Market Update: Wed, May 7, 2020 | LPL Financial Research


Stocks opened solidly higher. The S&P 500 Index opened sharply higher this morning after selling off late Wednesday to end the session lower. Asian markets were modestly lower overnight, though the Nikkei rose after being closed for a week. Stocks in Europe are solidly higher in midday trading, though gains trail the United States. Oil is rallying sharply after Saudi Arabia raised prices, while some well-received earnings and continued optimism around re-openings are buoying market sentiment even as the chorus of warnings about whether stocks have come too far, too fast grows louder.

Another jump in jobless claims. Initial jobless claims for the week ending May 2 came in at 3.17 million, slightly above Bloomberg’s consensus forecast and bringing the seven-week total to more than 33 million. The silver lining is the weekly total has fallen for five straight weeks, and bear market bottoms have tended to come around peak surges—as observed in late March—although claims may be elevated for at least a few more weeks. Friday’s monthly jobs report will highlight the depth of the hit to employment.

Policy bazooka. Policymakers in Washington, DC, and at the Federal Reserve have been laser-focused on combating the economic impact of COVID-19 lockdowns. We delve into the bold policy actions, comparing this response to the 2008–09 financial crisis and highlighting what might come next, all later today on the LPL Research blog.

Global recession? The global manufacturing Purchasing Managers’ Index (PMI) fell 7.9 points to 39.8 in April, the largest one-month decline on record and, according to calculations by Ned Davis Research, historically consistent with a 7.7% year-over-year drop in global industrial production. No country’s PMI was over 50, though China was close, and only Hungary saw a month-over-month increase, as Europe’s readings are among the lowest globally. The global economy likely has entered recession and a contraction in gross domestic product (GDP) this year is a realistic possibility, as we discuss in Weekly Market Commentary: Big News and New Forecasts.


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