Stocks remained pressured Wednesday, as the economic outlook post-Coronavirus continues to be uncertain. Bleak retail sales data, which was more than expected, was met with high valuations coming into the day.
All three major U.S. indices were down considerably, with the S&P 500 down as much as 2.7% by midday. Investors flocked into the 10 year treasury bond, sending the yield down to 0.63% from 0.68% in the morning and 0.75% Tuesday.
S&P 500 stocks are still trading at about 18 times 2020 earnings, a rich multiple given the fact that several issues still point to uncertainty regarding an economic recovery and the magnitude of a 2021 earnings rebound still remains a question mark. The indus entered the day at 18.8 times. The market had begun to look past what it knew would be a deep recession and now it seems there are few participants willing to ad stocks at these prices.
Retail sales for the month of March fell 8.7% one of the sharpest monthly declines in history. The growth trend pre-March was at around 0.3%. Investors aren’t surprised, but the data does speak to the depth of the recession.
But some states are reopening their economies as the spread of the virus decelerates, while others aren’t. The word used by Economist and Multi-Asset Strategist at New York Life Investments Lauren Goodwin to describe how the market views the end of lockdowns: “confusion.”
Head of Investment Strategy at E*Trade, Mike Loewengart said, "Bleak retail sales and corporate earnings are likely fairly priced in, but given the forward-looking vantage point of the markets it could be digesting Governors’ blueprints to reopen pockets of the country. These plans will be anything but normal and quick—the recovery will be long even as the economy starts to reopen.”
Continuing the ominous signs for corporate and consumer credit and corporate earnings was an earnings miss from Bank of America (BAC) - Get Report, which is down more than 6% Wednesday. The bank, like JPMorgan (JPM) - Get Report and Wells Fargo (WFC) - Get Report, said it set a side a large chunk of cash for expected credit losses, a move recorded as an expense that eats into profits.