Economic Beat: April 6, 2020

By Tom Jalics, Chief Market Strategist with Fifth Third Bank

Last week global stocks fell as the negative economic impacts of the coronavirus pandemic continued to roil markets. It was another volatile week, as investors weighed government stimulus measures against continued negative news flow about the spread of the virus. While financial market volatility has somewhat eased when compared with the last several weeks, the daily moves last week remain large when compared to just a few months ago. The S&P 500 Index was down 2.0% last week, and is 22.6% lower in 2020. The tech heavy NASDAQ and the blue chip Dow Jones Industrial Average were down 1.7%, and 2.7%, respectively for the week.

Yields were lower for the week, as markets held a generally risk-off tone, with the benchmark 10 year U.S. Treasury note down 12 basis points to end the week 0.59%. Oil surged late last week, on reports that OPEC leaders would meet virtually early this week, and that Russia is ready to cut production. Over the weekend, OPEC announced that this meeting was postponed until April 9th. West Texas Intermediate Crude oil was up nearly 32% for the week, after posting its worst quarterly decline on record in the first quarter of 2020. Gold was down 0.5% for the week, closing at $1620.81/ounce on Friday.

Fears about the coronavirus’ spread in the US was a cause for last week’s sell off. After expressing a desire to get the economy reopened around Easter, President Trump said the U.S. will extend federal social distancing guidelines until April 30th. President Trump also warned that the U.S. is facing a "very, very painful two weeks," with rising death tolls, even with social distancing and stay-at-home measures in place. New York remained the key area of concern from an outbreak and healthcare system stress perspective. However, there was also some heightened scrutiny on a number of new potential hotspots. One of the biggest issues seemed to be the lack of urgency on the part of some states in issuing shelter-in-place orders. There were concerns that Florida, which finally acted last week, may have moved too late.

Fallout from the virus was evident in last Friday’s labor report. Nonfarm payrolls fell by 701,000 jobs in March, with data covering the period through mid-month even before the widespread shutdowns went into effect. The drop was significantly worse than the expected 100,000 decline in payrolls. The unemployment rate jumped to 4.4% from 3.5% in February, also worse than anticipated. Additionally, the number of Americans applying for unemployment benefits surged in the last two full weeks of March, reaching about 10 million over the period, amid shutdowns across the country due to the coronavirus outbreak. A record 6.65 million people filed jobless claims in the week ended March 28, after 3.31 million claims in the previous week. Investors should expect economic reports that will show a sharp economic downturn in the weeks and months ahead.

In the week ahead, the fight against the coronavirus outbreak will remain at the forefront, with governments focused on reducing the physical and economic impacts. European Union finance ministers meet virtually to discuss economic strategies to fight the impacts of the pandemic. The Federal Open Market Committee releases minutes from its special March 15 meeting, during which it cut rates in a surprise move between regularly scheduled meetings, giving investors another look into the rationale behind the FOMC’s actions. Other highlights to the economic calendar include the JOLTS job openings report (though it comes a month in arrears), PPI and CPI releases, and jobless claims.

As always we'll be watching and reporting back to you next week.