Week #24: U.S. Equity continues to climb on Monday, with the Nasdaq 100 reaching a fresh record high and the Dow Jones moving vertically 400 points entering a fourteen-week high as investors wager on a swift economic recovery from the pandemic driven lockdown. For the time being, the anticipation of a second wave of the coronavirus and escalating US-China tensions have taken a backseat to the riots in the media. On the macro side, the National Bureau of Economic Research (NBER) officially declared the US entered into a recession (recognized as two consecutive quarters of economic decline) during February, concluding a 128-month expansion. The Dow Jones surged 462 points (1.7%) to 27,572. The S&P 500 climbed 39 points (1.2%) to 3232. The Nasdaq gained 111 points (1.1%) to 9925.
Oil: The Cartel agreed in April that it would slash supply by a record 9.7 million barrels per day during May-June to balance the global oil market and prop up prices that collapsed due to the coronavirus crisis. Before the market open June, 8, OPEC decided to continue the supply cut through July. WTI crude fell 3.4% to settle at $38.19 a barrel to end the trading day.
The Federal Reserve: Friday the central bank announced, “Chairman Jerome Powell will discuss the economic outlook next week.” Powell will talk to the Peterson Institute for International Economics via webcast on Wednesday at 9 a.m. Eastern. Currently, a 0.00-0.25 basis point cut is foreseen.
Unemployment: The US unemployment rate dropped to 13.3 percent in May 2020 from 14.7% in April, which was the largest in record back to 1939 and below market expectations 19.8 percent, as the economy gradually reopened. The number of unemployed individuals fell by 2.1 million to 21.0 million as those who were on temporary layoff decreased by 2.7 million to 15.3 million. Among those not on temporary layoff, the number of permanent jobs loses increased by 295,000 to 2.3 million. The number of employed rose by 3.8 million to 137.2 million and the labor force participation rate increased to 60.8 percent, after hitting the lowest since January 1973 the month prior. Since February, the unemployment rate was up by 9.8 percentage points and the number of unemployed persons increased by 15.2 million. This may be some of the most baffling statistics derived so far due to Covid-19.
Last Friday investors took the jobless rate numbers as a calming sentiment leading the way for the bulls to tear through the 200sma. To technical traders, the 200sma is one of the biggest support/resistance lines available. This lead way for the bulls to continue the current rally extending into the trading session Monday. Below we added a chart of $DJI where you can see the gap up past the 200ma last Friday. (Green Circle)
In Other News: Shockingly, after declaring bankruptcy in recent weeks, Hertz (HTZ) gained 115% through normal trading hours, and increased 23.5% after. Seasoned investor jaws are dropping as they see more green investors joining easy access, no fee, no commission brokers, and expressing little due diligence. This is the same trend that drove Tesla (TSLA) past its realistic valuation. As new stocks IPO with the slightest of a reputable business plan, the general public is now backing them on hearsay, and ill-fated speculation. Long-time traders may want to start following this trend as it doesn’t seem to be decelerating any time soon with an increasing number of accounts being deployed on conveniently low-cost brokers.