Stocks posted solid gains for the week on the heels of the largest weekly gain for the S&P 500 Index since 1974. While participation was led mostly by growth stocks early in the week, reports of a drug from Gilead Sciences that showed positive results in treating COVID-19 boosted stocks to broad-based gains on Friday. US equities shrugged off continued poor economic data, including a third consecutive week of more than 5 million new jobless claims.
The S&P 500 Index gained modest ground for the week, heading into the weekend with its highest weekly close since March 6. The Dow Jones Industrial Average lagged despite Friday’s outperformance, while the Nasdaq outperformed, cutting its year-to-date losses to under 4%.
Large caps led gains in the United States, as small caps declined slightly on the week. Growth stocks outperformed value by the most since April 2001. Consumer discretionary was the top-performing sector, followed by health care and technology, while financials closed firmly down.
In addition to continued record jobless claims, economic data gave further insight into the depths of the current likely recession. March retail sales showed an 8.7% month-over-month decline, more the double the previous record drop.
International markets were little changed for the week. Both the MSCI EAFE and MSCI Emerging Markets Indexes were negative through Thursday’s close, though both European and Asian stocks rallied strongly on Friday following news of the potential effectiveness of Gilead’s antiviral drug.
Fixed income markets continued to flex their resiliency, despite strong returns from equities, as the yield on the 10-year US Treasury fell throughout the week, boosting bond returns. Two-year US Treasury yields also reached new all-time lows, undeterred by increasing discussion of plans to reopen the US economy. Investment-grade and high-yield corporate bonds led as credit spreads for both sectors contracted further, now down significantly from their March 23 highs.
On Friday WTI crude oil briefly slumped below $18 per barrel. This was its lowest price since 2001 as concerns over falling demand and excess supply painted a bleak outlook for energy commodities. The US dollar was firmer on the week, although currency market headlines were dominated by volatility in the Australian dollar as it shrugged off disappointing first-quarter growth in China. Gold fell from its recent peak, while Copper rallied.
Next week’s US economic calendar will feature several data points on housing, durable goods orders, weekly jobless claims, preliminary (“flash”) Purchasing Manager’s Index (PMI) data from Markit, and consumer confidence from the University of Michigan. All of this data is expected to be consistent with historical recessionary conditions. Meanwhile, 96 S&P 500 companies will report first quarter results next week.
Internationally, investors will digest several data points from the Eurozone, including consumer inflation, current account and trade balances, consumer and business confidence, and Markit’s PMIs. Japan will report its own PMI data, in addition to data on consumer inflation and trade.
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