Market Perspective for April 17, 2020

The Nasdaq rallied 7.05 percent this week, the S&P 500 4.59 percent, and the Dow Jones Industrial Average 3.84 percent. Investors reacted positively to the potential opening of the U.S. economy and advancements in COVID-19 treatments. SPDR Consumer Discretionary (XLY) climbed 7.53 percent, SPDR Healthcare (XLV) 7.49 percent and SPDR Technology (XLK) 6.08 percent. iShares Nasdaq Biotechnology (IBB) rallied 10.18 percent.

The White House laid out guidelines for reopening the economy. States should see a decline of cases over a 14-day period, followed by a decline in positive test results, and the hospitals should be capable of handling a new outbreak with ample critical care space, along with frequent testing of healthcare professionals. The first phase of an opening would include restaurants, gyms, and churches, provided they adhere to social distancing and disinfecting regimens. If there is no uptick in cases, schools and youth programs could resume a few weeks later. Phase three would be a wider opening, with various rules relaxed.

Retail sales declined 8.7 percent in March. Sales ex-autos fell 4.5 percent. The National Association of Homebuilders’ confidence index fell to 30 in April from 72 in March. Initial claims for unemployment were 5.25 million.

The U.S. Dollar Index extended its rally this week, increasing of 0.23 percent. iShares MSCI Emerging Markets (EEM) advanced 3.27 percent and iShares MSCI EAFE (EFA) 1.36 percent. Both significantly trailed the returns of domestic equities.

Crude oil fell as low as $18 this week. The spread between May and June contracts widened to $7, with June crude futures selling for $25 per barrel. Prices are falling in the near months because there is a growing lack of storage.

Earnings season kicked off this week. The mega banks reported solid results but made large provisions for credit defaults. Regional bank PNC Financial Services (PNC) gained 0.09 percent for the week, while Citigroup (C) slipped 1.01 percent and JPMorgan (JPM) 4.82 percent.

Healthcare was much stronger led by Johnson & Johnson (JNJ). The firm did not provide guidance for the year but beat estimates and raised its dividend. JNJ advanced 8.69 percent.

Delta Air Lines (DAL) climbed 7.78 percent for the week. Industrial products maker Fastenal (FSAT) rallied 9.71 percent. Proctor & Gamble (PG) provided solid results. The firm also hiked its dividend, prompting shares to rally 9.51 percent. Dividend funds such as Vanguard Dividend Appreciation (VIG) returned 4.55 percent for the week as investors are seeking financially sound companies.

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