The Market Today

Coronavirus Case-Growth Appears to Have Peaked Last Friday, Still Watching

by Craig Dismuke, Dudley Carter

Vining Sparks Economic Forecast Revision, April 2020

We will host our Economic Outlook webinar this morning at 10:00 a.m. CT discussing the possible peak in growth of the coronavirus.  Additionally, we will detail how the coronavirus outbreak has affected our growth outlook and well as our expectations for interest rates. (Register here)



Rate of Virus Growth Appears to Have Peaked: It appears the coronavirus outbreak is beginning to slow.  After several days of spotty evidence, the three-day growth rate for most every country is now lower than the seven-day growth rate.  While the increase in cases over the past 24 hours was slightly larger than the previous 24-hour period, the rate of growth – which reflects the rate of transmission – appears to have peaked at the end of last week.  Our outlook that mobility would resume, at least partially, by early May is still possible.

While the rate of growth appears to have peaked, there continues to be a large number of new cases confirmed each day and hot spots of new growth within the U.S.  As such, containment measures (stay-home orders, etc.) are unlikely to be unwound in the near future.  Also worth noting, the growth rate of fatalities tends to be delayed by seven days from the confirmed case rate.  As such, there will be some very discouraging headlines ahead. The decline in the rate of growth could be due to containment measures or warming weather, either way there is light at the end of the tunnel.

Coronavirus Chartbooks (Updated 9:00 a.m. CT)

PowerPoint: Coronavirus Chartbook (PWPT)  

PDF/Mobile: Coronavirus Chartbook (PDF/Mobile)


Small Business Survey Sees Largest Decline on Record in First Half of March: Small business optimism fell 8.1 points in March, from 104.5 to 96.4, the largest monthly decline on record.  However, the results appear better than expected, evidence that the survey period only covered the first half of the month. Confidence fell to its lowest level under the Trump administration, but remained higher than its average for any non-Trump year since 2006.  The net number of businesses planning to increase capital spending remained positive, as did the net number of respondents saying they plan to hire and that it is a good time to expand.  Next month’s survey should capture the more recent deterioration in conditions.


Markets Embarked On Sharp Relief Rally as Investors Embraced Improved Virus Statistics: Despite more evidence of damage to the global economy from the new coronavirus, markets opened the week with a convincing relief rally as improved virus statistics spurred a recovery in risk appetite. While there were no U.S. economic reports released Monday, measures of consumer confidence in Japan and the U.K. collapsed to new cycle lows in March while a broad measure of sentiment in Europe tumbled to its lowest level ever recorded. While those measures are consistent with the unprecedented economic contraction expected around the globe, equities improved across Asia and Europe and the S&P 500 shot 7% higher, its best day since March 24. Forward-looking investors are well aware of the devastation caused by the virus, but seemed to latch onto the improving virus statistics in some European countries, including in Italy, as well as New York State as a hopeful sign that lockdown measures have been effective at slowing down the virus, and could be relaxed in the weeks ahead. Following improvements over the weekend, Italy reported its lowest number of new cases in nearly three weeks and new hospitalizations in New York improved again.

Stronger Stocks Sent Treasury Yields Higher and Steeper: While stimulus measures from monetary and fiscal authorities around the globe have reached unprecedented levels, the consensus has been that any sustainable turn higher in markets would hinge on signs of virus containment, which could be an early indication economies could re-open gradually in the months ahead. With the positive medical developments over the last 72 hours, the same upbeat response by equity markets also pushed Treasury yields higher on the day. The 2-year yield rose 3.3 bps to 0.26% while the 10-year yield jumped 7.5 bps to 0.67%. While most currencies also reflected the recovery in risk, the British pound slumped late in the session on a report that PM Boris Johnson, the first major world leader to contract the virus, had been moved to the ICU after being hospitalized earlier in the day. After rallying sharply last week on hopes of production cuts, oil prices dropped Monday after the OPEC+ meeting to discuss those cuts was delayed until Thursday.

Tracking the Headlines: While the latest virus statistics created a positive tone for global markets to start the week, many headlines continue to show the acute economic impact. Japan announced a national emergency at the same time it disclosed a record stimulus package worth nearly $1T. Hong Kong extended a ban on non-residents entering the country until further notice. White House economic adviser Kudlow said there has been no in-depth discussions on when to re-open the economy. The sports world continued to announce delays or cancellations to popular events. The 2020 British Open was canceled for the first time since World War II. Sticking with golf, officials were targeting mid-November for the Masters, the PGA Championship could occur in early August, and the U.S. Open may be held in mid-September. Related to the small business stimulus plans, there were reports that the SBA system to process loans went down for several hours. Also related to the Paycheck Protection Program (PPP), the Fed announced a facility to keep those loans from overwhelming bank’s lending limits by providing term-funding.


Market Sentiment Strengthens Further: For a second day in a row, global equities have rallied sharply on hopes that early signs of improvement in virus statistics from some of the worst hit areas around the world could indicate that peak infections could be reached sooner than previously projected. Led by gains in China, shares across Asia rose 2.3% and Europe’s Stoxx 600 was 2.6% higher with stocks in Italy and Spain out in front of the widespread gains. U.S. futures have shown no hesitancy in piling on to yesterday’s 7% gains with contracts on the S&P 500 up just under 3% at 7:15 a.m. CT and near the highs of the day. Other markets were also reflecting the optimism with safety bid fading from the U.S. dollar, gold inching back, and oil prices recovering from Monday’s drop. After mixed indications in recent days, Bloomberg reported that OPEC+ is “closing in on an agreement to curb output.”

Bond Yields Move Up in Hopes for Better Days Ahead: Bond yields have also broken higher on the second day of stronger risk appetite. The U.S. and German 10-year government note yields were up more than 6.5 bps and near their highs of the day. The 2-year Treasury yield rose 2.6 bps to 0.29% as the 5-year yield gained 4.6 bps to 0.49%. The market moves holding even after the historic drop in U.S. small business confidence speaks to the weight investors are placing on the improvement in the medical statistics. While significant uncertainties still attend the outlook, better virus data from places such as Italy, Spain, and New York State, as well as better national projections from some top U.S. models, have lifted spirits and equities as investors price in the potential for a return to a more normal life in the weeks ahead. A media outlet in Italy said that if conditions continue to improve, the government may begin relaxing restrictions in early May. Until worldwide restrictions are relaxed, government officials have been active at trying to keep their economies afloat. EU finance ministers are meeting today to discuss the potential for 500B in joint stimulus while U.S. House Speaker Pelosi told members of her party the next round of stimulus could be in excess of $1T.

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