In this week’s recap: Continued COVID-19-related volatility in the markets as oil and energy prices sink in reaction.
Weekly Economic Update
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%.1-3
Stock prices appeared to find some firmer footing early in the week, but then continued to trend lower as investors assessed the virus’ economic toll. Manufacturing output fell into contraction territory, while jobless claims soared with a record 6.6 million Americans filing for unemployment benefits.4
The market’s worst day followed President Trump’s announcement that he was extending the social distancing guidelines, adding that conditions were likely to get worse before getting better.
Oil prices soared on Thursday after comments by President Trump that Russia and Saudi Arabia would be cutting oil production and on news that China would be buying oil to add to its strategic reserve. Stock prices were pulled higher by the rebound in oil prices, but turned lower once again, falling under the weight of weak economic data.
Overlooked Troubles in the Oil Patch
The health and economic impact of COVID-19 has dominated the news cycle, and appropriately so. But a less-publicized story is the building stress in America’s energy industry.
Oil prices are depressed, which has left many U.S. producers that have substantial debt obligations in a precarious financial position. Just this week, a publicly traded oil company filed for bankruptcy protection, a potential precursor of more to follow.
Widespread failure in the oil patch may aggravate economic problems through the elimination of high-paying jobs, lower capital expenditures, and capital losses for bondholders.
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
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.
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1 – The Wall Street Journal, April 3, 2020.
2 – The Wall Street Journal, April 3, 2020.
3 – The Wall Street Journal, April 3, 2020.
4 – The Wall Street Journal, April 2, 2020.
The Wall Street Journal, April 3, 2020.
The Wall Street Journal, April 3, 2020.
Treasury.gov, April 3, 2020.