Equities staged a much-needed rally over the past several days. For the week, the Dow Jones Industrial Average gained 12.79 percent, the S&P 500 Index 10.26 percent and the Nasdaq 9.17percent.
Utilities, industrials, energy, financials, technology and consumer discretionary all outperformed. SPDR Utilities (XLU) rallied 17.31 percent, SPDR Industrials (XLI) 15.68 percent, SPDR Consumer Discretionary (XLY) 12.09 percent, SPDR Energy (XLE) 11.96 percent, SPDR Financials (XLF) 11.94 percent and SPDR Technology (XLK) 10.70 percent.
Investors should be prepared for continued volatility. The decline that began in late February was one of the fastest drops ever recorded. The ensuing 20 percent rally took only four days. Large and swift moves in either direction will continue. Focus on long-term objectives and resist overreacting to short-term volatility.
The Federal Reserve continued to take measures to support the market. It has already committed to buying at least $700 billion in assets: $500 billion in U.S. treasuries and $200 billion in mortgage backed securities. The Fed restarted the Term Asset-Backed Securities Loan Facility (TALF) created in 2008. It announced new lending programs for small businesses and consumers, worth up to $300 billion. It will help states and localities by purchasing municipals bonds. The Fed will purchase corporate bonds and ETFs.
Bond funds rallied on the news. LQD gained 14.65 percent on the week, Invesco Senior Loan (BKLN) 11.04 percent, iShares iBoxx High Yield Corporate Bond (HYG) 10.39 percent and Fidelity Corporate Bond (FCOR) 10.29 percent.
The passage of the $2 trillion stimulus bill offers direct cash payments to Americans, $500 billion in loans for corporations, aid for small businesses, state and local governments, hospitals and expanded unemployment benefits.
Crude oil remained under pressure this week with Saudi Arabia. West Texas Intermediate crude slid more than 9 percent to $21.84 per barrel.
Lululemon (LULU) delivered solid earnings this week, but citing the coronavirus complications, it refused to give guidance for the coming quarter. We expect most companies will similarly refuse guidance when earnings season begins in mid-April.