Stocks ended Friday with strength, as renewed U.S.-China trade tensions thawed. Wall Street is flagging several risks to stocks: Coronavirus infections, the U.S.’s exposure to China and high valuations.
All three major U.S. indices ended Friday up, with the S&P 500 up 1.69%. The 10 year treasury yield rose to 0.67%. And although the treasury department is issuing new bonds to finance the fiscal spending plan, putting price pressure on the 10 year, the yield did tick up for almost every hour that stocks did the same, indicating true risk-on sentiment.
What drove the market Friday: the U.S. and China spoke directly about honoring phase one trade deal terms, many states this week reopened their economies and fiscal stimulus began to aid consumer spend, supporting the thesis that the economy recover quickly rather than slowly.
The market looked right through the unemployment data, which hit the wires Friday, showing that 14.7% of the workforce is unemployed. The U.S. lost more than 20 million jobs in April.
Here’s what Wall Street’s saying:
Scott Knapp, Chief Market Strategist, CUNA Mutual Group
"This week, the markets are still seeing through the darkness that we’re continuing to see in the news. Talk of new tariffs and tensions with China have also provided some headwinds this week. It will be interesting to see how the COVID-19 pandemic changes the landscape of trade policy and its impact on market performance. Economic downturns shine a light on systemic risks. Right now, we’re seeing the downside that comes with having a supply chain that is heavily reliant on China. As a result, I think anti-globalization sentiment may increase around the world as we come out of this pandemic, and with that could come sizable changes to the order of global trade and the levers and tactics used to shape it."
Seema Shah, Chief Strategist at Principal Global Investors:
"Not only do the payroll numbers clearly set out the magnitude of the economic devastation that had already been trailed by incoming economic data in recent weeks, but it weighs heavily on expectations for the recovery. The elevated number of people considered temporarily unemployed suggests that many will re-enter the workforce as soon as the lockdown is lifted. But how many businesses will truly be able to re-hire their employees? Surely, continued social distancing suggests that many businesses will struggle to get back on their feet, with clear negative implications for the labor market.”
Tony Bedikian, Head Capital Markets, Citizens Financial to TheStreet:
"You’ve had a lot of people in the medical arena say that potential risk as we reopen are that more people are going be exposed [to the virus]. We enter into the fall when flu season begins, when typically a lot of illness spike, as we move into the fall and winter time. That’s going to be a risk as we move further into the year, that the virus data is really ultimately going to be what dictates further direction for the market. The market seems to be pretty optimistic about how the virus us going to play out.”
Team, Columbia Threadneedle Investments:
"Various equity market indicators continue to suggest caution. Volatility remains high, and the market no longer appears attractively valued after the April rebound. Eventually, we expect global economies to recover and (over the long run) for investors to be rewarded for equity positions. But for portfolios with tactical latitude, we believe that reducing exposures in an environment with an elevated risk of a correction makes sense."
Watch More of the Latest Videos from TheStreet and Jim Cramer
- Jim Cramer: What Coronavirus Means for Your Money in May
- Jim Cramer: Paypal Is 'COVID Currency Play'
- Jim Cramer: Oil Will Recover In the Long-Term
- Mother’s Day: How to Celebrate In the Era of Social Distancing
- Crunch Fitness CEO's Tips for Staying Fit Indoors
- Plunge in Travel Due to Coronavirus Pandemic Leads to Massive Tech Company Layoffs