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Stocks Gain, Bonds Mixed, and Commodities Slightly Up as Reopening Continues

Weekly Update – May 29, 2020

  • Stocks around the globe posted gains for the week. “Risk-on” sentiment continued as investors bet on continued Federal Reserve support, the eventual end of the coronavirus pandemic and phased reopening of various states. Concerns of renewed trade tensions with China slowed but did not stop market gains.
  • Risk-on, risk-off switches produced mixed results in the debt markets. The long and short ends of the U.S. Treasury yield curve rose, but yields declined in the middle. The bellwether 10-year yield ended flat, around 0.65%.
  • The Bloomberg Commodity index traced a choppy path higher. Oil and gold prices sagged midweek but closed at weekly highs. The U.S. dollar fell against a basket of major currencies.
  • U.S. consumer spending dropped by 13.6% in April, the steepest decline since 1959. Personal income surprised higher, gaining 10.5% in April versus a 2.2% decline in March. Economists noted gains were driven by transfer payments, with underlying income down 6.7%. The personal-saving rate spiked to 33% in April from 12.7% in March and 8.2% in February.
  • Between April and May, the University of Michigan’s index of consumer sentiment rose from 71.8 to 72.3; the current economic conditions index rose from 74.3 to 82.3. By contrast, the index of consumer expectations fell from 70.1 to 65.9. Expectations for inflation a year ahead rose sharply.
  • Initial unemployment benefits claims dropped to 2.1 million for the week ended May 23, from 2.4 million the week before. The report marked the eighth consecutive weekly decline, though jobless claims total more than 40 million since the pandemic began. The four-week moving average decreased, suggesting that while layoffs continue, some people are returning to work.
  • The Commerce Department said U.S. GDP fell at a 5% annual rate during the first quarter. May Chicago PMI declined to 32.3, its lowest reading since March 1992, following a 35.4 April print; new orders and production were weak.
  • In a rose garden press conference, President Trump criticized China’s recent anticompetitive and security efforts and its crackdown in Hong Kong. The President said he would pursue eliminating a range of policy exemptions related to Hong Kong, but did not say anything that would have undermined the Phase 1 trade agreement. Trump also announced the United States would terminate its relationship with the WHO.

CPWM Weekly Market Monitor (2020.05.29)

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