After a turbulent week, we opened on Friday with equity markets trading sharply lower only to see institutional buyers step in to take advantage of the steep intraday discounts. As a result, all three major market indices closed in the green on the day. That positive close was not thematically unfamiliar with the Nasdaq Composite leading the way gaining 0.79% while the S&P 500 added 0.39% and the Dow Industrials followed up the rear gaining 0.25%.
Despite a strong finish on Friday, the broader market lost ground on the week. The S&P 500 lost 2.3% and the Nasdaq lost roughly 1.2%. Markets continue to digest gains following the establishment of the lows on March 23. Broadly speaking, financials and manufacturing stocks continue to plague the Dow Industrials while large cap tech and pharmaceuticals continue to fuel the Nasdaq’s relative outperformance to the upside.
Investors will increasingly shift their focus this week to re-opening efforts across the country and earnings releases.
This week’s economic calendar highlights:
Housing Starts for April are released Tuesday morning at 8:30. Obviously, given the pandemic-centric backdrop that has defined all economic activity for months, the top-line of this data release should be underwhelming. Econoday consensus Starts – Level – SAAR is 0.968 M versus March’s 1.216 M reading. However, Permits – Level – SAAR are expected to tick higher in April versus March. Econoday consensus for April is 1.353 M versus March’s 1.033 M reading. As inconsequential as the “permits” vertical might seem, it may provide investors with a sense of tempered optimism that there may be a shift in the trend of recent extremely weak pandemic-centric data. The only other highlight of Tuesday, from an economic calendar perspective, is a scheduled speech to be given by Fed Chair Powell at 10:00 am.
As is customary, the EIA Petroleum Status Report is released on Wednesday. This data has been remarkably stable given all of the instability surrounding it. Last week’s report reflected a 3.5 M barrel draw in gasoline inventories and exactly the same amount of inventory build in distillates. Crude oil inventories last week dropped a scant 0.7 M barrels. As is also customary, the Fed releases its FOMC Minutes three weeks following the meeting. On Wednesday we receive minutes from the last meeting. I doubt there will be any surprises given how transparent Fed Chair Powell and other members of the FOMC have been in recent months
Like many “shelter-in-place” waistlines, the Federal budget deficit continues to expand-Sam Stovall, CFRA
Weekly Jobless Claims are released Thursday morning. Econoday consensus is calling for 2,375 K losses. Last week’s report was worse than what consensus was calling for at 2,981 K. The four-week moving average stands at 3,617 K. The Philadelphia Fed Business Outlook Survey, released Thursday, will be dreadful. Econoday is calling for a May reading of -41. April’s reading was a nearly comprehendible -56.6. The Composite Purchasing Manager’s Index (PMI) for May is released at 9:45 am. This report, not unlike the permits vertical in the Housing Starts data, may portend a potentially positive shift in trend. Composite-Level is expected to be 30.2 versus the prior month’s reading of 27.4. Manufacturing-Level is expected to be 37.5 versus the prior month’s 36.9. Services-Level are expected to be 30.0 versus 27.0. Existing Home Sales for April are out Thursday as well. Econoday consensus is calling for a reading of 4.325 M versus last month’s 5.270 M. The M/M change is expected to drop 8.5%. Y/Y the results should be nearly flat at 0.8%. Fed Chair Powell will speak again at 2:30 pm.
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Flickr photo: by coraliecharlet