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Volatility Declines, Yields Compress as Economy and Jobless Claims Show Virus Impact

Weekly Update – April 03, 2020

  • U.S. stocks lost ground for the week as fallout from the coronavirus pandemic impacted economic reports. Payroll and unemployment data pointed to an unfolding collapse of the labor market, with profound implications for a consumer driven economy. Markets in Asia and Europe were mixed. CBOE volatility declined as the outlook, while grim, at least grew clearer.
  • The United States passed two grim milestones on Thursday: accounting for the largest portion of the world’s new coronavirus cases — more than 30,000 of the total 80,600 — and its highest number of fatalities so far in a single day — 1,169 deaths, almost half of them in New York State.
  • Oil prices rallied late in the week on hopes that Saudi Arabia and Russia would cut production by at least 10 million barrels per day, which spurred a rally in the energy sector. Gold prices continued to benefit from risk-off sentiment.
  • The U.S. Treasury yield curve compressed as yields fell across the two-to-ten-year segment while rising across shorter maturities — a consequence of last week’s aggressive easing by the Federal Reserve. The widely-watched ten-year Treasury yield closed at 0.59%, down from 0.75% the prior week. The U.S. dollar rose against a basket of major currencies.
  • U.S. businesses cut 701,000 jobs in March, the worst nonfarm payrolls reading since March 2009, at the low point of the 2007–2009 recession. The unemployment rate rose from 3.5% in February to 4.4% in March, its biggest one-month increase since January 1975.
  • Initial unemployment benefit claims surged to a record 6.6 million for the week ended March 27, twice the number reported the week before. Many states reported being swamped trying to process deluges of new applications. Continuing claims rose to 3.0 million from the prior week’s 1.8 million.
  • The ISM Manufacturing index read 49.1 for March, down from February’s 50.1. New orders dropped 7.6 points to 42.2. Elsewhere, the final March reading of Markit Manufacturing PMI slipped to 48.5 from a flash reading of 49.2 and February’s 50.7. March Chicago PMI fell 1.1 points to 47.8.
  • The Conference Board Consumer Confidence index decreased 12.6 points in March to 120, better than the 110 forecast.

CPWM Weekly Market Monitor (2020.04.03)

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