Wednesday, June 3, 2020

Rise of the Small Caps

One of the big success stories of the market's comeback has been small-cap stocks. Following a yearslong bear market for small-capsthe Russell 2000 index, which tracks the performance of small-cap stocks, rose 20.9 percent during April and May.

That stretch marked the index's largest two-month percentage gain since 2009. Moreover, it is the best two-month relative performance to the S&P 500 index since February of last year, according to Dow Jones Market Data.

But keep in mind, one factor working in the favor of small-caps' rise is their dramatic underperformance over the past two years. While the S&P 500 consistently reached new heights throughout 2019 and in the first six weeks of 2020, the Russell 2000 still hasn’t regained the record high it set back in August of 2018.

The Post-Lockdown Economy

What will the economy - and our lives - look like after the pandemic? If consumers have to choose between spending a post-coronavirus-lockdown Saturday buying new clothes or at a restaurant having dinner, more will choose shopping. That’s according to a new survey from S&P Global Market Intelligence, which polled 1,250 people between April 30 and May 18.

When restrictions let up, 44 percent of consumers said they planned to head back to stores. But only 31 percent said they’d dine out. After three months, the dine-out result rose to 40 percent.

The thing consumers are most excited to spend on, according to the S&P survey, are professional services like hair salons and spas. More than half of respondents (55 percent) said they were eager to head back for those experiences.

Tuesday, June 2, 2020

A Look Back at May in the Market

The S&P 500 Index ended up rising 4.5 percent in the month of May. It is up 36.1 percent since bottoming out on March 23, although overall it's down 5.8 percent for 2020. 

These were the biggest gainers among the S&P 500 in May:

  1. L Brands, up 36.2 percent
  2. Fortinet, up 29.2 percent
  3. Dish Network, up 26.5 percent
  4. Fortune Brands Home & Security, up 26.5 percent
  5. PayPal Holdings, up 26.0 percent
  6. Albemarle Corp., up 24.6 percent
  7. Lowe's, up 24.4 percent
  8. News Corp., up 23.6 percent
  9. Dollar Tree, up 22.8 percent
  10. Oneok Inc., up 22.6 percent

Monday, June 1, 2020

Housing Springing to Life

There are some signs of very healthy life in the housing market, a good marker for the nascent economic recovery. Though the single-family home mortgage purchase index saw a more than 30 percent drop in April when compared to last year, it has reversed its course, according to new data out from the Mortgage Bankers Association.

The index is now up almost 10 percent compared to the same period last year. That indicates not just a rebound but real health in the home purchase market.

Meanwhile, mortgage applications to purchase a home rose 9 percent last week from the previous week and from a year earlier, according to the Mortgage Bankers Association’s index. It was the sixth straight week of gains for that figure, and a 54 percent recovery since early April.

Friday, May 29, 2020

The Beige Book Looks at Tennessee

The Fed's periodic Beige Book, surveying economic conditions in various part of the country, came out this week. The Atlanta district covers the economy here in Tennessee, and here's some of what it said:

  • Retailers and auto dealers reported very slow sales, and hospitality was at a record low.
  • "As demand shifted from restaurants to grocers as a result of safer-at-home practices, some food service supply chains were left with excess inventories while others, such as meat processing and packing, experienced shortages. However, the majority of firms have not increased prices, either due to a lack of pricing power or as a show of goodwill to troubled consumers."
  • "Continued declines in discretionary consumer spending was partially offset by sales growth in grocery and household products, office equipment, and home improvement goods. Ecommerce activity continued to accelerate as brick-and-mortar sales continued to decline."
  • On the brighter side, financial institutions reported growth in commercial loans as businesses accessed lines of credit and the Paycheck Protection Program (PPP): "Many contacts reported success in securing a PPP loan, which allowed them to avoid layoffs."

Wednesday, May 27, 2020

Consumer Confidence Is Stabilizing

A little bit of good economic news came out yesterday. The Conference Board's widely followed consumer confidence index rose slightly in May, after rapid declines in both March and April.

The Conference Board survey’s present situation measure, based on consumers’ assessment of current business and labor market conditions, fell to a reading of 71.1 this month from 73.0 in April. But the expectations index based on consumers’ short-term outlook for income, business and labor market conditions climbed to 96.9 from a reading of 94.3 in April.

The percentage of consumers expecting an increase in income dropped to 14.0 percent this month from 17.2 percent in April. But the proportion anticipating a drop fell even further, from 18.4 percent to 15.0 percent.

Tuesday, May 26, 2020

Oil's Roaring Comeback

Back in April, the U.S. oil benchmark, West Texas Intermediate crude, plunged below zero and into negative territory for the first time on record. But May is shaping up to be WTI’s best month ever on a percentage basis, going back to its inception in 1983.

WTI has jumped more than 70 percent in May and posted four straight weeks of gains. Chinese demand for oil in April rebounded to 89 percent of what it was a year earlier, according to IHS Markit, and the firm expects May demand to be 92 percent of 2019′s level. China is the world's largest importer of oil.

Remember, though, part of WTI’s rally this month is due to the historic low from which it bounced. Prices are still about 50 percent below January’s high of $65.65.