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Market Update: Wed, Apr 1, 2020

Market Update: Wed, Apr 1, 2020

| April 01, 2020

More weakness. After wrapping up one of the worst quarters ever for stocks, stocks sold off globally this morning after a somber warning from President Trump. Trump said the United States is facing potentially its toughest two weeks ever, and the White House is projecting deaths between 100,000 and 240,000, even with social distancing in place.

Good riddance. It was the worst quarter for the S&P 500 Index since the financial crisis and the worst first quarter ever, with stocks down 20% in Q1. That’s worse than the previous worst first quarter, which was down 19.4% in 1938. Some other lowlights from the quarter that was: Only one Dow stock was green (Microsoft at 0.01%); it was the worst quarter for crude oil (down 66%) and the worst Q1 ever for the Dow in 124 years; and the VIX soared more than 300% for the largest quarterly gain ever.

April is here. After the worst March for the S&P 500 (-14%) since March 1938, could better times be ahead in April? Historically, there’s a chance at least, as April has been the second best month of the year since 1950. Additionally, over the past 20 years, it has been the strongest month of the year, and 10 of the past 12 times that March was lower saw April close in the green. Obviously, with the headline risk of COVID-19, things will be difficult, but we wouldn’t want to ignore this data either.

COVID-19 update. Factor #1 in our Road to Recovery Playbook is finding confidence in the peak of COVID-19 cases in the United States. While we are monitoring this factor daily, we provide an update into new cases and what it may mean for stocks on today’s LPL Research blog.

Consumer confidence fell but held up better than expected. The Conference Board’s Consumer Confidence Index, reported on Tuesday, fell about 13 points in March to 120, its lowest reading since mid-2017. Not surprisingly, the expectations component of the survey, which fell about 20 points, led the decline as job losses began to surge as the March 19 survey deadline approached. The silver linings here, even as conditions are worsening, are that the survey exceeded Bloomberg’s consensus estimate by 10 points, and the 120 reading is significantly stronger than the sub-90 readings during the 2008–09 financial crisis.

Key manufacturing data on tap. With a US recession all but a foregone conclusion at this point, investors are braced for weak manufacturing data later this morning from the Institute for Supply Management (ISM). The ISM Purchasing Managers’ Index (PMI) for manufacturing is expected to fall toward recessionary levels below 45, based on Bloomberg’s consensus forecast. The manufacturing sector does not represent as big of a piece of the US economy as it did decades ago, but it has historically been a good signal for corporate profits, as we discuss on today’s LPL Research blog



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