Overview: Stock markets surged in a four-day trading week as evidence grew that the coronavirus may be peaking in Europe and the U.S. Additional policy support from the Treasury and Federal Reserve provided stimulus to the markets, as the S&P 500 Index rose 12% for the week. Interest rates were steady, with the 10-year Treasury ending the week at 0.72%. Corporate and municipal bonds outperformed, as the Fed added liquidity to existing and new credit facilities. The U.S. reported 6.1 million initial jobless claims last week, and the 16.8 million job losses over the past three weeks point to an approximately 11.6% increase in the unemployment rate.
A commentary from JP Morgan on the employment situation:
Due to the COVID-19 crisis, the U.S. labor market has deteriorated at an unprecedented speed and magnitude. The March employment report showed a decline of 701,000 payrolls, and the unemployment rate rose to 4.4%. However, underlying classifications within the report reveal the uncertainty of workers during the early weeks of social distancing. Temporary layoffs increased by 1 million, versus a 177,000 increase in permanent layoffs, reflecting the anticipation that many temporarily closed businesses will be able to reopen. Given that the first two weeks of March were early in the social distancing effort, there was a 34% rise in those who were working part-time for economic reasons, including that their hours were reduced. An untold number of workers also simply responded as employed but absent from work for “other reasons.” Self-employed workers remained committed to their businesses, with self-employment declining just 1%, while multiple job holders of varying hours, implying gig economy workers, declined 9%. Since then, an additional 16.8 million workers have filed initial claims for unemployment insurance, implying an unemployment rate of nearly 15%. In the months ahead, those on temporary layoff are likely to surge, but the hope is that expanded unemployment benefits and business loans from the $2.3 trillion fiscal package can keep workers and businesses afloat long enough to see a sharp rebound in employment once social distancing measures ease.
In other economic news, on April 9 the Fed took additional actions, reaffirming their commitment to support the economy. Measures included a liquidity facility for the Paycheck Protection Program (PPP), a Main Street Lending Program ($600 billion), increased corporate credit facilities ($850 billion), and a new Municipal Liquidity Facility ($500 billion).
Weekly Returns and Data
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