Stocks rose sharply on Tuesday on reopening hopes. Also, April saw an increase in new home sales from the week March number.
On Wednesday, the European Union outlined a $824BN coronavirus recovery plan. The plan will focus on countries whose economies have been hardest hit, Italy, Spain and Greece. The plan calls for 2/3 of the spending in the form of grants and 1/3 in loans. Although, the Netherlands, Denmark, Austria and Sweden have questioned being on the hook for EU debt to help their southern neighbors. However, France and Germany supported the plan. The plan will require approval from all EU countries. Notably, the plan requires countries to meet climate-neutrality goals as spending likely will fund renewable energy.
Also on Wednesday Japan approved a $1.1TN relief package that was more than double the initial plan unveiled in April.
Thursday saw unemployment figures. While over two million workers filed initial unemployment claims, the number of continuing claims fell by four million as more returned to work than were laid off.
The week’s rally stalled Thursday after President Trump announced there would be repercussions for China following it’s crackdown on Hong Kong.
Friday afternoon President Trump announced that his administration would revoke Hong Kong’s preferential treatment under U.S. law as it is no longer autonomous. Also, he announced measures to scrutinize U.S. listings of Chinese companies and limiting Chinese researches at U.S. universities. However, the markets recovered after he said that the phase 1 trade agreement would continue.
For the week, stock ended with solid gains.
Treasury yields were mixed as the 30-year bond rose to 1.413% but the 10-Year note fell to 0.659%. Crude oil rose to $35.32 and natural gas fell to $1.84 per MMBTUs. The U.S. dollar fell against a basket of currencies and gold prices rose to $1743.00 an ounce.
In economic numbers this week:
- Canada’s gross domestic product fell at an 8.2% annual rate in the first quarter.
- The S&P CoreLogic Case-Shiller National Home Price Index rose 4.4% in March from a year earlier.
- The Commerce Department reported:
- New home sales increased 0.6% in April from March. Keep in mind that new home sales are a fraction of the total home sales.
- The median sales price of a new home fell 8.6% from a year earlier to $309,900.
- Revised first quarter gross domestic product declined from 4.8% to 5.0%.
- Consumer spending fell 13.6% in April the biggest drop in records starting in 1959.
- Personal incomes rose 10.5% in April as households received their stimulus checks.
- The personal-savings rate was 13.1% in March, up from 8% in February as consumers remain cautious about spending.
- The Labor Department reported:
- 2.1MM workers filed initial unemployment claims last week.
- Continuing claims, measuring the total number of people that are unemployed, fell from 25.1MM to 21.1MM as some workers return to work..
- The EIA weekly oil report is here: wpsrsummary (4). Also, the EIA reported in the past week:
- Field production of crude oil dropped from 11.5MM barrels to 11.4MM barrels per day. The peak production at the end of February was 13.1MM barrels per day.
- Natural gas storage rose by 109BN cubic feet and is above the five year average at this time of year.
- Baker Hughes reported the number of active oil rigs fell 15 to 222 and the number of active natural gas fell 2 to 77.
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Loren C. Rex, CFP®, AIF®, MA Erik A Smith AIF®
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Battle Creek, MI 49017
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These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.