Stocks Are Up — 3 Signs Investors Are Still Nervous

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U.S. stocks were higher Monday, but several key data points, mixed with a health-related signal from President Trump has the financial market far from risk-on. 

All three major U.S. indexes rose marginally, with the S&P 500 up as much as 1%. For a moment, the Dow fell into the red and the S&P's gain moderated to 0.46%. 

But crude oil was down 5.8% to just over $20 a barrel. And money flowed into the 10 year treasury bond, with the yield falling to 0.65%. It was above 0.75% late last week. Supporting the price is the Federal Reserve's injection of capital into the treasury market. 

Trump kept social distancing guidelines in effect through April 30. On the one hand, it means the administration is taking the coronavirus seriously, which many market participants want to see. On the other hand, it signals the virus is nowhere near finished having its way with the economy, which other sources have confirmed Monday. 

Oil demand is easily hit hard when people and businesses spend less. 

"The extension of containment measures across countries and through time will likely continue weighing on oil prices,” wrote Ipek Ozkardeskaya, senior analyst at Swissquote Bank in emailed remarks to reporters. 

And while the market is pricing in an economic recovery towards the end of the year, some of those estimates have moved from a "V-shaped" recovery to a "U-shaped" one, which is slower. The latter indicates the shape of economic growth over time on a  graph.  

"Our base case scenario is that we’ll see a U-shaped recovery beginning in Q3, even if Q3 data as a whole doesn’t show meaningful economic growth," Economist and Multi-Asset Portfolio Strategist at New York Life Investments Lauren Goodwin wrote. "If the virus impact lasts longer, then financial market outcomes could retrench further. In the meantime, Q1 2020 data will show only early effects of the COVID shutdown, and Q2 will demonstrate a severe economic contraction."

Earnings growth estimates for 2020 have fallen by just under 10% and could fall more as the virus rages on. That is priced into stocks, while some stocks like Apple  (AAPL) - Get Report and Starbucks  (SBUX) - Get Report are even seeing 20201 revenue and earnings estimates come down on slow recoveries.He market multiple on S&P 500 has fallen to around 15 times, still above the roughly 13 times it was at when the market was pricing in a more severe recession. 

Investors, while some have already added stocks back to their portfolios, are largely risk-averse as they await developments. 

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