Blog Post

Stocks End the Week Lower after Comments from Dr. Fauci and Jerome Powell

Stocks ended the week lower with the small cap Russell 2000 index down sharply.  Dr. Fauci’s testimony to Congress and a surge in new cases in Texas, after reopening, quenched enthusiasm for a quick recovery.  Also, a speech by Jerome Powell on Wednesday described the economic outlook as “highly uncertain and subject to significant downside risks.”  He also encouraged the White House and Congress to approve more money to ensure a recovery.  While the House is close to voting on an additional $3TN, the Senate leadership has stated that they are waiting to see how the previous spending is going.  While the White House is waiting until June to start formal negotiations, some informal communications is occurring.

Economic data this week was generally very weak with some mixed results from China.

Oil prices firmed somewhat as Saudi Arabia unilaterally cut another 1MM barrels per day of production.  The UAE and Kuwait also said they will produce less than the agreed upon amounts.  Demand has picked up somewhat as some states start to reopen and commuters largely have chosen driving versus mass transportation.

Treasury yields fell with the 30-year bond ending at 1.332% and the 10-Year note at 0.625%.  Crude oil rose to $29.55 and natural gas fell to $1.646 per MMBTUs.  The U.S. dollar rose against a basket of currencies and gold prices rose to $1753.40 an ounce.

In economic numbers this week:

  • China reported for the month of April:
    • Producer prices fell 3.1% for the month.
    • Consumer prices rose 3.3% in April from a year earlier.
    • Industrial production rose 3.9% from a year earlier.  This rebound comes after the following drops: January -13.5%, February -13.5%.
    • Retail sales fell 7.5% from a year earlier.
    • Unemployment fell to 5.8% in April from a high of 6.2% in February.
    • Fixed asset investment fell 10.3% from a year earlier.
  • The United Kingdom reported   
    • Gross domestic product for the first quarter fell 2%
    • Retail sales fell 19.1% in April from a year earlier.
  • Germany’s gross domestic product fell 8.6% in the first quarter. 
  • The Federal Reserve reported that U.S. industrial production fell a record 11.2% in April. 
  • The Commerce Department reported retail sales fell a record 16.4% in April.  Online sales rose 8.4%. 
  • The Labor Department reported
    • 2.98MM workers filed unemployment claims last week, although Connecticut later reported it has incorrectly reported the state unemployment claims of 298,680 instead of 29,846. 
    • Consumer prices fell 0.8% in April.  Gasoline prices fell 20.6% in April.  However, food prices rose the most since February 1974, with meats, poultry, fish and eggs increasing 4.3%.
    • Producer prices, fell a seasonally adjusted 1.3% in the month of April.
  • The EIA weekly oil report is here wpsrsummary.  Also, the EIA reported in the past week:
    • Field production of crude oil dropped from 11.9MM barrels to 11.6MM barrels per day.
    • Natural gas storage rose by 103BN cubic feet and is above the five year average at this time of year.
  • Baker Hughes reported the number of active oil rigs fell 34 to 258 and the number of active natural gas rigs fell 1 to 79.

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Best Regards,

Loren C. Rex, CFP®, AIF®, MA                                                  Erik A Smith AIF®

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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.


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