Monday, April 6, 2020

What's Going On with Oil Prices

West Texas Intermediate oil prices, the benchmark for the U.S., ended last week 31.8 percent higher, posting the largest one-week percentage rise on record. Despite that surge, crude is still down nearly 40 percent in the last month on the heels of demand destruction from the coronavirus outbreak, and the price war between Saudi Arabia and Russia.

If you still have a reason to drive, it's gotten a lot cheaper lately. Tennessee's average gasoline price currently sits at $1.77 a gallon. That's 45 cents less than one month ago and nearly 71 cents less than one year ago.

OPEC and its allies, including Russia, will convene this week in an attempt to forge a truce in the price war. Most observers argue that some sort of deal will most likely be reached, since it is in producers’ best interest to have higher oil prices.

Friday, April 3, 2020

March Jobs Report

The American economy lost 701,000 jobs in March, according to Labor Department numbers released this morning. It was the first decline in payrolls since September 2010 and came close to the May 2009 financial crisis peak of 800,000. The unemployment rate rose to 4.4 percent, up from 3.5 percent, to reach its highest level since August 2017.

As bad as these numbers are, there's good reason to think they're understated.  The Bureau of Labor Statistics used as its reference period the week ending March 12, which was when the nation began shutting down. The weekly initial jobless claims reports have shown 10 million new filings for unemployment insurance over the past two weeks.

Some two-thirds of March's drop came in the hospitality industry, particularly bars and restaurants forced to close during the economic shutdown. That sector suffered 459,000 job losses, with 417,000 coming from food and drinking establishments. The Bureau of Labor Statistics noted that the drop nearly wiped out all of the gains from the past two years.

Thursday, April 2, 2020

Americans Worried, but Holding Fast

The stock market crash has left Americans wondering whether worse is yet to come, Allianz Life found in its latest quarterly market perceptions study. Sixty-three percent of participants in the study expressed concerns about a recession, up from 43 percent in the fourth quarter, and 57 percent thought that the market had not bottomed out.

But most of them are holding fast. Notwithstanding their anxiety over market swings, 52 percent of Americans said now was a good time to stay neutral and not take any action because of market conditions.

Americans in the survey also appeared optimistic that they would eventually be able to recover their retirement savings. Seven in 10 respondents believed that they would have time to rebuild their retirement nest eggs even if the market continued to fall.

Wednesday, April 1, 2020

First Quarter Is Finally Over

Yesterday, the final day of March and of the first quarter, the Dow Jones Industrial Average fell by 1.8 percent. Overall, the index was down 23.2 percent for the first quarter, That was its biggest decline since the fourth quarter of 1987, the year that Black Monday occurred, on October 19.

The S&P 500 Index ended with a first-quarter decline of 20 percent, its biggest quarterly loss since 2008. It was also the S&P's worst first quarter ever. The Nasdaq suffered a first-quarter decline of 14.2 percent.

The only Dow stock that rose during the first quarter? Microsoft. It closed at $157.71 yesterday, up exactly one penny from its $157.70 close on December 31.

Tuesday, March 31, 2020

China on the Comeback

China  said yesterday that its official Purchasing Manager’s Index for March was 52.0, beating expectations for an economy hit hard by the coronavirus outbreak. PMI readings above 50 indicate expansion, while those below that level signal contraction.

In February, China's official PMI had hit a record low of 35.7. While there's reason to suspect the accuracy of these numbers, this is a positive sign for how quickly an economy can rebound from the pandemic.

Earlier this year, manufacturing activity slowed dramatically in China as the government instituted large-scale lockdowns and quarantines. This week, China’s Ministry of Industry and Information Technology said that as of March 28, the resumption-of-work rate for larger industrial enterprises was 98.6 percent, and the return of workers stood at 89.9 percent.

Monday, March 30, 2020

A Week of Recovery

Here's a mark you probably weren't expecting to be set: The Dow Jones Industrial Average just notched its best weekly gain since 1938, despite falling by 4.1 percent in Friday's trading. For the week, the Dow booked a gain of 12.8 percent, its strongest weekly performance in 82 years.

The S&P 500 finished down 3.4 percent on Friday, but still had a weekly gain of 10.3 percent. The Nasdaq Composite fell 3.8 percent on Friday, but on the week it’s up 9.1 percent. For both of those indexes, it was their best week since March 2009, when the markets bottomed out after the financial meltdown.

The Dow was aided by a comeback for the ages from blue-chip component Boeing, which surged 70.5 percent for the week. That was its best weekly gain ever.

Thursday, March 26, 2020

Three Million Jobless Claims

A sobering economic number is out this morning: Americans displaced by the coronavirus crisis filed unemployment claims in record numbers last week, with the Labor Department reporting a surge to 3.28 million new filers.

That number shatters the Great Recession peak of 665,000 from March 2009, as well as the all-time mark of 695,000 in October 1982. The number for the previous week, which reflected the period before the worst of the coronavirus hit, was 282,000.

But the news isn't all bad. The House is expected to pass a $2 trillion stimulus bill, already approved by the Senate, tomorrow morning, which should help ameliorate the job losses. Putting everything together, the market is happy about these moves, with stocks moving higher in early trading this morning.