April 3, 2020 - Stocks lost ground this week with both a big rally and big loss on the board.
Monday saw a rally of more than 3% by each of the major indices, but Tuesday and Wednesday combined for losing sessions. Wednesday in particular was an ugly day. The market dropped after President Trump said in a Tuesday evening press conference that the coronavirus death toll in the United States could range from 100,000 to 240,000.
That announcement, and moves by southern-state governors helped to reinforce the notion that this is not an isolated problem that is likely to pass quickly.
Thursday, the market ended higher, but the economic news of the days was 6.6 million new claims for unemployment the week ended March 27. This week's report came on the heels of what was, at the time, a record smashing new-claims number of 3.3 million the week before. Thursday's rally felt like the phenomenon we discussed last week, where traders expect some government intervention in the market and so buy on negative news because they feel like some help is coming.
Ten million people requesting unemployment benefits for the first time is an astounding number, and likely understates the size of the problem as not everyone who lost a job in the last two weeks even tried to file a claim and state unemployment systems were overwhelmed which likely prevented many from successfully filing.
With 10 million new unemployment claims on the board, Friday's monthly unemployment report, which showed the economy losing jobs for the first time in nearly 10 years, and the unemployment rate rising to 4.4% seemed anticlimactic. The reference week for the monthly report is the week containing the twelfth of the month, which in March was before much of the country started to take coronavirus seriously, and certainly before the two weeks where more than 10 million people lost jobs.
From a technical perspective, the market held on to much of last week's gain, and all three of the major indices now sit above their 52-week lows. The Nasdaq has bounced the least from the low, but also managed to fall the least from the 52-week high. It's possible that low could hold, but given how fast the market fell, it got overextended to the downside and a bounce was going to come at some point.
Whether we go up or down from depends largely on how quickly the number of new coronavirus cases peaks and starts to decline. It will be some time after the peak when things start to reopen, and it's hard to know exactly how consumers will respond given the damage to the economy and the lingering possibility of new infections.
All told this week, the S&P 500 lost 2.08%, the Dow fell 2.70% and the Nasdaq slid 1.72%.