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Before the Bell: S&P Futures Up On Coronavirus Numbers (INDEXSP: .INX)

America is opening up with only four states still in shutdown. S&P futures are 47 to 48 points higher. The Federal Reserve has been the most significant player in helping keep up the markets. Fed Chairman Jerome Powell said he expects the economy to recover through the second half of this year, but a full recovery may not come before there’s a vaccine.

Politically, America is divided with the Republicans wanting to open the country while Democrats are looking to keep the states in shut down and increase government spending on social programs. Speaker of the House Nancy Pelosi said Democrats are open to negotiations on the $3 trillion economic-stimulus bill the chamber passed last week.

The number of coronavirus cases are declining. Secretary of Health and Human Services Alex Azar said the U.S. isn’t seeing a spike in new coronavirus cases in areas that have reopened but cautioned it’s still early. New York Governor Andrew Cuomo said the number of COVID-19 hospitalizations continues to fall and the state can now conduct as many as 40,000 tests per day versus its goal of 6,000.

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Speaking before Congress earlier this week, top health officials talked up the growth in U.S. testing. CDC Director Robert Redfield said that widespread testing was essential for the U.S.’s reopening process.

And the Food and Drug Administration (“FDA”) recently granted “emergency use” authorization to Quidel Corp’s COVID-19 antigen test, to allow for more rapid screening. Assistant Secretary for Health Admiral Brett Giroir said Quidel will be able to distribute 300,000 antigen tests per day within the next few weeks. He also anticipates our nation will be able to perform 40 million to 50 million tests a month by September.

As testing ramps up, consumers will get a clearer picture of the pandemic. It will increase the “comfort” factor for regular interaction as infected individuals can isolate themselves. It will afford people the opportunity to go back to “normal” daily routines. That will go a long way in removing economic uncertainty. Couple this with states beginning to reopen, and consumer spending is set to rebound as well.

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Real Estate Market Coming Back?

COVID shutdowns aren’t keeping people from re-entering the housing market. The Mortgage Bankers Association (“MBA”) continues to see a recovery in home purchase applications. In the week ending May 8, the MBA’s Purchases Index rose 11% from the week prior. This marked the fourth-straight week of increases for the index.

According to Joel Kan, the MBA’s associate vice president of economic and industry forecasting, the Purchases Index has seen a “stark recovery” in recent weeks. He noted that purchase activity saw double-digit growth in multiple states – Illinois, Florida, Georgia, California, and North Carolina. In New York, the U.S. epicenter of the COVID outbreak, purchase applications jumped 14%.

Kan said the MBA expects the positive trends in purchase activity to continue. He also noted that we’re in the final weeks of the spring season, which is typically the busiest time for home sales.

As states continue to reopen their economies, we should see the pent-up demand to enter the market. This will be a tailwind for home sales, and homebuilders, going into the summer.  (This will be an excellent indicator of the health of the ecomony)

Mortgage rates remain near record lows, making it easy for prospective buyers to get an affordable mortgage. The National Association of Realtors’ (“NAR”) Housing Affordability Index remains well above 100, reading 162.2 in March. This means the average family can afford 162% of the average home in the U.S.

This is a good sign for the housing market. It’s a signal that demand didn’t disappear because of the pandemic, it was just delayed. Now that things are beginning to reopen, this demand should re-enter the market. And all this is happening while the U.S. consumer has very little confidence and clarity about how the pandemic will play out. But that could soon change.

As America returns to normal, we fully expect housing and the markets to come back.

Earning Report This Week

Monday:

CWCO, FEDU, HZN, IGT, INSE, KMDA, NAT, NIU, SE, SOGO, SOHU before the open.

APLE, BIDU, BILI, DAC, FTK, IQ, NOAH, TRVG, YVBD after the close.

Tuesday:

AAP, CUE, DXYN, DY, EXP, HD, RADA, SINA, WB, WMT, before the open.

ASND during the day.

CSV, DAO, IIN, KRNT, NTES, RRR, SQM, TRNS, URBN, after the close.

Wednesday:

ADI, DQ, LOW, MCK, QIWI, RDY, ROLL, TCNNF, TGT, before the open.

AHT, COHR, CPLG, EXPE, LB, NDSN, SCVL, SKY, SNPS, TTWO, VER, YY, ZTO after the close.

Thursday:

BBY, BJ, BRC, CSU, DAVA, ENTX, HRL, LCUT, MDT, QTRHF, SDRL, TGP, TJX, TK, TNK, USPH, WMS before the open.

PAVM during the day.

A, AGYS, CRMT, CTHR, DECK, HPE, INTU, NVDA, NVGS, PANW, PLT, PRSP, RAMP, ROST, SPLK, after the close.

Friday:

BABA, BKE, DE, FL before the open.

Weekly Economic Calendar

Monday

Japanese Preliminary GDP for Q1
Japanese Tertiary Industry Index for March
NAHB Housing Market Index for May (10 a.m.)
Fed’s Bostic Speaks (2 p.m.)

Tuesday

Japanese Final Industrial Production for March
Japanese Final Shipments for March
ECB’s de Guindos Speaks
German Wholesale for April (2 a.m.)
U.K. Claimont Count Change, Rate for April (2 a.m.)
U.K. Employment, Rate, Unemployment Rate for March (2 a.m.)
U.K. Average Weekly Earnings for March (2 a.m.)
U.K. Preliminary Labor Productivity for Q1 (4:30 a.m.)
German ZEW Current Situation, Economic Sentiment for May (5 a.m.)
Preliminary Building Permits for April (8:30 a.m.)
Housing Starts, Completions for April (8:30 a.m.)
Fed’s Powell Speaks (10 a.m.)
Fed’s Kashkari Speaks (10 a.m.)
ECB’s Lane Speaks (10 a.m.)
Fed’s Rosengren Speaks (2 p.m.)
American Petroleum Institute Crude Oil Inventory Data (4:30 p.m.)

Wednesday

Japanese Core Machinery Orders for March
U.K. CPI for April (2 a.m.)
U.K. PPI for April (2 a.m.)
U.K. RPI for April (2 a.m.)
Eurozone ONS House Price for March (4:30 a.m.)
Eurozone CPI for April (5 a.m.)
MBA Mortgage Applications (7 a.m.)
Eurozone Preliminary Consumer Confidence Indicator for May (10 a.m.)
Fed’s Bostic Speaks (10 a.m.)
Energy Information Administration Crude Oil Inventory Data (10:30 a.m.)
Fed’s Bullard Speaks (12 p.m.)
FOMC Minutes (2 p.m.)

Thursday

Japanese Preliminary Export, Import for April
Japanese Preliminary Trade Balance for April
Markit/JMMA Japan Preliminary Manufacturing PMI
Markit France Preliminary Manufacturing, Services, Composite PMI for May (3:15 a.m.)
Markit Germany Preliminary Manufacturing, Services, Composite PMI for May (3:30 a.m.)
ECB’s Panetta Speaks (3:35 a.m.)
Markit Eurozone Preliminary Services, Composite PMI for May (4 a.m.)
U.K. Preliminary CIPS Manufacturing, Services PMI for May (4:30 a.m.)
U.K. CBI Industrial Trends Orders for May (6 a.m.)
Philadelphia Fed Index for May (8:30 a.m.)
Initial Jobless, Continuing Claims (8:30 a.m.)
Markit U.S. Preliminary Manufacturing, Services, Composite PMI for May (9:45 a.m.)
Existing Home Sales for April (10 a.m.)
Leading indicators for April (10 a.m.)
Fed’s Williams Speaks (10 a.m.)
Fed’s Clarida Speaks (1 p.m.)
Fed’s Powell Speaks (2:30 p.m.)

Friday

Japanese CPI for April
U.K. Public Sector Net Borrowing for April (2 a.m.)
Markit Eurozone Preliminary Manufacturing PMI for May (4 a.m.)
ECB’s Lane Speaks (10:30 a.m.)
Baker Hughes Rig Count Data (1 p.m.)
Bond Market Closes for Memorial Day Holiday (2 p.m.)
CFTC Commitment of Traders Report (3:30 p.m.)

 

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