THE WEEK ON WALL STREET
An open-ended commitment by the Federal Reserve to support American businesses and capital markets along with the passage of a $2 trillion aid package improved investor sentiment and drove a strong rally in stock prices. The Dow Jones Industrial Average jumped 12.84%, while the Standard & Poor 500 gained 10.26%. The Nasdaq Composite index rose 9.05% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, increased by 12.03%.
A stunning string of Federal Reserve initiatives and the passage of a $2 trillion aid bill buoyed stocks this week, with the Dow Jones Industrial Average jumping by over 11% on Tuesday, its best day since 1933. Stocks continued to strengthen the following day, registering their first back-to-back gains since February. Despite a record 3.28 million jobless claims, stocks added to their gains for a third straight day. Stocks gave back some gains on the final day of trading to end an otherwise welcomed week of positive price action.
A SHIFT IN THE CONVERSATION
The conversation around the domestic spread of the coronavirus has been centered on “flattening the curve,” with closures of local businesses and schools, a shift to working from home, and appeals for social distancing. Hitting the pause button on the U.S. economy, however, has had its consequences, including massive job losses, sharp declines in business revenues, and disarray in the capital markets. This week the conversation shifted to include how to restart the economy amid a pandemic that has not peaked.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Consumer Confidence.
Wednesday: Automated Data Processing (ADP) Employment Report. Purchasing Managers Index (PMI): Manufacturing Index. Institute for Supply Management (ISM) Manufacturing Index.
Thursday: Jobless Claims for Unemployment. Factory Orders.
Friday: Employment Situation Report. Purchasing Managers Index (PMI): Services Index.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Tuesday: Conagra Brands (CAG), McCormick & Co. (MKC)
Thursday: Walgreens Boots (WBA), Chewy (CHWY)
Friday: Constellation Brands (STZ)
It’s not clear what the rally this past week means for the market going forward. Absent such clarity, markets are likely to remain volatile in the near term, requiring investors to be patient with their long-term investments and wait as calmly as possible for time to answer the big questions overhanging today’s market. While the government’s response has been swift, we still don’t know what the economic fallout from this will be. Obviously, the sooner everyone can get back to work the sooner the recovery can begin.