Market developments and recovery progress for April 29

A perspective from E*TRADE Capital Management, LLC 04/29/20

The latest market and economic developments:

  • Stocks rallied Wednesday amid the Fed’s "do what is necessary" approach to recovery and renewed hope for a potential coronavirus treatment. 
  • The initial reading of first-quarter GDP showed a 4.8% decline in the US economy, the sharpest contraction since Q4 2008.1 Economists anticipate that number will drop further when final revisions are issued.
  • Consumer confidence plunged to its lowest level in six years, from 118.8 in March to 86.9 in April, as consumers viewed the job market with increasing pessimism.2
  • The Federal Reserve expanded its debt purchases to include smaller city and county municipal bonds.

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

  • Preliminary results of a remdesivir clinical study by Gilead Sciences showed encouraging signs of treating patients with severe cases of COVID-19. More than half of patients treated with a five-day dosage of the antiviral drug improved and were discharged from the hospital within two weeks.4
  • The number of newly admitted coronavirus patients in New York fell below 1,000 on Monday, the first time hospitalizations have been under that threshold in a month.5
  • On Friday, Texas will reopen businesses at 25% capacity6—one of the largest states to date to ease its lockdown. California also joined the growing number of states making plans reopen, announcing it will loosen its stay-at-home order in the next few weeks.7
  • Starbucks expects 90% of company-owned stores in the US will be open by early June,8 a positive sign the economy post-coronavirus is sputtering back to life.

Food for thought:

After unleashing unprecedented monetary stimulus over the past two months, the Federal Reserve on Wednesday reaffirmed its commitment to doing whatever it deems necessary to support the economy and financial markets in what is likely to be the worst downturn since the Great Depression. While the Fed remains committed to providing seemingly unlimited stimulus to combat the crisis, it also espoused caution in the medium term, noting continued risks and possibly more economic carnage ahead. The Fed pledged to keep interest rates near zero until employment and inflation got back on track.9 The announcement followed the Federal Open Market Committee’s first regularly scheduled meeting since it issued two emergency rate cuts in March, padding an already-strong day for stocks. 

Wednesday’s rally in the face of a worse-than-expected GDP reading speaks to the forward-looking nature of the market. While more troubling economic data is likely still to come, progress on the medical front is helping fuel the ascent. However, exceptionally large moves are prone to corrections, and the market rarely makes a dramatic move without retreating at least once or twice.

Bottom line: With stocks up more than 30% since March, the incredible rebound is yet another example of why timing the market is so challenging. Keep investing decisions centered around the big picture, and invest based on individual timelines, goals, and risk tolerance.

  1. CNBC, “US GDP shrank 4.8% in the first quarter amid biggest contraction since the financial crisis,” 4/29/20, https://www.cnbc.com/2020/04/29/us-gdp-q1-2020-first-reading.html
  2. CNBC, “Consumer confidence plunges in April as millions lose jobs,” 4/28/20, https://www.cnbc.com/2020/04/28/us-consumer-confidence-april-2020.html
  3. The Wall Street Journal, “Fed to Extend Loans to More Cities, Counties,” 4/27/20, https://www.wsj.com/articles/fed-will-broaden-municipal-lending-program-eligibility-11588019579
  4. CNBC, “Gilead says early results of coronavirus drug trial show improvement with shorter remdesivir treatment,” 4/29/20, https://www.cnbc.com/2020/04/29/gilead-reports-positive-data-on-remdesivir-coronavirus-drug-trial.html
  5. Forbes, “New COVID-19 Hospitalizations In N.Y. Drop Below 1,000 For First Day In A Month,” 4/28/20, https://www.forbes.com/sites/lisettevoytko/2020/04/28/new-covid-19-hospitalizations-in-ny-drop-below-1000-for-first-day-in-a-month/#47dbcb5559b2
  6. Bloomberg, “Texas Reopening Businesses on Friday With 25% Occupancy Limit,” 4/27/20, https://www.bloomberg.com/news/articles/2020-04-27/texas-reopening-businesses-on-friday-with-25-occupancy-limit
  7. The Wall Street Journal, “U.S. Coronavirus Cases Top One Million as Some Lockdowns Ease,” 4/28/20, https://www.wsj.com/articles/coronavirus-latest-news-04-28-2020-11588063873
  8. Forbes, “Starbucks Reopening After Coronavirus: 90% Of Company-Run U.S. Stores Will Be Open By Early June,” 4/28/20, https://www.forbes.com/sites/andriacheng/2020/04/28/starbucks-to-open-90-of-owned-us-outlets-by-early-june-as-businesses--plan-reopening-in-coronavirus-era/#2a5f4d4010c5
  9. CNBC, “Fed pledges to keep rates near zero until full employment, inflation come back,” 4/29/20, https://www.cnbc.com/2020/04/29/fed-decision-fed-pledges-to-keep-rates-near-zero-until-full-employment-inflation-come-back.html

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