Market developments and recovery progress for May 22

A perspective from E*TRADE Capital Management, LLC 05/22/20

The latest market and economic developments:

  • US stocks were lower early Friday but remained on track to wrap a week of solid gains, despite millions more unemployment claims and mounting tensions with China.
  • An additional 2.4 million Americans filed for unemployment last week, bringing the nine-week total to 38 million.1
  • Minutes from the Federal Reserve’s April meeting showed policymakers felt the coronavirus poses an “extraordinary amount of uncertainty and considerable risks” to economic activity, and that the central bank would keep interest rates near zero until a recovery was in place.2
  • US manufacturing and services firms reported a slightly slower rate of contraction in May, according to the most recent PMI data from IHS Markit®.3
  • On Wednesday, the Senate passed a bill that could ban Chinese companies from listing on US exchanges—adding to growing tensions between the two countries.4

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

  • With 85% of its US locations reopened, Starbucks said it has regained two-thirds of store sales from last year. In China, same-store sales have reached roughly 80% of prior-year levels.5
  • Disney, Universal, and SeaWorld are submitting plans to reopen their theme parks in Orlando, Florida. While the companies will need approval from the local government before officially opening their gates, both Disney and Universal have already started to open shopping centers on their resorts.6
  • State beaches in New York, New Jersey, Connecticut, and Delaware will be open for Memorial Day Weekend. Meanwhile, coronavirus cases in the US rose 1.5% on Thursday, in line with the seven-day average.7

Food for thought:

With the summer season unofficially kicking off this weekend, it seems like an appropriate time to reflect on the progress we have made since the pandemic gripped the world two seasons ago: Headlines have evolved from the latest state and even national lockdowns to reopening plans. Daily death tolls in the US epicenter, New York, have fallen roughly 80%. And a record-setting bear market has recovered more than 30% of its losses since March. In fact, the S&P 500® is only down around 9% year-to-date, quite remarkable considering the magnitude of the economic disruption.

But there is still an extraordinary amount of uncertainty ahead as we face what is expected to be an epically bad quarter for the US economy. In the coming weeks, markets will be weighing the path toward recovery, progress on the medical front, and escalating tensions between two world superpowers. 

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

  1. Bloomberg, “Americans Again File by the Millions for Unemployment Benefits,” 5/21/20, https://www.bloomberg.com/news/articles/2020-05-21/another-2-4-million-americans-filed-for-unemployment-last-week
  2. CNBC, “Fed minutes show fears of ‘extraordinary amount of uncertainty and considerable risks’ because of coronavirus,” 5/20/20, https://www.cnbc.com/2020/05/20/fed-minutes-released.html
  3. MarketWatch, “IHS Markit says latest U.S. PMI data indicate rate of collapse in U.S. economy peaked in April,” 5/21/20, https://www.marketwatch.com/story/ihs-markit-says-latest-pmi-data-indicate-rate-of-collapse-in-us-economy-peaked-in-april-2020-05-21
  4. CNBC, “U.S.-China tensions are flaring on a new front: the financial markets,” 5/22/20, https://www.cnbc.com/2020/05/22/stock-market-rising-us-china-tensions-will-hit-financial-markets.html
  5. Yahoo!, “Starbucks Regains Almost Two-Thirds Of U.S. Same-Store Sales As Stores Reopen,” 5/21/20, https://money.yahoo.com/starbucks-regains-almost-two-thirds-185545287.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAADpBwCmLo--aFbp9enogZey709OgIHNOTbCyrFAlm7S6JyXVEMJWg2u3Kt8Vzf9Z1UqsPpFSY3KYpvsjjDcEcTAYq5DD9vJsCqB8CNLv8O8AphNeOzrIwkbkCnIVfuTFlWzegyFDUljShgz9A4jbs10FWpVLegTsx5hqALruuzbq
  6. Bloomberg, “Disney and Universal to Begin Submitting Florida Reopening Plans,” 5/20/20, https://www.bloomberg.com/news/articles/2020-05-20/disney-and-universal-to-submit-florida-reopening-plans-thursday
  7. Bloomberg, “U.S. Cases Rise 1.5%; Americans Defer Medical Care: Virus Update,” 5/21/20, https://www.bloomberg.com/news/articles/2020-05-21/china-records-2-new-cases-women-s-jobs-vulnerable-virus-update

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