Market Perspective for May 15, 2020

The Nasdaq decreased 1.14 percent this week, the S&P 500 Index 2.22 percent and the Dow Jones Industrial Average 2.62 percent. SPDR Healthcare (XLV) advanced 0.98 percent as biotechnology and pharmaceutical shares extended their rallies. iShares Nasdaq Biotechnology (IBB) climbed 3.16 percent and SPDR S&P Pharma (XPH) rose 2.46 percent.

The National Federation of Independent Business’ small-business confidence index dipped to 90.9 in April from 96.4 in March. The result was much better than expected, indicating many small businesses are optimistic about the future.

As expected, consumer and producer prices tumbled in April. The headline consumer price index slid 0.8 percent for the month. Core CPI dipped 0.4 percent. Producer prices slumped 1.3 percent.

Initial jobless claims were 2.98 million for the week ending May 9, down slightly from the prior week’s 3.18 million.

Retail sales declined 16.4 percent in April. Sales ex-autos fell 17.2 percent. Non-essential physical retail suffered the largest declines, with clothing store sales down 79 percent. Grocery sales dipped 13 percent. Home supply stores only decreased 3.5 percent. Online sales rose 8.4 percent.

Consumer sentiment showed a surprising increase in May. Analysts expected sentiment would drop from April, but the University of Michigan’s advance survey for May showed consumer confidence rose from 71.8 to 73.7 over the first part of the month.

The U.S. Dollar Index remained strong, gaining 0.5 percent on the week. iShares MSCI Emerging Markets (EEM) decreased 2.25 percent and iShares MSCI EAFE (EFA) fell 2.85 percent. The war of words between China and the United States escalated. iShares China Large-Cap (FXI) declined 2.79 percent.

A number of states began opening their economies this week. The initial data shows pent up demand for services. Most companies are opening with social distancing rules, reducing supply. This could generate many stories of “sold out” openings. A booking agency for Carnival cruises said August demand was about double from last year. Shanghai Disneyland sold out at its open and bookings are sold out for future dates. A casino in Oklahoma did a soft opening ahead of its return to normal business. There were hundreds of people lined up. Drive-in theaters are seeing a surge in popularity as well.

 

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