Your Weekly Market Blip 5/8/20

Your Weekly Market Blip 5/8/20

Stocks rallied in the face of a historically bad labor report for April. How can this be? Remember that markets are forward looking and are already paying more attention to lockdowns easing and people getting back to work instead of looking at what happened in April. It’s kind of like the line in the old movie Gumball Rally where the Italian driver, Franco, rips the car’s rear view mirror off and says “The first rule of Italian driving. What is behind me is not important.” Check out the quick video on our Facebook page.
Stocks ended the week on an uptick with the Dow gaining 455 at 24,331. Trading volume was mixed. Banks and tech led the way. For the week the Dow gained about 2.5%.
The latest unemployment data made history rising from 4.4% in March to 14.7% in April. While horrible, it was not as bad as expected since the gurus had predicted a reading of 16%. Back at the beginning of April some were calling for an April unemployment rate of 20% to 30%. One reason for the better than expected result was all the cash that Uncle Sugar pumped into the system via the Small Business Administration with the PPP loan program. A survey contained in the report showed that of the 20.6 million who were laid off, 18 million say they expect this to be temporary. One interesting aspect of all the enhanced unemployment benefits is that with the $600 monthly bonus program which runs through July some people are making more than when they were working. Small businesses with PPP loans are trying to bring people back but some are reluctant since it would mean a pay cut if they lose the unemployment bonus. Meanwhile the business owner needs to get people back on the payroll in order for the PPP loan to be a grant. It’s like double jeopardy. States are starting to look into this issue and hopefully a resolution will be hammered out. It’s interesting how in the rush to keep things going we set up two gubment programs which now appear to be working against each other.
WTI crude oil front contracts showed a price of $24.56 per barrel up 4% on the day and 25% for the week. OPEC + has cut production by 10 million barrels per day and the US saw another 200,000 barrel per day cut. The collapse in demand and full storage has led to an extraordinary level of production cuts around the world. Meanwhile refined oil products have seen three weeks of demand improvements which is boosting optimism in the oil patch.

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