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Stocks Down For The Month, But Well Off Their Lows
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Stocks pulled back yesterday, but held onto the majority of their gains from the day before.
The major indexes are still up strongly from their lows.
As I mentioned before, the Dow has already exited their bear market, and begun a new bull, by closing up 20% from their lowest close.
The S&P and Nasdaq have not crossed that threshold yet. But are not that far behind.
There is growing hope that we could see the outbreak reach its peak by mid-April. If that comes to pass, we could begin to start opening the economy shortly thereafter (late April/early May).
Gladly, the numbers from other countries where the outbreak started before us, are seeing improvement.
China is the first country that comes to mind, although, their lack of transparency does call some of their data into question.
Italy, however, is a country that the U.S. has been monitoring very closely. They've had a severe outbreak, but now seem to be on the other side of the curve.
You'll remember, when the U.S. first began the social distancing policies in an effort to slow the spread, Italy was repeatedly mentioned in comparison since our initial curve mirrored theirs. (They are ahead of us by roughly two weeks.)
Officials were hoping, thru mitigation, that we would see a deviation in our trajectory vs. theirs. Aside from NY and NJ, we're seeing that. But more importantly, the rate of new cases in Italy is slowing, and that's great news for us, and why many experts are confident that we'll reach our peak in the next two weeks and get on the downslope of our curve as well.
Getting back to China, while some of their outbreak stats are to be taken with a dose of skepticism, the mere fact that a lot of the country is getting back to work is encouraging. In fact, China reported their manufacturing activity actually expanded in March, with their Purchasing Manager's Index coming in at 52.0, beating expectations for a print of 45.0, and up sharply from February's record low of 35.7.
We'll get our own manufacturing numbers later today, but we're not on the other side yet, so they will be ugly. Nevertheless, seeing the strong manufacturing recovery in China bodes well for the U.S. in due time.
Remember, the market is forward looking. So every piece of good news we see in areas that were ahead of us in the outbreak presents a positive sign.
The main economic report this week, however, will be the Employment Situation Report on Friday. Although, the Weekly Jobless Claims report on Thursday is also eagerly anticipated after last week's nearly 3.3 million people filing for unemployment.
Just remember, once the worst is behind us (and we get closer and closer every day), stocks could soar in anticipation of the economy reopening.
See you tomorrow,
Kevin Matras
Executive Vice President, Zacks Investment Research
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