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 24, 2020.
Equity markets were generally lower across the globe last week with the benchmark S&P 500 down 1.30%, the Russell up 0.33% and the NASDAQ down 0.18%. Overseas the international developed markets (MSCI EAFE) dropped 2.01% while the emerging markets (MSCI EM) were down 2.39%. Oil prices were a key focus together with a new U.S. stimulus package and plans to reopen some states and countries as the worst of Covid-19 may possibly be behind us. Energy was the only sector in the U.S. to show gains while real estate and utilities were the worst performers.
Bond prices rose as interest rates fell, with the benchmark 10-year U.S. treasuries yielding 0.60% at the end of the week, down 5 basis points and down 132 basis points year-to-date. Pushing rates down is the idea that inflation may be headed to negative territory, at least temporarily as it did during the recession of 2008-2009, due to oil and food prices. (1)
Based on expiring oil futures contracts last week, West Texas crude oil hit -$37 per barrel, the first time in history that the price has gone negative. Over supply combined with severely limited storage capacity during the time of contract expiration was the cause of this anomaly. Within a day the price jumped back to positive territory; it closed the week at $17.18 per barrel. (1)
There were an additional 4.4 million jobless claims, bringing the total to 25 million over the past six weeks. (2) Economists are estimating the unemployment rate has jumped to 15% in April from 3.5% in February.
New manufacturing orders for durable goods decreased $36 billion or 14.4%. This decrease follows three consecutive monthly increases. Excluding transportation, new orders decreased 0.2% while transportation orders were down 41% led by ongoing issues in the aircraft industry. (3)
The consumer sentiment index for April was reported at 71.8 by the University of Michigan, up slightly from their preliminary read of 71 and better than the consensus estimate of 66.5. Details of the survey reveal that consumers – who drive about two-thirds of our economy – are fretful about current conditions but remain more optimistic in their expectations of the economy. (4)
Proprietary portfolio happenings:
FLIR Systems (FLIR), a Core Select holding, rose 16.1% last week on news that Amazon and other large employers have begun to deploy thermal cameras to screen workers for elevated temperatures as part of their Covid-19 protection plans. (5) FLIR is a leader in measurement and diagnostic systems and threat-detection solutions worldwide.
Quest Diagnostics (DGX), a G50 holding, reported revenues and earnings that beat expectations. (6) Stock in this global provider of health care diagnostic testing, information and services rose 11.7% for the week on the report.
Snap Inc. (SNAP), a G33 and Contrarian Choice holding, reported strong revenues and positive indicators of future revenues and earnings in their user numbers and engagement statistics when the developer of the Snapchat smartphone application reported quarterly results. (7) Shares rose 23.3% for the week.
Did You Know? Recycling one glass jar saves enough energy to watch television for three hours.
Sources: (1) JP Morgan Weekly Market Recap 4-27-20, (2) US Department of Labor 4-23-20, (3) Census Bureau Durable Goods Orders 4-24-20, (4) University of Michigan Survey of Consumer Sentiment 4-24-20, (5) Reuters, “Amazon Deploys Thermal Cameras” 4-18-20, (6) Quest Diagnostics press release 4-22-20, (7) Snap Inc. press release 4-20-20