More market volatility is expected this week as coronavirus and a slew of economic data releases keep investors on their toes.
Cases of the virus are still on the rise, and the U.S. now has the most cases globally, surpassing China and Italy. As of Sunday morning, there were 124,686 confirmed cases in the U.S. with over 2,100 confirmed deaths, according to Johns Hopkins data.
COVID-19 developments have been causing a frenzy among investors, and stocks continued to whipsaw in either direction. Despite the violent swings, the Dow (^DJI) rose 12.8% last week for its best weekly gain since 1938. Meanwhile, the S&P 500 (^GSPC) jumped 10.3% and posted its best week since 2009.
President Donald Trump officially signed a bipartisan $2 trillion economic stimulus bill in an effort to aid struggling Americans amid the COVID-19 pandemic. “This round of stimulus is the broadest in terms of scope and the most substantial in terms of cost. In addition to assistance for larger distressed businesses, knowing relief will be provided outright to American families via direct payments and small businesses via potentially forgivable and interest free loans helped restore hope and provided comfort to the markets,” Raymond James Chief Investment Officer Larry Adam wrote in the March 27th edition of Weekly Headings. “The US economy will likely struggle temporarily, but the combination of aggressive monetary policy and substantial fiscal stimulus should deter the worst case scenarios from occurring.”
March jobs report
On the heels of last week’s shocking initial jobless claims data, market participants will get another glimpse of how the COVID-19 outbreak has crushed the U.S. labor market with the release of March’s jobs report Friday.
The number of Americans filing for unemployment benefits skyrocketed to a record-breaking 3.283 million for the week ended March 21. Consensus expectations were for 1.64 million claims. The previous record was 695,000 claims filed the week ended October 2, 1982. Initial jobless claims for the week ended March 14 was revised higher to 282,000 from 281,000 and was the largest single-week increase since the Great Recession.
Economists polled by Bloomberg anticipate 100,000 job losses in the month of March, down from the 273,000 jobs added during February. The unemployment rate is expected to have ticked up to 3.8% from 3.5% last month. The survey period for the March report was conducted during the second week of the month, and thus will not capture the full impact of job losses due to COVID-19. Many expect the full hit to the labor market will be revealed in April’s figures.
“The March employment report is more or less irrelevant at this stage because we already know that millions of workers have been laid off since the survey was conducted earlier this month,” Capital Economics wrote in a note March 26. “But the April report is on course to be by far the weakest ever.”
Weekly jobless claims data for the week ended March 28 is expected to be just as bad as the prior week. Economists project 3.15 million claims were filed. “The numbers could remain elevated as there have been reports of unemployment insurance offices working through a backlog of applications and workers unable to apply for unemployment benefits due to sudden surge in claims. This suggest that we could continue to see very high numbers over the next week before it settles back to more normal levels,” according to economists at Bank of America.
ISM manufacturing & non-manufacturing
The Institute for Supply Management’s manufacturing data will be released Wednesday and service sector data is scheduled for Friday. Both data points will help investors gauge the blow to the U.S. economy due to COVID-19.
Factory closures and massive supply chain disruptions are likely to have caused a sharp slowdown in manufacturing during the month of March. “[We] anticipate that ISM will meaningfully underperform other manufacturing surveys,” Credit Suisse said in a note March 26. “Going forward, ISM should drop further into recessionary territory as factory shutdowns persist and consumer and investment demand slows sharply. We expect a cumulative decline of over 15% in US industrial production from March through May. Some parts of production will see a sharp pickup when contagion concerns ease, but the recovery will be incomplete and we expect long-lasting weakness in the manufacturing and energy sectors.”
Economists expect an ISM manufacturing reading of 45.0 in March, down from 50.1 in February. A reading above 50 indicates expansion and a reading below 50 signals contraction in the manufacturing sector. The manufacturing sector represents about 11% of the U.S. economy.
Meanwhile, the services sector is also expected to have plunged in March due to coronavirus and widespread temporary store closures. “We expect the ISM non-manufacturing index to decline sharply to 40.0 in March from 57.3, consistent with a substantial negative shock to many service industries due to strict social distancing policies that were implemented during the month,” Nomura wrote in a note March 27. “Many restaurants and recreational service establishments, which do not qualify as ‘essential’ for many state lockdowns, have temporarily shuttered, in many cases reducing their employment numbers at the same time. As a result, we think the ISM non-manufacturing index will weaken considerably during the month.”
Economists surveyed by Bloomberg expect ISM non-manufacturing index reading of 44.0, down from 57.3 last month.
Monday: Pending Home Sales month-on-month, February (-2.0 expected, 5.2% in January); Dallas Fed Manufacturing Activity, March (-10.0 expected, 1.2 in February)
Tuesday: MNI Chicago PMI, March (40.0 expected, 49.0 in February); Conference Board Consumer Confidence, March (110.0 expected, 130.7 in February)
Wednesday: MBA Mortgage Applications, week ended March 27 (-29.4% prior); ADP Employment Change, March (-150,000 expected, 183,000 in February); Markit US Manufacturing PMI, March final (48.0 expected, 49.2 prior); Construction Spending month-on-month, February (0.5% expected, 1.8% in January); ISM Manufacturing, March (45.0 expected, 50.1 in February); ISM Prices Paid, March (41.8 expected, 45.9 in February); Wards Total Vehicle Sales, March (13.75 million expected, 16.83 million in February)
Thursday: Trade Balance, February (-$40.0 billion expected, -$45.3 billion in January); Initial Jobless Claims, week ended March 28 (3.150 million expected, 3.283 million prior); Continuing Claims, week ended March 21 (1.803 million prior); Bloomberg Consumer Comfort, week ended March 29 (59.7 prior); Factory Orders, February (0.2% expected, -0.5% in January); Durable Goods Orders, February final (1.2% expected, 1.2% prior); Durables excluding Transportation, February final (-0.6% expected, -0.6% prior)
Friday: Change in non-farm payrolls, March (-100,000 expected, 273,000 in February); Change in Manufacturing payrolls, March (-10,000 expected, 15,000 in February); Unemployment rate, March (3.8% expected, 3.5% in February); Average Hourly Earnings month-on-month, March (0.2% expected, 0.3% in February); Average Hourly Earnings year-on-year, March (3.0% expected, 3.0% in February); Markit US Services PMI, March final (38.5 expected, 39.1 prior); Markit US Composite PMI, March final (40.5 prior); ISM Non-Manufacturing Index, March (44.0 expected, 57.3 in February)
Tuesday: Conagra Brands (CAG) before market open
Friday: Constellation Brands (STZ) before market open
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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