Market developments and recovery progress for May 6

A perspective from E*TRADE Capital Management, LLC 05/06/20

The latest market and economic developments:

  • Following two days of gains, US stocks continued to rise early Wednesday as a growing number of states begin to reopen their economies. 
  • Crude oil posted five-straight days of gains—the longest winning streak since July—before pulling back on Wednesday. Production cuts agreed to by the top oil-producing countries went into effect on May 1, helping to stabilize supply as demand has slowly picked up amid reopenings across the globe.
  • ADP’s employment report showed private companies cut more than 20 million jobs in April—the worst loss in the report’s history, but slightly better than expected.1
  • With more than 55% of companies in the S&P 500® reporting, earnings are on track to fall by almost 14% for Q1. Analysts are expecting earnings to decline by 37% in Q2 and 20% in Q3.2 

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

  • On Monday, New York state reported its lowest daily coronavirus death toll since March 28—more than 70% lower than numbers from early April3—a trend that continued through today, Wednesday, May 6.
  • New York City—the epicenter of the US outbreak—currently satisfies three of seven reopening criteria according to Governor Andrew Cuomo: a steady decline in deaths, a steady decline in new hospitalizations, and monthly testing requirements.3
  • California—one of the first states to issue a statewide lockdown—will begin scaling back restrictions on Friday. The announcement came on Monday after California reported its lowest daily death toll in three weeks.4

Food for thought:

ADP’s employment report provided a preview of what’s to come on Friday, when the Bureau of Labor Statistics publishes its first official jobs report capturing a full month of pandemic-related losses. While it’s possible the labor market will pick back up as pockets of the country reopen, if job losses end up being permanent, the impact on consumer spending and the economy will be profound.  

Markets appear optimistic amid the progression of easing lockdown measures across the country. As we move to the next chapter in this story, though, renewed fears of a trade conflict have emerged after the White House floated the possibility of hitting China with tariffs in retaliation for its perceived mishandling of the coronavirus outbreak. And while the effects of the pandemic remain a question mark, the effect trade tensions have on the market is all too familiar. 

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

  1. CNBC, “US private payrolls drop by 20.2 million in April, the worst job loss in the history of ADP report,” 5/6/20, https://www.cnbc.com/2020/05/06/adp-private-payrolls-april-2020-drop-by-record-20point2-million.html
  2. FactSet, “Earnings Insight,” 5/1/20, https://www.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_050120.pdf 
  3. The New York Times, “Models Project Sharp Rise in Deaths as States Reopen,” 5/4/20, https://www.nytimes.com/2020/05/04/us/coronavirus-live-updates.html?action=click&campaign_id=57&emc=edit_ne_20200504&instance_id=18218&module=Spotlight&nl=evening-briefing&pgtype=Homepage&regi_id=76161369&segment_id=26604&te=1&user_id=5907a09bfb75dbf35537993d15f86005#link-16e7c321
  4. Bloomberg, “California Moves Toward Reopening With Virus Stabilizing,” 5/4/20, https://www.bloomberg.com/news/articles/2020-05-04/california-takes-steps-toward-reopening-with-virus-stabilizing

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