Week 24 in Brief
How did the major indexes perform?
All three US indices finished the week up with volatility down following Thursdays’ market sell-off. Stocks suffered their sharpest daily decline in three months on Thursday, as grim economic forecasts and a worrisome uptick in new coronavirus cases rattled investors’ confidence. The market had been recovering and by Monday, the S&P 500 had climbed about 45% from its lows in late March and recouped all of its losses for the year. But this changed this week when the Fed provided a ‘sober’ economic assessment.
- The Dow Jones Industrial Average gained 477.37 points, or 1.9%, to close at 25,605.54, after touching an intra-session peak of 25,965.55 and a low of 25,183.
- The S&P 500 index added 39.21 points, or 1.3%, at 3.041.31, off its intraday peak at 3,088 but also off its low at 3,003.10.
- The Nasdaq Composite Index climbed 96.08 points, or 1%, to 9,588.81, after briefly slipping into negative territory at 9,485.04.
- On Thursday all three indexes saw their sharpest one-day drops since March 16. The S&P 500 and the Dow finished at their lowest levels since May 26, while the Nasdaq ended at its lowest since May 29.
- For the week, the Dow lost 5.55%, the S&P 500 fell 4.8%, and the Nasdaq was off 2.33%.
- All sectors ended the week lower. The energy was the worst performer, losing 11.07% in its worst week since March. Tech was the week’s top performer after falling just 2.03%.
- Boeing was one of Friday winners, climbing by more than 11% and closing at $189.51.
- Hertz filed for bankruptcy protection last month. But as investors improbably piled into its shares this week, the car rental pioneer is trying to take advantage. The company wants to sell up to $1 billion in new stock.
European stocks rallied despite investor fears of a second coronavirus wave in the US and a record contraction in the UK economy.
- The pan-European Stoxx 600 closed 0.1% higher provisionally, with most sectors and major bourses in positive territory. Britain’s FTSE 100 finished with a 0.5% gain, having earlier rallied as much as 1.6% despite figures showing the UK economy’s steepest monthly contraction on record. In Germany the DAX ended 0.2% lower, having been up around 1.7% at midday, while France’s CAC 40 slipped back from an intraday gain of more than 2% to close higher by just 0.5%.
- The British economy shrank by 20.3% in April compared with the month before, a record contraction that indicated devastation in many parts of the economy. Manufacturing fell by 24.3%, led by a 90% fall in the sector that includes motor vehicles.
- Three of the largest airlines operating from Britain - British Airways, EasyJet, and Ryanair - have filed a legal challenge to the 14-day quarantine imposed by the British government on Monday on many travellers arriving in the country.
Asian shares were moderately lower Friday compared to the US partly because markets in the region have not seen massive gains in recent weeks.
- Japan’s Nikkei 225 plunged on the open, but only ended down 0.8%, South Korea’s Kospi lost 2%, Hong Kong’s Hang Seng shed 1.1%, while the Shanghai Composite shed 1 point to 2,919.74.
- Meanwhile, Australia’s S&P/ASX 200 skidded 1.9% to 5,847.80 as India’s Sensex declined 1.7% to 32,970.36.
- The GBP was trading higher against both USD and EUR on Friday, despite the release of data that showed the UK economy suffered a 24.5% decline in GDP year-on-year in April.
- USD was up against the yen, last trading up 0.4% to 107.325 USDJPY, and up 0.7% against the CHF at 0.9511.
- EURUSD fell 0.6% to 1.1228, sliding from 1.1422, the three-month high it reached on Wednesday.
- Meanwhile, the dollar index climbed 0.5% to 97.33, after earlier hitting a one-week high.
- Oil was little changed on Friday and headed for a first weekly fall since April as new U.S. coronavirus cases spiked, stoking fears of a second wave of the virus hitting fuel demand. West Texas Intermediate settled 8 cents lower at $36.26 per barrel, while Brent crude gained 18 cents to settle at $38.73, having tumbled 7.6% on Thursday after US data showed crude inventories rose to a record high.
- Gold prices gained on Friday as investors bought the safe-haven metal as fears of a fresh wave of coronavirus cases added to the gloomy economic outlook from the U.S. Federal Reserve. Spot gold was up 0.4% to $1,734.66 per ounce and has jumped about 3% so far this week, heading for its biggest gain since the week of April 10. U.S. gold futures rose 0.2% to $1,742.80.
- Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.5% to 1,135.05 tonnes on Thursday, its highest in over seven years.
- The yield on US 10-year Treasuries, which moves inversely to bond prices, rose to 0.687%, after slipping by as much as 0.3 percentage points this week.
The week Ahead?
- Investors will weigh the potential positives of a reopening economy against the possibility of the second wave of coronavirus infections that threatens economic progress.
- The market is also looking forward to Fed Chairman Jerome Powell’s Congressional testimony on Tuesday and Wednesday.
- Data on retail sales for May will be released on Tuesday. Retail sales are typically a barometer for consumer spending, and in addition to jobs, data may show a very slight improvement over April as states reopened.