Uncertainty Escalates to Hamper Stocks…..

U.S. equities finished solidly lower, as uncertainty ratcheted higher following Federal Reserve Chairman Jerome Powell’s speech, comments from some prominent investors on market valuation, and continued uneasiness pertaining to a potential second wave of COVID-19 in the wake of new cases being reported out of Asia and Europe. Treasury yields were lower amid a rise in bond prices, and the U.S. dollar overcame early pressure to finish higher. Meanwhile, gold gained ground and crude oil prices fell. In economic news, wholesale price inflation fell more than expected. On the equity front, United Natural Foods issued an upbeat Q3 pre-announcement, while Uber and Grubhub are reportedly haggling over price in the ride-sharing company’s possible takeover of the food delivery service. European markets finished at their lows amid the uneasiness, while markets in Asia were mixed.

The Dow Jones Industrial Average tumbled 517 points (2.2%) to 23,248, the S&P 500 Index declined 50 points (1.8%) to 2,820, and the Nasdaq Composite decreased 139 points (1.6%) to 8,863. In heavy volume, 1.1 billion shares were traded on the NYSE and 4.2 billion shares changed hands on the NASDAQ. WTI crude oil lost $0.65 to $25.68 per barrel and wholesale gasoline was $0.07 lower at $0.85 per gallon. Elsewhere, the Bloomberg gold spot price was $13.95 higher at $1,716.65 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—gained 0.3% to 100.23.

The Producer Price Index (PPI)  showed prices at the wholesale level in April dropped 1.3% month-over-month (m/m), versus the Bloomberg forecast calling for a 0.5% decrease and March’s unrevised 0.2% decline. The core rate, which excludes food and energy, declined 0.3% m/m, versus an expected 0.1% dip and March’s unadjusted 0.2% rise. Y/Y, the headline rate was 1.2% lower, compared to projections of a 0.4% decrease and the prior month’s unadjusted 0.7% gain. The core PPI rose 0.6% y/y last month, below estimates of a 0.8% increase and March’s unrevised 1.4% gain.

The MBA Mortgage Application Index rose 0.3% last week, following the prior week’s 0.1% gain. The modest increase came as a 3.3% drop in the Refinance Index was more than offset by a 10.6% rise for the Purchase Index. The average 30-year mortgage rate increased 3 basis points (bps) to 3.43%.

Federal Reserve Chairman Jerome Powell discussed current economic issues via a webinar hosted by the Peterson Institute of International Economics. Powell noted the severe economic impact of the COVID-19 pandemic and that “the path ahead is both highly uncertain and subject to significant downside risks,” while reiterating that the Central Bank stands ready to do what it takes to support the economy. The comments come as the Fed kept its extraordinary monetary policy stance unchanged last month, restating its commitment to use its full range of tools to support the virus-crippled economy and keep markets functioning smoothly.

Treasuries were higher following the data and Powell’s remarks, as the yield on the 2-year note dipped 1 bp to 0.16%, while the yields on the 10-year note and the 30-year bond declined 4 bps to 0.65% and 1.34%, respectively.

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