U.S. and World News
Coronavirus cases across the world has eclipsed half a million and the United States has surpassed every other country in the world in number of cases, currently at about 95,000. At the epicenter of the virus, New York City Mayor Bill de Blasio projects “over half the people in this city will ultimately be infected.” In the United Kingdom, Prime Minister Boris Johnson has tested positive for coronavirus, after instating a “stay-at-home” order earlier this week. The U.S. House of Representatives was prepared for a voice vote on the $2 trillion coronavirus relief bill passed by congress earlier this week, until one lawmaker announced his opposition to the bill late last night. This announcement led to House members scrambling back to Washington to hold a recorded vote. The bill passed in the House early this afternoon and is now being sent to the President’s desk. The relief bill includes one-time direct payments to individuals, added unemployment insurance, and loans to businesses.- The oil price war led by Saudi Arabia has resulted in the worst crude oil crash in a generation and even lower prices are anticipated. Secretary of State Mike Pompeo urged Saudi Arabia to curb production on Wednesday as weakening global demand is compounding on the issue, but Saudi Arabia shows no signs of slowing down. The U.S. shale industry is at risk and is running out of options now as most of the U.S. economy is shut down along with Europe and India. U.S. shale producers are now asking for radical solutions such as a tariff on international oil. Yesterday, leaders of the Group of 20 met to discuss the global pandemic, but the statement made no mention of the oil crisis.
Markets
- Markets rebounded in what was the best week since 2009. The S&P 500 jumped 10.28% and closed at 2,541. The Dow Jones rose 12.48% and closed at 21,637. Year-to-date, the S&P 500 is down 20.96% and the Dow Jones is down 23.72%.
- Yields fell further this week. The 5 year and 10 year U.S. Treasury Notes are yielding 0.39% and 0.68%, respectively.
- The spot price of WTI Crude tumbled further this week. Prices fell 4.77% and closed at $21.55 per barrel. Year to date, Oil prices are down 64.71%.
- The spot price of Gold rose by 8.22% and closed at $1,621.92 per ounce. Year to date, Gold prices are up 6.89%.
Economic Data
- Initial jobless claims rose by a record 3 million to 3.28 million and the four-week moving average of claims rose 766,000 to 998,000. Claims rose by 398,000 in Pennsylvania, 213,000 in Ohio, and by 179,000 in New Jersey.
- Personal consumption rose by 1.8% versus expectations for an increase of 1.7%
- New home sales came in at 765,000 versus expectations for a reading of 750,000
- Durable goods orders rose by 1.2% versus expectations for a decline of 0.9%
- Durable goods orders ex-transports fell by -0.6% versus expectations for a decline of -0.4%
- Personal income rose by 0.6% versus expectations for a 0.4% increase
- Personal spending rose by 0.2%, in-line with expectations
- The PCE price index rose by 0.1%, in-line with expectations and the year-over-year rate rose by 1.8% versus expectations for a 1.7% increase
- The core PCE price index rose by 0.2%, in-line with expectations and the year-over-year rate rose by 1.8% versus expectations for 1.7%
- The University of Michigan’s index of consumer sentiment fell 6.8 points 89.1 versus expectations for a reading of 90.0
Fact of the Week
- The United States currently has about 95,000 confirmed cases of coronavirus and a population of 327.2 million (0.029% infection rate) while Italy has about 86,500 confirmed cases and a population of 60.5 million (0.14% infection rate). The United States has a population that is 5X the size of Italy, but Italy has an infection rate that is about 6X higher than the U.S. (Source: John Hopkins).
Rich Gartelmann, CFP® – (630) 844-5730 – rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson, CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Mike Cava, CFA®, CFP® – (630) 281-4522 mcava@oldsecond.com
Mike Demski – (630) 966-2430 mdemski@oldsecond.com
Jacqueline Runnberg, CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Visit Old Second Wealth Management
Non-deposit investment products are not insured by the FDIC nor any govt agency; not a deposit of, or guaranteed by, the bank; may lose value.
Last night, the Senate passed “phase 2” of the Virus Relief Bill which will provide free testing, expanded funding for food security programs and ensures paid sick leave. In addition, news passed that the floor of the New York Stock Exchange (NYSE) would be closed Monday March 23rd. THE MARKETS WILL REMAIN OPEN! Only the NYSE floor will be closed. Though this is not normal operating procedure, today the vast of majority of trades on the NYSE occur in an electronic format.
The coronavirus pandemic has turned life around for many people around the world, and America is beginning to share the pain that many other countries have experienced in the past couple of months. As of today, there are just over 14,000 confirmed cases of the virus in America and about 210 deaths. Schools and businesses have closed, millions of employees are working from home, and unemployment is on the rise as “social distancing” has brought the economy to a screeching halt. California, New York, and Illinois have taken unprecedented action and declared state-wide “stay-at-home” or “Shelter-in-place” orders. These laws involve all non-essential businesses to close, but do allow citizens to go out only to pick up food, medicine, or other essential items and to go outside for a walk. The laws will be enforced by issuing a misdemeanor to citizens found in violation. The U.S. government and the Federal Reserve are doing everything that they possibly can to heal the sick, stop the spread of the virus, and keep the economy afloat by taking massive fiscal and monetary stimulus measures. The Federal Reserve slashed the fed funds rate to zero and initiated a security purchases program that continues to grow by the day. The government is spending over $1 trillion on a stimulus package that includes paid family leave, enhanced unemployment insurance, payments to individuals, and corporate bailouts.
Last night, the Senate passed “phase 2” of the Virus Relief Bill which will provide free testing, expanded funding for food security programs and ensures paid sick leave. In addition, news passed that the floor of the New York Stock Exchange (NYSE) would be closed Monday March 23rd. THE MARKETS WILL REMAIN OPEN! Only the NYSE floor will be closed. Though this is not normal operating procedure, today the vast of majority of trades on the NYSE occur in an electronic format.
Late in last Friday’s trading session, President Trump declared the Coronavirus pandemic a national emergency and announced a number of measures aimed at combatting Covid-19 and stemming the economic turmoil that has taken place over the last few weeks. The declaration opens up billions of dollars to help fight spread and Trump vowed a massive increase in the number of tests available as a result. Among other items, he announced a number of partnerships with the private sector. There’s a Google-led web portal for citizens to log their symptoms and arrange for testing if needed. Retailers such as Wal-Mart have also pledged to ramp up their supply chains in efforts to keep their shelves stocked as well as offering up portions of their stores’ parking lots for drive thru testing. Trump also announced large purchases of oil into the United States’ Strategic Petroleum Reserve in an attempt to stabilize oil prices and stockpile oil at low costs in case of supply issues in the future. Interest on all federally held student loans has been waived as well.
This week, the United States response to the coronavirus began to ratchet higher as the World Health Organization declared the virus a global pandemic and community spread within the country worsened. During President Trump’s address to the nation on Wednesday night, he announced a suspension of all travel from Europe to the United States for 30 days, as the spread throughout Europe has escalated dramatically. Italy remains on a nationwide lockdown and ordered all non-essential shops and services to close, leaving only supermarkets and pharmacies open. President Trump also announced plans for deferred tax payments, payroll tax relief, and low interest business loans. All of the major sports organizations have either canceled or delayed activities, including the NCAA tournament. State governments have also taken emergency measures such canceling large public events. Grocery stores have taken measures to contain supply, with grocery retailer Kroger placing limits on the amount of sanitary products and cold medicine that customers can buy per order, as Americans rush for supplies.
Yesterday markets had their largest single day drop since October of 1987 in the wake of the Coronavirus concerns. We also saw all major sports in U.S. suspend their seasons and the NCAA cancel both the Men’s and Women’s basketball tournament. Perhaps the rationale was that there is already enough madness this March.
For the second time this week, the New York Stock Exchange halted trading due to the circuit breaker of a 7% intra-day loss being breached. Investors remain concerned of the impact from the Coronavirus through the U.S. as well as the rest of the world. As markets evaluate the economic impact and potential effect on corporate earnings, volatility has surged in the market with the VIX index reaching levels not experienced since the financial crises of 2008.
The New York Stock Exchange halted trading this morning due to the circuit breaker of a 7% intra-day loss being breached on the heels of Coronavirus spread and the surprise decision made by Saudi Arabia to slash prices and increase production of oil. These circuit breakers were put in place in an effort to calm market trading during times of extreme stress & panic. Markets have been experiencing wide spread volatility over the course of the last two weeks and this past weekend’s events added to the market’s fears. While the effect on stocks has certainly been front and center, the fear has gripped the bond markets, sending interest rates to their lowest levels in history. The entirety of the U.S. Treasury curve going out to 30 years is now below a 1% yield.
President Donald Trump signed an $8.3 billion emergency spending package this morning to fight the coronavirus. At this point, there are have been more than 100,000 confirmed coronavirus cases in the world, including over 230 cases in the United States that include 14 deaths. Italy is now the worst-affected country outside of Asia with 2,502 cases and 79 deaths, which led to all schools and universities to be closed across the country. The coronavirus began to spread in several communities across the United States this week, closing schools and putting California in a state of emergency after their first death. According to the International Air Transport Association, airlines are expected to lose $63 billion to $113 billion in revenue for passenger traffic globally in 2020, depending on the future spread of the virus.