Market recap: Friday, April 3
Markets remained volatile during Friday's trading session, as the COVID-19 outbreak worsens throughout the United States and around the globe. The Final Round panel discusses the latest market action.
Video Transcript
JEN ROGERS: We're going to close out this week of trading here. You're in the last hour now. We have markets down. The majors are all down more than 1.5%. The Russell, meanwhile, falling more than 4%. Of course, the March jobs report coming in far weaker than expected. But all market participants know that it's not even reflecting the level of pain being felt in the labor market in this country. That report only captured data through the 12th of the month before much of this country went into lockdown and we started seeing a lot of these furloughs and layoffs in here.
Just looking at the market right now, again, talking about the Russell being down-- we're seeing declines here, and especially this week, financials have been really ugly. XLF up here down another 3%, utilities off 4% here as well. Energy-- it's a little bit of a mixed bag with energy this week. Of course, we had that record day yesterday for crude-- up some 24%, some gains here on some more news out of Washington and a possible deal between the Saudis and the Russians.
The energy sector, though, XLE, is off just about 2% right now. Want to bring in my co-host, Myles Udland. He's in New York City. And, Myles, I've got-- you know, I've just been going through a bunch of, you know, not great headlines. I'm going to go to you with one that's, I think, pretty good. The VIX is below 50. Is that good?
MYLES UDLAND: It's certainly more constructive for this market. And you know, you call out the weakness in financials, and I think, in a sense, it's pretty healthy and pretty expected, right? We say so often on the show-- and you hear so often in other places-- what is the financial sector? Well, it's really just a leveraged bet on the health of the economy. Obviously, as you mentioned, the jobs report indicating that this economy is not in very good shape, and I think that data is likely to deteriorate over time. We're going to talk about that a little bit more as the show goes on.
And you mentioned the Russell 2000-- well, about a fifth of the Russell 2000 market cap comes from the regional banking sector. So you would expect when financials are under pressure, when the economy is under pressure, that's where you're going to see a lot of that hit. Regional banks-- they're off 5% today. The KRX KBW regional index of some 5%. So that is certainly weighing on the Russell right now.
Yeah, I mean, we're going to get into the small business loans, right? Those are going through the banking sector. The banking sector is a very important part of where this recovery comes out. But just from an investor standpoint, when you say, where's the economy going most broadly? What are the sectors that have the most direct exposure to that? Well, that's still going-- it's always going to be financials-- obviously still the case today. If you look at the S&P 500 sectors right now, consumer staples actually in the green. Health care, real estate among the out-performers on today's session.
And I think, ultimately, we're going to be looking at a recessionary environment. So what does that mean? That means consumers are hunkering down. It means consumers are trying to find ways to cut some fat out of their budgets. Staples are going to be a way that-- they find their way into that basket. And so I think that from a market perspective, a lot of what we're seeing is explicable. And that's actually a good thing, because we have had more than our fair share of sessions in the last three weeks where you looked at the tape and you said, I don't really know what to tell you. I think today's story is a little bit more normal, as it were. Now, we're still off 2%, basically, and that's a big drop. But in this environment, I think you take it.
JEN ROGERS: Definitely take it in this environment. And to your point about what we're seeing and how it's different, I mean, just the range right now this week that we've had-- ranges of 2% to 4%. It's very different than what we got used to with those 5%, 7% swing days. Just because it's nice to see some green-- you called out consumer staples here. Names like Campbell's Soup we've got up 3%, Connagra up almost 3%, Altria, Kellogg as well-- those are some of the outperformers today in here.
We are going to be talking a lot more about what's happening with small business loans with people that have been talking to the banks. But as you called out in the Russell, I mean, these banks are really scrambling right now to get this money to small businesses, but it's not exactly going to be a profit center for them. Even though they're in focus and they're working hard on this, it's not business as usual in terms of loans and being able to repackage them and sell them on to investors.
There's a lot of questions still about the actual business model for banks with this.
MYLES UDLAND: Yeah. I mean, I don't know, I've been thinking about this a lot. And we've talked about it on the show. And I think it's going to be a conversation for probably years to come. But this whole framework of the business model and how we're even administering this-- I mean, it really just speaks to a broken federal system, right? The federal government-- what it needs to do right now is it needs to make everyone whole as fast as possible.
But the federal government's only way to do that is to enlist the private sector to get it done for it. And as you mentioned, yeah, not a profit center-- obviously, JP Morgan only wants to do things that are profitable. It's going to have to do things that are not profitable here. But I think the question is, why are we asking JP Morgan to be the one administering emergency grants to consumers and small businesses? Now, it's our only option. Practically speaking, it's what had to be done. I think it's a pretty good solution.
I think there's some relative optimism today that this may go, like, 90% as well as it is on paper, which would be a tremendous success by any measure. But I think, you know, to go kind of far afield here-- you think about why doesn't everyone who lives in the country have a bank account with the Federal Reserve? I think that's a fair question. I think that's the kind of thing on the other side of this, we should really be talking about, because that's what needs to be done.
Fed and Treasury need to give everyone money, and then everyone needs to stay home for six weeks, and then we figure it out from there. The current system, again, not horrible, but it's-- we're sort of prisoners of our own-- of this own design, right? And so, you know, I don't know what that does to the stock price, and maybe it didn't really matter. But I think that's kind of where the conversation is probably going to go. That's what the books are going to be about, right, when this is all over.
JEN ROGERS: All the books. I think it does matter for the stock, market because this is all about the speed that this money is coming out. And as you say, we're having to put this together piecemeal-- get checks to go through the IRS. What do we do with the unbanked? I mean, I don't think we're going to be probably going to the situation where we have a digital fiat and the Federal Reserve is our banker, but things will change no doubt.
