Before The Bell
It was a dazzling April on Wall Street, with the stock market, which has suffered a massive meltdown from late February to late March, putting on its best performance since the 1980s, as the leading indexes all scored big wins. Optimism that the state-by-state lockdowns and the broad-based social distancing policies that had been enacted would help to ease some of the pain from the COVID-19 pandemic and that the worst of this nation’s severe economic contraction would run its course over the summer, contributed to the strong gains.
However, after the Dow Jones Industrial Average had sprinted ahead on Tuesday, with an advance of 532 points, on hopes that Gilead Sciences (GILD) had developed an effective treatment for the coronavirus, fell back yesterday morning as a series of dour economic releases brought investors back to earth. Specifically, an hour before the stock market opening, we received data on weekly jobless claims, personal income, and consumer expenditures.
Taken one by one, the jobless claims report showed an increase of 3.84 million for the seven days ended on April 25th. That brought the six-week total of employment losses to more than 30 million. Although the week’s tally was down from the prior seven-day figure, the total was still above consensus. Also, surveys issued by the U.S. Commerce Department showed a 2.0% drop in personal income and a 7.5% plunge in personal consumption expenditures.
So, stocks opened the day lower, and by just after noon on the East Coast, the blue chips were off by almost 450 points. Things were somewhat better on the NASDAQ, reflecting strength in the technology space. But even here, weakness emerged as the afternoon began in earnest, and that composite would finish lower, as well. The S&P 500 also would head downward. However, the big casualty remained the Dow, which would spend most of the remainder of the session lower by some 300-350 points.
As we headed toward the finish line, the market would pare its deficits for a time, but still sink back to end matters with moderate, but still meaningful losses. All told, the Dow would close off by 288 points, but still finish April with a strong comeback. Now, investors will need to await more economic data. And investors will not have to wait long, as the Institute for Supply Management will a little later release its latest survey on manufacturing activity. That issuance is expected to show a sizable contraction.
Finally, the next few days will see data on non-manufacturing activity and then a week from today, the monthly report on employment and unemployment. Steep setbacks are the overall forecast. As for the day ahead, after slumping last night, early indications this morning are that the equity markets will head lower, buffeted by indicated setbacks in the shares of Apple (AAPL) and Amazon (AMZN).
– Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in AAPL.
