The Market Today

Covid-19 Cases in U.S. Show Convincing Signs of Slowing

by Craig Dismuke, Dudley Carter

CORONAVIRUS UPDATE Vining Sparks Coronavirus Chartbook (PDF) (Link) (Updated)

Daily Case Count – U.S. Cases Slow to Lowest in Five Weeks, Despite Re-Openings: The number of cases in the U.S. continued to trend lower yesterday with the exception of one reporting change.  Total cases increased 21,166 but could have dropped to 17,652 which would have been the lowest daily tally in over five weeks, despite all of the re-openings over the past three weeks.  Regarding the unusual reporting circumstances, officials in Massachusetts changed how they report cases, now including “probable” cases that were not confirmed.  As such, the state reported 3,840 new cases yesterday and 189 additional deaths.  Yesterday’s reporting of “probable” cases and deaths included a look-back period to March 1.  As far as newly “confirmed” cases using the previous methodology, Massachusetts only reported 326 new cases yesterday.

Monitoring the Headlines: While the pace of the virus-related headlines was slower Monday, the themes were consistent with those from recent weeks. New cases in New York were less than 1,000 for the first time in eleven weeks. New Jersey’s governor announced his state would move to phase two of its four-phase plan on June 15 but warned that re-opening the economy makes an uptick in new cases inevitable. Among the phase-two changes, outdoor dining and salons will re-open. Southwest’s CEO said the company’s revenue trends were improving but still 80% to 85% lower than a year ago. In Washington, the CBO estimated the House’s $3 trillion Heroes Act will add $3.5 trillion to the deficit over ten years. In the Senate, an aide to Majority Leader McConnell said the senator would seek consent to pass the House bill to loosen PPP restrictions.



Quiet Day – Auto Sales: U.S. auto sales are scheduled to be released today with expectations for sales to partially rebound from April’s historic collapse.  Sales fell to 8.58 million (ann.) in April but are expected to improve to 11.10 million in May.


Equities Rose as Optimism Won Out over Risks: Economic optimism won out Monday over worries around domestic unrest in the U.S. and risks of the U.S.-China trade agreement potentially unraveling. After recovering from an early stumble, the S&P 500 slid sideways to notch a 0.4% gain as the financials, energy, and industrial sectors all gained more than 1%. While still reflecting contraction, purchasing managers’ indexes, or PMIs, improved across Europe in May and reflected expansion in China’s manufacturing and services sectors. Shortly after the open of U.S. trading, the ISM’s survey of U.S. manufacturing pointed to a modest recovery (more below).

Treasury Yields Stay Stagnant amid Persistent Uncertainty: The additional signs of economic stabilization helped counter concerns about weekend protests in the U.S., some of which became violent and destructive and led to curfews in several larger metro areas. Also ahead of U.S. trading, reports indicated China had instructed state-run agricultural firms to pause purchases of U.S. farm goods in response to President Trump announcing last Friday that the U.S would seek to remove Hong Kong’s special trading status due to China’s legislation to strengthen its national security interest in the special administrative region. Those developments kept Treasury yields within the tight ranges that persisted throughout May (more below). The 2-year yield inched down 0.4 bps while the 10-year yield added 0.7 bps.


Stocks Continue to Climb Amid Uncertainty: While investors are presumably watchful of risks surrounding the U.S.’s relationship with China and the unrest in cities across the country, they sanguinely pushed global equities higher in tandem on Tuesday in the absence of a significant uptick of infections as economies re-open. After Asian stocks rose 0.9%, gains accelerated in Europe with the Stoxx 600 1.5% higher while U.S. futures had improved 0.5% at 7:20 a.m. CT. Stocks around the world have marched to their highest levels in nearly three months on early indications re-opening economies has stabilized activity without yet reenergizing the virus. Oil prices also improved while the Dollar weakened. Peripheral European yields continued to press lower while the 10-year Treasury yield added 2.3 bps to 0.68%.


ISM Reports Small Uptick in Manufacturing in May: The ISM’s manufacturing index improved less than expected in May, recovering 1.6 points to 43.1 after sliding 7.6 points in April and 9.4 points in the three months since January. Even adjusting out a 1.6-point drag from faster delivery times, actually a positive in the current context of thawing supply chains, a slightly firmer recovery in new orders (+4.7 points), production (+5.7 points), and employment (+4.6 points) was still modest and left the absolute levels deep in contraction. While other metrics also indicated some pick-up in activity – orders backlogs rose, new export orders improved, and inventories grew – the overall pace of activity remains disappointing and slow.

Construction Spending Fell Less Than Expected but Remained Weak: Construction spending slowed less than expected in April but reflected widespread weakness across each category. Total dollars spent fell 2.9% in April after no change in March (revised down from +0.9%) and a 0.2% gain in February (revised up from -2.5%). While April’s decline was much less severe than the 7.0% economists expected, the drop was driven by a 3.0% decline in private projects and a 2.5% reduction in public dollars spent. In the private housing sector, new single-family construction dropped 6.6%, multi-family contracted 9.1%, and home improvement outlays were flat.

ICYMI – May 2020 Monthly Review: Global equities pushed higher in May as economic optimism and massive stimulus efforts helped offset rising U.S.-China tensions. April’s historic contraction was worse than expected based on data released throughout May but positive market momentum resumed in the second half of the month. Governments and central banks have unleashed historic amounts of stimulus and early-May data shows some stabilization as economies re-open. Also comforting risk assets, Fed officials reiterated their commitment to keep rates low for a long time. Click here to view the full recap.

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