6/12/20 Market Notes
Volatility returned with a vengeance on Thursday when sentiment deteriorated in the wake of sobering economic assessments from the OECD and Federal Reserve and a resurgence of new virus cases. Weekly Initial Claims data came in close to expectations but didn't surprise to the upside as did last week's employment report. The S&P 500 plunged 188 points (5.9%) to 3002, the Dow dropped 1,862 points (6.9%) to 25,128 and the Nasdaq Composite shed 528 points (5.3%) to 9493. Safe haven assets rose with the US Dollar Index gaining 0.8%, long-term Treasuries up nearly 2% and gold rising over 1%. The market was primed for a sell-off after gaining 17% in April and May and another 6% in June before the decline. Through most of that period, risker assets - companies in the most exposed industries and sectors, the lowest quality high yield bonds and emerging markets - led gainers. Although much of the rise was simply correcting oversold conditions on the downside, by June the rally was beginning to feel overdone with speculative excesses building. Asian and European markets surprisingly ignored yesterday's US hiccup with Asian markets down less than 1% and European shares rising solidly. That buoyed US futures which are about 2% higher. Investors were cheered by a strong earnings beat from Adobe last night which offset the slightly disappointing report from Lululemon. Looking ahead to the economic calendar, consumer sentiment is due this morning with expectations pointing to improvement in that measure. Next week has a more active calendar with Retail Sales, Industrial Production and Housing Starts set to provide a clearer read on the path to economic recovery.
Disclosures: This market commentary is written by the 1879 Advisors® and represents the views of 1879 Advisors®. This commentary is not investment advice and should not be used as a basis to make investment decisions. Please consult with your registered investment advisor before making any investment decisions.