Markets fell last week as COVID cases rose and Federal Reserve Bank (FRB) actions stand to restrict banks. Do these short-term factors indicate a coming storm?
Monday
Markets advanced about .4% to start the week. It was focused largely on Apple’s decision to start using their own processors in some devices. This improved future profitability for the company.
Tuesday
Monday night Peter Navarro, advisor to the President, indicated that the China trade deal was over. This statement sent futures markets into chaos overnight. All was right with the world by the morning, as markets rallied on news that he was mis-quoted. Markets ended the day marginally higher.
Wednesday
The day started down strongly as a jump in COVID cases in Florida has put strain on investor sentiment. The optimism of New York’s re-opening has been called into question. Oil inventories came in higher than expected, putting pressure on energy shares as well. In all, this led to a trading day where markets closed nearly 3% down.
Thursday
Markets opened in the red Thursday as a slew of economic data came out. Initial jobless claims continue to persist at the 1.5M mark per week. It was expected again to decrease to 1.3M. The latest revision of 1st GDP data remained at -5.0%. Core durable goods orders impressed as they were expected to increase by 2.5% and they grew by 4%. Markets ended up climbing approximately 1%.
Friday
News broke Thursday night that the FRB will be restricting dividend payments from Financial institutions. This announcement started a snowball of losses for Friday. The S&P 500 ended up falling 2.42% on the day.
Conclusion
In all, the S&P 500 shed 2.87% across a very hectic week. Volatility increased to 35.25 last week (VIX). As the quarter draws to a close the focus will begin to shift to quarterly earnings for GDP for Q2. A strong contraction is expected as the economy was all but shuttered for April and part of May. As case counts increase across the nation, focus may shift towards how this will impact Q3. All said, there is reason to be cautious in coming months.
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