Hello and welcome to this week’s Jones Financial Blog! Our goal at Jones & Associates is to help keep you up to date with interesting current economic/market happenings as well as some proprietary portfolio happenings. Knowledge is power and thought we would share some of ours with you. Enjoy!
All data is for the week ended April 10, 2020.
Equities across the globe rose last week primarily due to news that new COVID-19 cases in the U.S. are below the expectations of many health care specialists. The broad U.S. index— the S&P 500 – rose 10.46%, the Russell 2000 climbed 14.84% and the NASDAQ gained 8.90%. Overseas the international developed countries (MSCI EAFE) added 6.72% while emerging markets (MSCI EM) gained 5.89%. In the U.S., real estate and materials were the best performing sectors while communication services and staples were the laggards, although both rose in value. (1)
Interest rates rose on longer maturities as the yield curve steepened slightly, with the yield on the benchmark 10-year Treasuries up 10 basis points to 0.73% and the yield for the 30-years up 11 basis points to 1.35%. (1)
Oil ministers from OPEC+ and the G20 met late last week and agreed to cut production by nearly 10 million barrels per day to support prices to at least break even for many producers as global demand has sharply declined due to COVID-19. (2) Year-to-date the price of oil has fallen 63% to $22.76 per barrel of West Texas crude - down 20% last week alone. (3)
The NFIB small business sentiment index sank 8.1 points to 96.4 in March, the largest monthly drop on record. Plans to increase employment and make capital outlays both declined. The net percentage of firms expecting higher sales in six months sank to -12, the lowest since the recession. (4)
Initial jobless claims, a rough proxy for job losses, have now posted increases of 6.6 million, 6.8 million and 3.3 million in the last three weekly readings due to the coronavirus. The highest single weekly reading ever recorded had been 695,000 in 1982. (5)
The mortgage application index dropped last week as purchases stood 33% lower than the year ago level and refinancings s dropped 19% on a week over week basis due to the impact of COVID-19. The average 30-year mortgage rate was 3.54%, down nearly a percentage point from a year ago. (6)
Meanwhile, forbearance (delay of payment) requests on existing mortgages – prompted by skyrocketing new jobless claims – climbed 1,270% in the first half of March then 1,896% in the second half of the month, helped by the fact that homeowners will not receive a hit to their credit score during this event-driven economic downturn. (7)
Proprietary portfolio happenings:
Exxon Mobil (XOM), a G50 and Core Select holding, announced a 30% reduction in capital expenditures for this year while maintaining its long term outlook. (9) Shares rose 7% for the week.
D.R. Horton (DHI), a Core Select holding, reported quarterly homes sales rose 10% year-over-year. However, the home builder withdrew guidance for the full year due to the impact of COVID-19. Shares rose 26% for the week.
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Sources: (1) JP Morgan Weekly Recap, (2) Oilprice.com,(3) Dept of Labor 4-2-20, (4) Abbott Labs Investor Relations, (5) Seeking Alpha