Rising numbers of coronavirus cases last week weighed on market sentiment. Pandemic related news investors wrestled with included Disneyland delaying its reopening, Texas and Florida reversing some of their reopening measures, and NY-NJ-CT imposing quarantines on travelers from certain hot-spots. Spikes in cases and the trend of the most recent coronavirus news was not good for the stock market, as it dampens the outlook for a strong economic recovery.
While the status, course and outlook of the pandemic was most front and center for the market last week (and likely will be for the foreseeable future), there was some other market moving news last week.
The financial sector saw its fair share of action with some notable good news/bad news. First, financials rallied after the FDIC said it would loosen some restrictions imposed under the Volcker rule, making it easier for banks to make large investments in venture capital, as well as relaxing some other limitations. The group then reversed course and was pulled sharply lower after the Federal Reserve stress test. The result, in order to preserve capital the Fed ordered banks to suspend share repurchases and capped the payment of dividends for the third quarter. Elsewhere, the IMF lowered its 2020 economic forecast for the global economy to minus 4.9%, citing the negative impact the pandemic has had on global economic activity.
When it was all said and done last week, the negatives outweighed the positives and the major stock market averages finished lower. The Dow Jones Industrial Average shed 3.3%, the NASDAQ Composite fell 1.9% and the Standard & Poor’s 500 Index dropped 2.9%. Looking to the holiday-shortened week ahead (markets are closed Friday in observance of Independence Day), we’ll get the June Jobs Report a day early on Thursday and a widely followed earnings report heading into the upcoming earnings season.
FedEx is set to report earnings tomorrow and the company is widely considered to be an economic bellwether. Their commentary often provides insight into the state of the economy and provides a sort of preview to upcoming earnings reports. As for the jobs report, expectations are for the U.S. economy to have added approximately 3 million jobs in June, and for the unemployment rate to come in at around 12.2%.
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All the best – Southport Station Financial Management, LLC