Weekly Expert Market Perspectives Park Avenue Securities PAS

Re-acceleration in Coronavirus Cases Takes Market Lower

The first few days of the week started off great, but the back half of the week saw heavy selling as governments and companies were forced to respond to a rise in new coronavirus cases with preemptive measures. The Dow Jones Industrial Average fell 3.1%, followed by losses in the S&P 500 (-2.9%), Russell 2000 (-2.8%), and Nasdaq Composite (-1.9%).

This week's biggest decliners were the S&P 500 energy (-6.5%), financials (-5.3%), and communication services (-5.2%) sectors. The information technology sector declined just 0.5%. 

There was an onslaught of negative-sounding developments that heightened concerns about the pace of a recovery, which ultimately put a stop to the Nasdaq's eight-session winning streak. Notable headlines included the following:

  • The U.S. reported daily highs in new coronavirus cases amid an acceleration in more younger people getting infected. 
  • New York Governor Cuomo announced that the tri-state area will be imposing a 14-day quarantine on travelers coming from coronavirus hotspots.
  • The EU was reportedly considering its own restrictions on U.S. travelers, banning them from entering when it relaxes its border restrictions on July 1.
  • Texas and Florida scaled back reopening efforts. 
  • Apple (AAPL) re-closed stores in Houston and Florida, and Walt Disney (DIS) postponed the reopening date of Disneyland past July 17.

Re-thinking the reopening strategy could temper the rebounding economic data that have contributed to the market's recovery. The latest May data showed new home sales rebound 16.6% m/m to a seasonally adjusted annual rate of 676,000 (Briefing.com consensus 635,000), durable goods orders rebound 15.8% m/m, and personal spending rebound 8.2% m/m (Briefing.com consensus +7.0%). 

The re-acceleration of cases also threatens to undo some of the progress in the labor market that the government spent a lot of money to stabilize. Weekly jobless claims for the week ending June 20 decreased by just 60,000 to 1.480 million (Briefing.com consensus 1.250 million).

In the financials space, regulators relaxed some Volcker Rule restrictions, allowing banks to increase their investments in a broad set of venture capital funds. Out of an abundance of caution, though, the Fed will require banks to suspend share repurchases and cap dividend payments in the third quarter following its stress tests results.

Separately, social media stocks succumbed to heavy selling at the end of the week after more companies halted ad spending on Facebook (FB). Shares of Facebook fell 9.5% this week. 

U.S. Treasuries finished the week with modest gains. The 2-yr yield declined three basis points to 0.16%, and the 10-yr yield declined six basis points to 0.64%. The U.S. Dollar Index declined 0.2% to 97.45. WTI crude fell 3.2% (-$1.35) to $38.49/bbl.

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1 This material contains the current opinions of the presenter but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice. Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. The Guardian Life Insurance Company of America, New York, NY. © Copyright 2020 The Guardian Life Insurance Company of America. 

ast performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Data and rates used were indicative of market conditions as of the date shown and compiled by Briefing.com. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

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2020-104414 (Exp 9/20)