earnings-this-week-11587312000
  2. Bloomberg, “Mnuchin, Democrats Close on Virus Aid Deal Nearing $500 Billion,” 4/20/20, https://www.bloomberg.com/news/articles/2020-04-20/mnuchin-democrats-close-on-virus-aid-deal-nearing-500-billion
  3. The New York Times, “Daily Virus Deaths Drop Across Region: Live Updates,” 4/20/20, https://www.nytimes.com/2020/04/20/nyregion/coronavirus-new-york-update.html?module=STYLN_live_tabs&variant=1_menu&region=header&context=menu&state=default&pgtype=Article#link-4506a381
  4. CNBC, “Gov. Andrew Cuomo says New York will roll out antibody testing in ‘aggressive way’ this week,” 4/19/20, https://www.cnbc.com/2020/04/19/gov-cuomo-says-new-york-will-roll-out-antibody-testing-in-aggressive-way-this-week.html
  5. Bloomberg, “Italy’s New Virus Cases Decline Even Though Record Number Tested,” 4/17/20, https://www.bloomberg.com/news/articles/2020-04-17/italy-s-new-virus-cases-down-slightly-as-record-number-tested

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