Equities could not overcome historic dysfunction in the commodity markets last week, falling slightly, on the back of the 2nd best 20-day rally on record. Wild gyrations in oil prices were the primary source of volatility in a week where corporate earnings, re-opening debates, and CoVid-19 curve/testing/modeling continued to drive the narrative. The yield curve flattened as the 10yr U.S. treasury flirted with its record low 0.54% yield set back on March 9th. The USD was mixed against the majors but finished higher for the week, continuing its bull run.

Market Anecdotes

  • The spot WTI oil contract posted its largest daily decline last week, its first ever negative print, and the curve fell into the steepest contango on record. Prices gyrated wildly on the week finishing -5.2% while energy equities actually gained 1.93%.
  • An ‘add on’ $484b stimulus package (v3.5) passed last week. Components were $320b for PPP ($60b for community banks), $75b for hospitals ($100b from PPP). $25b for testing (states & localities, CDC, NIH, BARDA, testing for uninsured).
  • BCA again highlighted the force of the fiscal stimulus packages we’ve seen in the U.S. and globally, far surpassing the ‘08-’09 response. Not included in these figures are over $1.3t in loan guarantees.
  • The fiscal open tap hasn’t held back the Fed in any way with the Fed balance sheet growing 2% last week alone. Main St Lending, corp., and muni facilities will gear up over the next couple of months.
  • FactSet reported, with 24% of S&P 500 companies in, blended earnings of -15.8% and revenue of 0.1%. If that holds, it would be the largest earnings decline since Q2 2009’s -26.9%. The forward P/E ratio stands at 19.1x.
  • FactSet estimates for 2020 GDP are U.S. -2.9%, Eurozone -4.8%, U.K. -4.9%, and China 2.2% with more modest 2021 recoveries of 2.9%, 2.8%, 2.5%, and 6.3% respectively.,
  • Ned Davis highlighted median active manager performance outperformed passive products by 227bps thus far during the CoVid-19 crisis.
  • The FT reported Gilead’s remdesivir registered a discouraging clinical trial on Thursday, a material force behind the quick evaporation in momentum that day.

Economic Release Highlights

  • Weekly jobless claims of 4.427mm took claims from over the prior 5 weeks to over 26mm.
  • Flash U.S. PMI fell in April to 27.4 from 40.9 in March, now at levels last seen in October 2009. Services and manufacturing registered 27.0 and 36.9 respectively.
  • Non-U.S. composite PMIs in Eurozone 13.5 (31.4), U.K. 12.9 (36), and Japan 27.8 (35.8) cratered as well. Services and manufacturing registered EZ (11.7, 33.6), U.K. (12.3, 32.9), and Japan (22.8, 43.7) respectively.
  • U.S. consumer sentiment for April (f) was 71.8, a record 18pt collapse from February.
  • March durable goods fell 14.4% M/M. Two silver linings were beats in ex-transports (-0.2% vs -5.0%) and core capital goods (0.1% vs -5.0%).
  • March new home sales of 627k fell sharply from February’s 765k level. Existing home sales fell 8.5% M/M to 5.270mm, but were actually still up 0.8% Y/Y.
  • German ZEW survey of -97.5 revealed surging “expectations” and plummeting “current conditions”, logging the widest spread between the two on record.
  • One of the first reports in weeks that came in better than forecasted are Taiwanese exports registering +4% YoY versus expectations for -8%.