Market developments and recovery progress for May 18

A perspective from E*TRADE Capital Management, LLC 05/18/20

The latest market and economic developments:

  • Despite an end-of-week rally, the S&P 500® lost more than 2% last week, but stocks surged early Monday following reports of positive developments on a coronavirus vaccine and generally bullish sentiment from Federal Reserve Chairman Jerome Powell over the weekend.
  • In a 60 Minutes interview on Sunday night, Powell cautioned that the economic recovery may stretch through 2021 but said he does not see the US entering a depression. While acknowledging that unemployment and GDP numbers may resemble those during the Great Depression, he expressed optimism that the downturn would be relatively short-lived, and the US economy would recover in the long run.1
  • Tensions between the US and China intensified after the White House announced additional restrictions on Chinese telecom giant Huawei. The new rules would block exports of American semiconductors to foreign manufacturers, stoking concerns of possible retaliatory measures from China.2

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

  • Biotech company Moderna reported positive results in an early-stage human trial for a potential coronavirus vaccine. The study, which was conducted by the US National Institutes of Health, found that all 45 participants developed antibodies after receiving varying doses of the vaccine. The company is aiming to have the treatment ready for emergency use by the fall.3
  • New coronavirus cases in the US are falling. As of Friday, newly reported cases were declining in 19 states and increasing in three, with the others remaining mostly stable.4 On Saturday, new infections increased by 1.5% nationwide, below the seven-day daily average. Also, New York state reported a seven-week low in daily virus-related deaths.5
  • The New York Stock Exchange will reopen its trading floor on May 26, two months after closing. Traders returning to work will be required to wear masks and social distance, and will not be allowed to use public transit to and from the office.6
  • Apple is reopening 25 of its US stores this week. In a letter to customers released Sunday, the company announced additional safety measures for newly reopened shops, including limiting store capacity, conducting temperature checks at the door, and requiring face coverings. Apple will also reopen 10 of its 17 retail stores in Italy this week.7

Food for thought:

As we were reminded by this morning’s market moves, much of the uncertainty in the current environment hinges on our ability to develop a vaccine. As the world transitions out of lockdown, health experts, global leaders, and market observers have begun to shift their focus to reopening the economy, including changes in consumer behavior and how businesses adapt in the post-coronavirus era.

This week investors will be tuning into earnings reports from major retailers with robust digital storefronts, including some that have been spared much of the devastation caused the nationwide lockdown. Results from the likes of Nordstrom, Walmart, Target, Home Depot, and Lowe’s may show how consumer spending—which accounts for roughly 70% of the American economy—has evolved over the past months. 

Bottom line: While optimistic headlines are a welcome reprieve from last week’s flurry of dismal economic data, investors should be wary of letting bullish sentiment distract from what is likely a long road ahead. Stay the course and keep investing decisions focused on individual timelines, long-term goals, and risk tolerance.

  1. CNBC, “Powell says GDP could shrink more than 30%, but he doesn’t see another Depression,” 5/17/20, https://www.cnbc.com/2020/05/17/powell-says-jobless-rate-could-top-30percent-but-he-doesnt-see-another-depression.html
  2. The Wall Street Journal, “U.S. Moves to Cut Off Chip Supplies to Huawei,” 5/15/20, https://www.wsj.com/articles/u-s-moves-to-cut-off-chip-supplies-to-huawei-11589545335?mod=article_inline
  3. Business Insider, “Moderna's coronavirus vaccine just showed signs of success in an early study in people,” 5/18/20, https://www.businessinsider.com/moderna-coronavirus-vaccine-releases-first-human-trial-results-2020-5
  4. The New York Times, “Coronavirus Cases Slow in U.S., but the Big Picture Remains Tenuous,” 5/16/20, https://www.nytimes.com/2020/05/16/us/coronavirus-united-states.html?action=click&module=Top%20Stories&pgtype=Homepage
  5. Bloomberg, “China Vaccine to Be Global; Moderna Drug Promising: Virus Update,” 5/17/20, https://www.bloomberg.com/news/articles/2020-05-17/u-s-cases-slow-disney-begins-opening-in-florida-virus-update?cmpid=BBD051820_OUS&utm_medium=email&utm_source=newsletter&utm_term=200518&utm_campaign=openamericas
  6. The Wall Street Journal, “New York Stock Exchange to Reopen Trading Floor,” 5/14/20, https://www.wsj.com/articles/new-york-stock-exchange-to-reopen-trading-floor-11589495486
  7. Bloomberg, “Apple To Reopen 25 U.S. Stores, 12 in Canada This Week,” 5/17/20, https://www.bloomberg.com/news/articles/2020-05-17/apple-says-nearly-100-stores-globally-have-reopened-their-doors

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