Equities broke out this week, driven by promising news and a renewed promise from the Federal Reserve.
All 50 states have now taken at least some measures to reopen, and a number of governments overseas have as well. Two companies announced positive results from early trials of possible Covid-19 vaccines. Even a couple of retailers had some surprisingly decent earnings reports.
All of that helped propel the S&P 500 to its highest point since early March. U.S. crude oil rose 19% on Tuesday alone, and a number of observers have declared the bottom for commodities.
Who were this week’s real winners and losers? Let’s take a look.
Winner: The Fed
We were tempted to go with either Moderna Inc. or Inovio Pharmaceuticals Inc. for this week’s winner, based on their progress on potential vaccines. But if you really think about it, the winner has to be the Fed.
After last week’s selloff—itself sparked by comments from Chairman Jerome Powell—the market was in a sour mood. It needed a confidence boost. The central bank delivered.
“You wouldn’t want to bet against the American economy,” Mr. Powell said during Sunday’s interview on “60 Minutes.”
That put the markets in a good mood for Monday. Add in the Wednesday release of the Fed-meeting minutes, and the market was reassured that the only thing it seems to care about was still there.
“The only certainty in the current environment is the continued promise from the Fed of unlimited support,” Canaccord Genuity analyst Tony Dwyer wrote.
Loser: The Bears. (Or Is It Really the Bulls?)
The bulls and bears have been locked in a tug of war for the past month. This week, one appeared to win.
Driven by all of the above, the S&P 500 traded as high as 2980 on Wednesday. It is only a hair underneath its 200-day moving average (2999), and only 13% off its February record of 3386.
So, a clean win for the bulls, right? Not exactly.
Even with the Fed’s unlimited power, the pandemic isn’t over and the economy has a long road in front of it. The Congressional Budget Office predicted the U.S. will be digging out of this hole for the next 18 months.
Next Week: Consumer Data
Economic reports are starting to fully reflect the pandemic’s effects, and next week brings several that focus on consumers. Consumer-confidence reports for May come from the Conference Board on Tuesday and University of Michigan on Friday. New-home sales for April will be reported Tuesday. The April durable-goods report and weekly jobless claims arrive Thursday. Personal income and spending lands Friday.
There isn’t likely to be anything outright good in those reports, but there may be signs at least that the bottom has been hit.
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