In this week’s recap: Promising drug trials and plans to ease public lockdowns turn thoughts to economic normalization.
Weekly Market Commentary |Presented by Sterling Wealth Advisors |May 4, 2020
Stock prices ended the week slightly lower, despite news of positive results from a test trial of a COVID-19 drug treatment and several states easing their economic lockdowns.
The Dow Jones Industrial Average slipped 0.22%, while the Standard & Poor’s 500 lost 0.21%. The Nasdaq Composite Index dropped 0.34%. The MSCI EAFE Index, which tracks developed stock markets overseas, rose 4.34%.1,2,3
Light at the End of the Tunnel?
Investors were emboldened last week by two significant developments: a quickening in the pace of state re-openings and positive results from a clinical trial of a treatment for COVID-19. These developments turned investor focus toward economic normalization and away from the economic destruction that has occurred.
Market optimism was also supported by earnings reports early in the week, which showed that some companies were navigating reasonably well through the crisis. But stocks retreated on Friday as traders reacted to mixed earnings from two tech titans. The two firms offered a reminder that even the strongest companies have not escaped the economic impact of the pandemic.
Worries over possible new China trade tariffs also weighed on stocks as the trading week came to a close.
It was a busy week for corporate earnings reports. So far, the earnings season has been mixed; it has provided some clarity, though, about the impact of COVID-19 on businesses.
With 193 of S&P 500 companies reporting, 65% have checked in with results ahead of consensus Wall Street estimates. Among the better-performing sectors to date were Technology and Consumer Staples. Financials were among the laggards.4,5,6
Despite the continued shutdown of businesses nationwide, stocks staged a powerful rebound in April, leading some to wonder if Wall Street is disconnected from Main Street. But market watchers are quick to point out that Main Street may not be as disconnected as it appears. April’s rally was led by a group of very large companies, with over 75% of stocks in the S&P 500 trading below their 200-day moving average.7
TIP OF THE WEEK
Before accepting a college loan, be sure that you and your student understand the consequences of a default.
Monday: Factory Orders.
Wednesday: Automatic Data Processing (ADP) Employment Report.
Thursday: Jobless Claims.
Friday: Employment Situation Report.
Source: Econoday, May 1, 2020
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Monday: Skyworks Solutions (SWKS), Tyson Foods (TSN).
Tuesday: Walt Disney (DIS), Electronic Arts (EA), Prudential Financial (PRU), Illinois Tool Works (ITW), Sysco (SYY).
Wednesday: Square (SQ), CVS Health (CVS), General Motors (GM), Shopify (SHOP), T-Mobile (TMUS).
Thursday: Bristol-Myers (BMY), Anheuser-Busch (BUD), Becton Dickinson (BDX), Danaher Corp. (DHR).
Source: Zacks, May 1, 2020
Companies mentioned are for informational 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 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. Companies may reschedule when they report earnings without notice.
QUOTE OF THE WEEK
“The greatest obstacle to discovery is not ignorance – it is the illusion of knowledge.”
THE WEEKLY RIDDLE
Can you name three words in everyday English that begin with the letters “dw”?
LAST WEEK’S RIDDLE: Can you name two perennial vegetables? (That is, vegetables that don’t need to be replanted and that can live on to produce in a future growing season?)
ANSWER: Asparagus and rhubarb.
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1 – The Wall Street Journal, May 1, 2020
2 – The Wall Street Journal, May 1, 2020
3 – The Wall Street Journal, May 1, 2020
4 – NASDAQ, April 30, 2020
5 – NASDAQ, April 30, 2020
6 – NASDAQ, April 30, 2020
7 – Index Indicators, May 1, 2020
The Wall Street Journal, May 1, 2020
The Wall Street Journal, May 1, 2020
Treasury.gov, May 1, 2020