Market developments and recovery progress for May 11
The latest market and economic developments:
- Stocks fell in early trading Monday as investors weighed reopening the economy against the potential for a new wave of coronavirus infections. On Friday, the S&P 500® broke a two-week losing streak and posted its highest weekly close in more than two months.
- Saudi Arabia announced it will cut oil output by an additional one million barrels/day, on top of production cuts agreed to by OPEC to help curtail oversupply. Oil prices rose immediately following the announcement but have since stabilized.1
- Trading in Fed fund futures indicated investors were betting the Federal Reserve would move to negative interest rates by next year. Many analysts have pushed back against the idea though, citing the Fed’s preference for the type of monetary policies that proved effective during the 2008 downturn.2
- China’s central bank pledged to use “more powerful” policies to help the Chinese economy recover from the coronavirus pandemic. While the People’s Bank of China has increased liquidity and credit supply, its response has been limited compared to other major global economies.3
And here are the most recent updates on our path toward recovery:
- In New York, daily new coronavirus hospitalizations have fallen to the lowest levels since March, when Governor Andrew Cuomo first issued a statewide lockdown.4 New York’s stay-at-home order is set to expire on Friday, May 15, unless the governor pushes back the date.
- In much of Europe, the spread of the virus continues to slow as several countries loosen lockdowns. On Monday, Spain reported its lowest daily virus death toll since March 18, while Germany had the smallest number of new cases in six days. Over the weekend, British Prime Minister Boris Johnson outlined plans for the UK to roll back restrictions starting this week with residents allowed to enjoy unlimited outdoor leisure time.5
- Apple will begin opening some US stores this week, starting with locations in Idaho, South Carolina, Alabama, and Alaska. Apple’s stores in the US have been closed since mid-March and will operate under new social-distance protocols.6
Food for thought:
After taking the record-breaking jobs report in stride last week, investors appear to be weighing the repercussions of reopening an economy that is still highly susceptible to a second wave of infections and subsequent lockdown measures.
Last week’s market moves highlight the dilemma investors are currently facing as they try to draw distinctions between a stock market that seems bent on marching higher and an economy struggling under the weight of a global pandemic. The stock market has mostly experienced a V-shaped recovery up until this point, driven by massive stimulus efforts and, perhaps, wishful thinking. The reality is the economy is not experiencing the V-shaped recovery some economists were anticipating at the outset of the quarantine. In fact, economic data points to a U-shaped recovery with no clear indication yet of how deep and wide it will be.
Bottom line: Investors should be cautiously optimistic as we assess the economic and market landscape. In the meantime, stay the course and keep investing decisions focused on individual timelines, long-term goals, and risk tolerance.
- CNBC, “Saudi Arabia says it will cut oil production by an additional 1 million barrels per day,” 5/11/20, https://www.cnbc.com/2020/05/11/oil-news-crude-wti-brent-prices-today.html
- The Wall Street Journal, “Despite Recent Bets, Fed Isn’t Likely to Consider Negative Interest Rates,” 5/10/20, https://www.wsj.com/articles/despite-recent-bets-fed-isnt-likely-to-consider-negative-interest-rates-11589136655
- Bloomberg, “PBOC Vows Stronger Pro-Growth Policy But Leaves Details Vague,” 5/9/20, https://www.bloomberg.com/news/articles/2020-05-10/china-pledges-stronger-monetary-policies-to-handle-growth-hit
- CNBC, “Back to where we started — New York coronavirus hospitalizations fall to March levels, Cuomo says,” 5/10/20, https://www.cnbc.com/2020/05/10/new-york-coronavirus-hospitalizations-fall-to-march-levels-cuomo-says.html
- Bloomberg, “South Korea Sees Case Flare Up; Europe Eases Curbs: Virus Update,” 5/10/20, https://www.bloomberg.com/news/articles/2020-05-10/pence-in-self-quarantine-u-k-plans-slow-opening-virus-update?cmpid=BBD051120_MKT&utm_medium=email&utm_source=newsletter&utm_term=200511&utm_campaign=markets
- CNBC, “Apple to reopen stores in US starting next week,” 5/8/20, https://www.cnbc.com/2020/05/08/apple-to-reopen-stores-in-us-starting-next-week.html