Markets Mixed After Rocky Session…..

After a bumpy session, U.S. equities finished mixed and near the flatline, with some upbeat results on the earnings front contributing to sentiment, as well as continued signs of relative stability in the oil markets after the dislocation in the crude oil futures market earlier this week. As well, the House is set to vote on the near $480 billion aid package, with hopes high that it will pass. Eli Lilly topped expectations, while rail companies CSX and Union Pacific also delivered solid results as operating efficiency improvements countered a challenging volume environment. The timing of the reopening of the U.S. economy also remained in focus amid the backdrop of the trillions of dollars of fiscal and monetary policy support, as well as continued relative positive developments from the healthcare sector. The optimism overshadowed more gloomy economic data that showed initial jobless claims spiked again and new home sales tumbled, while reads on manufacturing and services sector output contracted more than expected. Treasury yields were lower at the mid-to-long end of the curve amid a rise in bond prices, the U.S. dollar was little changed, and gold gained ground. Europe finished higher despite some dismal Eurozone and U.K. April manufacturing and services sector reports, while markets in Asia were mixed.

The Dow Jones Industrial Average rose 39 points (0.2%) to 23,515, the S&P 500 Index lost 2 points (0.1%) to 2,798 and the Nasdaq Composite ticked 1 point lower to 8,495. In moderately heavy volume, 1.1 billion shares were traded on the NYSE and 3.7 billion shares changed hands on the NASDAQ. WTI crude oil rose $2.72 to $16.50 and wholesale gasoline lost $0.01 to $0.68 per gallon. Elsewhere, the Bloomberg gold spot price was $19.52 higher at $1,733.60 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly flat at 100.42.

The markets saw a choppy session and finished mixed, but were able to remain comfortably north of the March 23rd lows, with three main drivers of the action.  Earnings season is ramping up and the quarterly results continue to take a back seat to any commentary and guidance regarding the severe disruption of the COVID-19 (coronavirus) pandemic in an attempt to assess the depth and duration of the economic downturn, which remains highly uncertain. Also, the recently exacerbated turmoil in the oil markets continues to garner attention as this week has seen heavy demand and supply shocks get exacerbated by the technical anomaly in the futures markets.

The trillions of dollars from the Federal Reserve and Congress aimed at keeping the financial markets functioning properly and countering the recent severe spike in unemployment claims continues to add a hefty layer of support to sentiment. Additional help appears to be on the way after the Senate on Tuesday passed a nearly $480 billion bill to provide further aid to small businesses and the healthcare system, with a bulk of the funds earmarked to replenish the Payroll Protection Program (PPP) that dried up last week. The additional relief package is heading to the House for a vote and could pass this week.

Weekly initial jobless claims spiked again, coming in at 4,427,000 for the week ended April 18th, below the Bloomberg estimate of 4,500,000, and compared to the prior week’s downwardly-revised 5,237,000 level. The four-week moving average for week ended April 11th, rose by 280,000 to 5,786,500, while continuing claims increased by 4,064,000 to 15,976,000, south of estimates of 16,738,000. Unemployment claims over the past several weeks have surged amid the unfolding COVID-19 crisis, but the trillions of dollars in fiscal aid—and potentially more—and unprecedented blast of monetary policy support are aimed at stemming the flood of unemployment.

Treasuries rose on the mid-to-long end of the curve on the economic data and continued relative optimism regarding the war on the coronavirus, along with the massive amount of fiscal and monetary policy support. The yield on the 2-year note was little changed at 0.22%, while the yield on the 10-year note dipped 2 basis points (bps) to 0.60% and the 30-year bond rate declined 4 bps to 1.18%.

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