Market Data as of Week Ending 05/08/2020 unless noted otherwise.
Stock prices recovered after a rough start to the month of May. Small and medium sized businesses outperformed their larger counterparts for the third consecutive week. Investors responded favorably to reports that treatments might bring an eventual end to the health and economic crisis. For the first quarter, S&P 500 companies have reported an earnings decline of more than 10% and analysts expect a decline of nearly 20% for calendar year 2020. Developed foreign stocks in Europe and Asia posted much more modest gains for the week and Emerging Market stocks declined, underperforming developed foreign markets.
U.S. Treasury yields were mixed for the week as short-term bond yields declined while long-term yields increased. Below investment grade corporate bonds outperformed as investor demand continues to build for higher yielding credit. Investment grade corporate bonds are yielding more than 2.5% and high yield corporate bonds are yielding more than 7.5%.
The official U.S. employment report was released for April and the unemployment rate increased to 14.7%, the highest in more than 70 years. Some positive news in the report was that the vast majority of those laid off told surveyors that they expected to be rehired within six months. However, expanded unemployment benefits through the summer could make unemployment a more financially viable option than going back to work for lower wage earners. Signs of fragmentation emerged in Europe when the German Constitutional Court ruled that parts of the European Central Bank’s (ECB) bond-buying program were unconstitutional.