Need to Know: The economy may already have achieved what marked the bear-market lows of 1970, 1974, 1982, 1990, 2001 and 2009

Need to Know

Visitors wearing face masks to protect against the new coronavirus stand widely spaced in line as they wait to enter the Forbidden City in Beijing, May 1, 2020. The Forbidden City reopened on Friday, China’s May Day holiday, to limited visitors after being closed to the public for more than three months during the coronavirus outbreak.


Associated Press

What a month. In the midst of a pandemic lockdown that has seen some 30 million Americans file for unemployment benefits, and millions more around the globe, the S&P 500
US:SPX
surged 12.7% in April. That is the best monthly performance since Jan. 1987, and the best April since the Great Depression.

Jeff Hirsch, editor of the Stock Trader’s Almanac and chief market strategist at Probabilities Fund Management, says the lows from late March are likely to hold. He presents this chart on weekly jobless claims and bear markets, and finds the big bear market lows of 1970, 1974, 1982, 1990, 2001 and 2009 were marked by the peak in jobless claims.

The most recent claims figure of 3.8 million for the week ending April 25 is well off the peak of 6.9 million. But that doesn’t mean he’s optimistic about the market.

“Even if March 23 turns out to be the ultimate low (and it does look like it) that does not mean the next six months or more are going to be pure rally to new highs. In fact new highs are not likely for quite some time and we will likely retest the lows,” he says. “There are some promising vaccines and treatments in the works and states are beginning to reopen, but there is no way of knowing when our lives and economy will return to some semblance of normal.”

The buzz

Apple
US:AAPL
fell 3% reported a dip in profits for the fiscal second quarter but growing sales. The technology company said it would not give third-quarter guidance due to uncertainty caused by the pandemic.

Amazon
US:AMZN
dropped nearly 5% as it warned it might not make money in the current quarter as the e-commerce company adapts to the coronavirus. First-quarter revenue topped expectations.

Disinfectant maker Clorox
US:CLX
also topped expectations on virus-related demand.

The oil sector will also be in the spotlight as Exxon Mobil
US:XOM
and Chevron
US:CVX
both announced they would cut capital spending.

The key economic data will be release of the Institute for Supply Management’s manufacturing index for April, with automobile makers reporting vehicle sales throughout the day.

President Donald Trump on Thursday suggested tariffs could be a way he could punish China over the coronavirus outbreak, when responding to a question about a published report that said defaulting on Treasury obligations that China owns was a possibility. Various other White House officials have publicly said the U.S. won’t default.

The market

U.S. stock futures
US:ES00
were pointing in the same direction as the trader adage, “sell in May and go away,” with futures on the Dow Jones Industrial Average
US:YM00
down 399 points.

Many overseas markets were shut in observance of the May 1 holiday but markets in Tokyo
JP:NIK,
London
UK:UKX
and Sydney
AU:XJO
slumped.

Crude-oil futures
US:CL
turned higher, while gold
US:GC00
futures slipped.

The chart

Joe Davis, Vanguard global chief economist, talks of a two-phase recovery from what’s he dubbed the Great Fall. “Getting business activity back to where it was before the pandemic could take two years — a U-shaped recovery — given shocks to both supply (stemming from containment measures) and demand (stemming from consumers’ likely reluctance to immediately resume face-to-face activities such as dining out, traveling, or attending large events). Some parts of the economy will recover more quickly than others. But it is unlikely we’ll see the labor market as tight as it had been before 2023, which means the U.S. Federal Reserve may be on hold near 0% interest rates for that long as well,” he writes.

Random reads

Now it’s getting serious — Key West, Florida, will skip the Ernest Hemingway Look-alike contest this year.

NASA says Antarctica and Greenland lost enough ice to fill Lake Michigan.

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