The Week on Wall Street
Modest declines in stock prices this week masked the
volatile inter- and intraday price swings as investors digested poor economic data and a warning from
the president that the worst days of the COVID-19 pandemic may still lie ahead. The Dow Jones
Industrial Average slipped 2.70%, while the Standard & Poor's 500 dropped 2.08%. The Nasdaq
Composite Index declined 1.72%. The MSCI EAFE Index, which tracks developed overseas stock markets,
slid 2.76%.[1][2][3]
The Quarter in Brief
The spread of COVID-19 sent stocks tumbling in the first
quarter as health and economic costs of the pandemic began to mount. Stocks remained under pressure,
despite the Federal Reserve's lowering of short-term interest rates and the government's stimulus
efforts through the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act. The DJIA sank
23.2% and the S&P 500 dropped 20% on the quarter. The COVID-19-related volatility in the market
has left all but a handful of sectors in a prolonged period of uncertainty. With millions of Americans
staying at home in an effort to "flatten the curve" of COVID-19's impact on people, businesses are
coping with closing for the duration, altering practices, or facing staffing issues.[4]
Oil Turbulence
The oil market dominated the commodities headlines during the
first quarter. The failure of Russia to join Saudi Arabia in supporting lower oil production targets
left Saudi Arabia fuming and responding with an announcement of its intention to raise oil output. Oil
prices plummeted on the news, contributing to the stock market's woes. While lower oil prices
represent a boon to consumers in the form of lower gasoline prices and a relief to companies with high
energy consumption (e.g., airlines, chemical), they also pose a risk to the American energy industry.
Should low oil prices persist, it may lead to lower capital expenditures, labor force reductions, and troubles in the credit markets as less-capitalized companies struggle to meet their debt obligations. As the quarter came to a close, there was some speculation that President Trump would take a larger role in working with Russia and Saudi Arabia on production targets.
What's Next
It is difficult to see, in the middle of the COVID-19 epidemic,
exactly what the full impact will be. Suffice it to say, the cost in human terms has been staggering
so far and seems certain to affect at least part of the coming quarter. As people and businesses adapt
to extended periods of quarantine, the only thing that seems clear is that no aspect of American life
will be unchanged. CARES Act stimulus checks are on the way for millions of Americans. The Federal
Reserve has lowered interest rates. Further measures are being considered at the state and federal
levels. The only two things that seem truly certain are that action is being taken and that we'll all
breathe a sigh of relief once this crisis subsides.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: JOLTS (Job Openings
and Labor Turnover) Survey.
Wednesday: FOMC (Federal Open Market Committee)
Minutes.
Thursday: Jobless Claims for
Unemployment.
Friday: Consumer Price Index.
Source: Econoday, April 3, 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
Wednesday: Delta
Airlines (DAL)
Thursday: Rite-Aid (RAD)
Friday: First
Republic Bank (FRC)
Source: Zacks, April 3, 2020
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The Wall Street Journal, April 3, 2020. 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 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.
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The Wall Street Journal, April 3, 2020. 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 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.
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The Wall Street Journal, April 3, 2020.
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CNN.com, March 31, 2020.