Summers here – Markets are heading into the long weekend with the traditional defensives outperforming.  Homebuilders are higher by 1.4%, Staples 19bps, and Utilities 36bps, and 10-year Treasuries are hovering around the .66% level.  And that defensive posturing means ytd underperformers (now called Value) are lagging.  Economic data started the long weekend early by taking the day off, but traders had a couple more earnings to check before they disappeared.  Once again, the CV-19 winner/ losers earnings showed, as Foot Locker (FL -12.9%) reported comp sales that fell 42.8% in the quarter.  Top supplier, Nike (-24bps), is not expected to report till mid-June.

Value leading? Straight talk from Fauci and Powell reminded participants that global economies are far from the V shaped recovery many are looking hoping for, and the S&P 500 dropped 3.8% the previous two sessions.  The gap between Value and Growth remains wide though, and when Trump said today he would be open to a Phase 4 stimulus bill (just not the one the Democrats offered this week), Value stocks helped turn around a very negative start to the session (S&P was -1.8% at the low), and the S&P is now in the green.  JPM and Wells Fargo outperformed from the start, and now the Bank sector is +3.7% (Fox’s Gasparino has been talking about a merger between GS and WFC).  The other popular Value sector, Energy, is also leading (+1.9%).  US Treasuries remain bid though, with the 10-year yield at 0.62%.  So this is not risk-on across the board, but rather a rebalance into market underperformers.

WOW – Hopefully this will be the only time in everyone’s career that markets see a NFP drop like this.  20.5mn jobs lost is tough.  Markets expect that loss to flip in the coming months, and some companies are moving forward with their plans to re-start their plants (Boeing and Ford).  But job creation will take time for the tail, since every sector saw deep cuts (leisure 7.6mn, education 2.5mn, retailers 2.1mn, manufacturing 1.33mn). 

Welcome to the Grand Re-Opening! US markets continue to embrace the “light at the end of the tunnel” as States slowly re-open their economies.  While the V, U or Nike swoosh rebound remains to be seen, any economic re-start is a short term positive.  Ford, GM and Fiat Chrysler all look to get their plants going, as Simon Property will open 49 sites in early May.  The shift has helped the economic sensitive SmallCaps outperform once again.  The Russel 2000 has gained 5% this week, and is once again above its 50 day moving average.  As a harbinger of the economy, this index will be the one to watch for any future economic disruption. 

It’s a Friday! Fridays have not been kind to equities this year, with indexes closing in the green only 26% of the time (tough to take risk during the virus outbreak).  Currently though, stocks are trying to beat those odds.  Led by Tech/ Semis, the S&P is hovering near its 50 day moving average (2807). Underperforming? Energy names are giving up some of their 15% gains seen this week (even in the wake of the Oil implosion).  US Treasuries are also stable today, with the 10-year yield currently sitting at 0.60%  Next week is busy for the Central Banks, and the Fed meets Tuesday and Wednesday. Plus, earnings will be in full swing (especially from the FANG gang).

Monday blahs – US markets posted solid gains last week, but as a new earnings season starts, investors are taking some money off the table.  JP Morgan, J&J, JB Hunt and Wells Fargo report their Q1’s tomorrow, followed by BofA, Citi, Goldman and UnitedHealth Wednesday.  Retail (thanks to Amazon +4.4% and eBay +2.2%) and Food (Walmart +1.6%) are the only sectors in the green, with Homebuilders (-6.9%) and Banks (-3.9%) underperforming.  With many international markets closed for Easter Monday, US volumes are tracking down 16% versus their 20 day average.

The Stim, the Curve, and the Potential – US equities continue to add to their gains post the European close.  The potential for a peak in new US cases leading to the potential of some easing of the quarantine restrictions, is helping investors feel better about adding to their positions.  Also helpful, another stimulus package ($250-500bn) for small businesses could be voted on before the weekend. Granted the markets have a different mindset in the final thirty minutes of trading.  But as of now, the SPX looks safe to hold the 2650 support level that was created Monday.

It’s a Friday, so hit the risk-off button – The S&P has been trading in a diagonal (top left bottom right) pattern all day and is heading towards a weekly loss.  Markets are beginning to see the quantitative effects of the pandemic shutdown as March economic data is beginning to roll out.  As stocks continue their slide into the weekend (another Friday risk-off scenario), bond have benefitted with the 10-year yield now sitting at 0.574%   For those looking for a bright spot today, the VIX is below 50 for the first time since March 10th.

3283k vs 282k – That was the weekly jobless claims, and the stark reality of what the economy is facing.  While the $2trln stimulus package is on its way to the House for a vote tomorrow, today’s datapoint is the first showing the coronavirus impact.  But US equities are moving higher today as quarter end approaches, trying to get back above the 2600 level on the S&P.  Given the drastic asset movements this month, pensions will be rebalancing their portfolios (into equities from bonds), helping support US stocks into the weekend.

The new normal – Futures once again limit down overnight, but the circuit breaker did not get triggered until 12:56 today (versus just after the open the previous three times).  Looking around at all of the assets, the only one trading in the green is the Dollar, as everyone is rushing to cash (not just investors).  Oil is down 21%, a level last seen in 2002. Metal commodities are down, as well as Bonds.  One technical level our team has been watching is the 2346 on the SPX (from Dec. 2018), the index has now broken it, next level is -15% from here.