Monthly Market Insights | April 2020
The spread of COVID-19 sent stocks tumbling, as the health and economic costs of the pandemic continued to mount.
The Dow Jones Industrial Average dropped 13.74 percent, while the Standard & Poor’s 500 Index fell 12.51 percent. The NASDAQ Composite lost 10.12 percent.1
Stocks moved sharply lower early in the month, as investors grappled with a string of troubling coronavirus headlines. Meanwhile, the markets kept an eye on the evolving coronavirus pandemic, while digesting both the Super Tuesday results and a drop in oil prices.
On March 15, the Federal Reserve cut interest rates to zero and announced several actions designed to support households and businesses. However, markets were unfazed by the Fed’s aggressive move, electing to instead focus on the contraction of economic growth that many are expecting.
As prices fell, the hospitality, real estate, and travel industries felt the immediate impact of the newly instituted social distancing rules. At the same time, financial stocks suffered losses on lower interest rates, while energy prices sunk to new lows in part due to lower oil prices.
The CARES Act
As the month came to a close, the passage of the $2 trillion CARES Act led to a historic jump in stocks and provided some much-needed support to the market. Stocks registered their best weekly performance since 1933, with the S&P 500 surging over 10 percent.2
However, stocks were mixed in the final days of trading, leaving the markets with losses for the month.
All industry sectors ended lower in March, with declines in Communication Services (-12.69 percent), Consumer Discretionary (-13.58 percent), Consumer Staples (-4.12 percent), Energy (-36.78 percent), Financials (-19.48 percent), Health Care (-3.93 percent), Industrials (-18.24 percent), Materials (-13.37 percent), Real Estate (-12.97 percent), Technology (-7.32 percent), and Utilities (-7.14 percent).3
What Investors May Be Talking About in April
Now that coronavirus testing appears to be ramping up in the United States, investors will be closely watching the status of new cases of COVID-19.
Keeping a Watch on Economic Data & Earnings
Investors are also expected to watch for fresh economic data that may provide some insight into the current level of economic activity. One example may be the weekly job claims for unemployment insurance, which could provide a preview of the overall health of the labor market in advance of the monthly jobs report.
Throughout the month, companies will be preparing their financials to report on first-quarter earnings. The reports may provide more information about how deeply firms have been impacted by the overall economic slowdown.
In any case, investors should brace for continued volatility, as market watchers believe it may take some time to recover from the pandemic’s impact.
Stocks weakened globally in reaction to the growing COVID-19 pandemic, with the MSCI-EAFE Index dropping 13.88 percent.4
European markets were hit hard. France lost 17.21 percent; Germany, 16.44 percent; the United Kingdom, 13.74 percent. Italy also dropped 22.85 percent.5
Pacific Rim stocks were more mixed. Australia fell 21.18 percent, while Japan lost a more modest 10.53 percent, and Hong Kong, 9.67 percent.6
Gross Domestic Product
The final reading of GDP growth rate for the fourth quarter came in at 2.1 percent.7
Employers added 273,000 jobs in February, a number that came in higher than economists estimated. While the number does evidence a healthy labor market, it also reflects a period in which the COVID-19 impact in the U.S. was in its early stages. The unemployment rate stood at 3.5 percent.8
Retail sales declined 0.5 percent, a number below the 0.1-percent increase anticipated by economists.9
Industrial production rose 0.6 percent in February.10
Housing starts declined 1.5 percent. Year-over-year, housing starts were 39.2 percent higher.11
Existing home sales jumped 6.5 percent, with tight inventories leading to an 8.0-percent year-over-year rise in the median sales price to $270,100.12
New home sales leaped 7.9 percent, reaching levels not seen since June 2007.13
Consumer Price Index
Prices of consumer goods rose 0.1 percent in February. Over the last twelve months, the CPI has increased by 2.3 percent.14
Durable Goods Orders
Orders of long-lasting goods rose 1.2 percent, a surprise jump. Economists had expected a drop of 0.8 percent.15
On Sunday, March 15, the Federal Open Market Committee (FOMC) announced a rate cut in response to fast-changing market conditions stemming from the coronavirus pandemic.
The Fed cut its benchmark interest rate to nearly zero and announced several actions designed to support the flow of credit to households and businesses. The Fed maintained activity throughout the month with a string of new initiatives to support the U.S. economy and financial markets.16
By the Numbers
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance.
The forecasts or forward-looking statements are based on assumptions, may not materialize and are subject to revision without notice.
The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. The S&P 500 Composite index is an unmanaged group of securities considered to be representative of the stock market in general. The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies. The Russell 1000 Index is an index that measures the performance of the highest-ranking 1,000 stocks in the Russell 3000 Index, which is comprised of 3,000 of the largest U.S. stocks. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial professional for additional information.
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1. The Wall Street Journal, March 31, 2020
2. The Wall Street Journal, March 27, 2020
3. FactSet Research, March 31, 2020
4. MSCI.com, March 31, 2020
5. MSCI.com, March 31, 2020
6. MSCI.com, March 31, 2020
7. CNBC.com, March 26, 2020
8. The Wall Street Journal, March 6, 2020
9. The Wall Street Journal, March 17, 2020
10. MarketWatch.com, March 17, 2020
11. CNBC.com, March 18, 2020
12. The Wall Street Journal, March 20, 2020
13. MarketWatch.com, March 24, 2020
14. Reuters.com, March 11, 2020
15. CNBC.com, March 25, 2020
16. FederalReserve.gov, March 2020
17. Library of Congress, 2020
18. Benjamin Franklin Historical Society, 2020
19. American Library Association, 2019
20. Mental Floss, 2019