The stock market had its good days this week and its bad days. Unfortunately, the losses on the bad days outweighed the gains on the good days, so it was a losing week overall for the major indices.
The small-cap and mid-cap stocks were the hardest hit, yet the large-cap stocks also felt their share of pain as investors sold into recent strength, unnerved by the expanding economic, medical, social, and psychological impact of COVID-19, as well as misgivings about the U.S. economy’s rebound potential.
Oil prices jumped off the chart as one of the few winning standouts, soaring as much as 35% on the back of reports that Russia and Saudi Arabia could be close to agreeing to a production cut soon to stem the slide in oil prices. That speculation triggered a short-covering rally that translated into a rare week in which the energy sector (+5.4%) stood out as the best-performing sector.
The weakest areas were the utilities (-7.1%), financial (-6.8%), real estate (-6.2%), consumer discretionary (-4.7%), and industrials (-4.5%) sectors.
The stock market overall had a generally risk-averse mindset, evidenced by the outperformance of the consumer staples (+3.5%) and health care (+2.0%) sectors. The latter was underpinned by news out of Abbott Labs (ABT) early in the week that it has launched a point-of-care test that can detect COVID-19 in as little as five minutes and word from Dow component Johnson & Johnson (JNJ) that it identified a leading COVID-19 drug candidate that could be ready for human clinical studies as early as September.
Those positive developments notwithstanding, COVID-19 concerns soon ramped up again following a contention from members of the White House coronavirus task force that there could possibly be anywhere between 100,000 and 240,000 deaths in the U.S. linked to COVID-19. The latest data from Johns Hopkins show 6,921 deaths in the U.S. so far.
That sobering contention coupled with President Trump’s observation that the next two weeks could be a “very, very painful” time for the U.S. caused some mid-week pain for the market that culminated with a 7.0% decline in the Russell 2000 on Wednesday alone.
The real pain, though, was seen in the labor market.
Weekly initial jobless claims soared to a record 6.648 million, bringing the two-week total for jobless claims to 9.989 million. Those claims, however, were largely absent in the March employment report, which was based on the employment survey conducted the week of March 12. Even so, it was noted on Friday that nonfarm payrolls declined by 701,000 positions in March and that the unemployment rate increased to 4.4% from 3.5%.
In actuality, the unemployment rate is probably closer to 10% at this juncture. That thought kept the market in check on Friday along with increased concerns that the V-shaped economic recovery many are hoping for won’t be seen.
The arbitrary decision by states to issue stay-at-home orders, reports of confusion involving the application process for obtaining small business relief under the CARES Act, retailers extending store closures, airlines cutting capacity further, and reports discussing a second wave of COVID-19 cases popping up in China were other factors that exacerbated concerns about the U.S. economy’s rebound potential.
The underperformance of the small-cap and mid-cap stocks, which have a predominately domestic orientation, stood out as a manifestation of those concerns.
Source: Briefing Investor