Markets “In a Nutshell” for April 21, 2020
Investment Week at a Glance
Stocks finished mostly up for the week. The Dow Jones Industrial Average was up 2.21%, the S&P 500 rose 3.04%, the New York Stock Exchange Composite (2,000 stocks) rose 0.64% and the average investors index (Value Line Index) was down 0.61%. Foreign stocks (DJ Global ex U.S.) were up 0.97%. Bond prices were higher for the week, with the 10-year U.S. Treasury ending the week 13 basis points lower at 0.63%. (Data source: Wall Street Journal)
Grim Data Piles On
The grim economic data continues to pile on as investors are finally able to digest exactly how badly the economy is getting hit right now and the data is historically bad. The initial unemployment claims report this week showed over 5 million new unemployed workers filed for assistance, bringing the total from the past three weeks to over 22 million. Retail sales dropped almost 9% and data on manufacturing and energy have begun to shed light on some of the more economically dependent jobs in the labor force. While select companies, like Amazon, are beginning to bring more workers on to increase distribution, the monthly unemployment picture for April, which will give a much broader look at the economic impact, will be one of the worst the U.S. has seen since the 1930’s. (Barron’s)
Small Caps Left Out of Rally
While large companies’ stock prices have begun to bounce back, small publicly traded companies have been left behind so far and may signal that the recovery hasn’t begun yet. Historically, small cap companies are much more volatile and are much more affected by the economic slowdown, but in turn, tend to lead the stock market back in a recovery. Small cap stocks actually ended the week down almost 1%, where large cap stocks rose over 2%. Until small companies’ stocks begin to sustainably lead its larger peers, skepticism will remain on whether stocks are actually in a recovery or not.
In a good sign that next steps are beginning to be taken, the federal government, as well as regional coalitions of states, are getting together to plan on exactly how the country will begin to open back up. Issues still remain as a vaccine and widely available testing kits act as large hurdles to bringing the country back to work. Gilead Sciences reported at the end of the week that its experimental drug to combat the virus is performing well in trials, but it is still very unclear when the earliest it is possible it could be available, if it even is effective. Testing nationwide remains an issue as well, but seems much more likely to be solved first and could be the key to opening up parts of the country, as detailed in federal guidance. (Barron’s)
Within the S&P 500, the largest 500 stocks in the U.S., the largest 100 of those 500 fell on average 16% since the peak on February 19th. What was the average drop of the smallest 100 stocks in the S&P 500?
Have a Great Week!
4) The smallest 100 stocks within the S&P 500 have fallen 35% since February 19th, almost twice as much as the largest 100. (Barron’s).