The Market Sum | Insight after the bell Friday's Headlines 1. US markets flat, but post best week in six 2. Oil falls on China economy concerns 3. The 3 stages of transition to recovery 4. Best global markets so far this year 5. What to expect next week Dow
24,465.16
−8.96
(-0.04%) | | S&P
2,955.45
+6.94
(+0.24%) | | Nasdaq
9,324.59
+39.71
(+0.43%) | | | | | | Bitcoin
$9,192.98
+$125.29
(+1.38%) | | US 10-Yr Yield
0.657
−0.02
(-2.95%) | | | | | | Russell 2000
1,355.53
(-18.76%) | | Crude Oil
$33.29
(-41.95%) | | US 10-Yr Yield
0.657
(-56.78%) | | | | Image credit: vm/Getty (Programming note: We will be off on Monday for Memorial Day, but back in your inbox on Tuesday. Have a safe and happy weekend.) Markets Today U.S. markets closed relatively flat to end the week as investors didn't assert themselves ahead of the Memorial Day weekend. The DJIA fell for the third day in four, but posted its best week in six. Renewed tensions surfaced between the U.S. and China, as well as between China and Hong Kong. These add a new layer of complexity to any global economic recovery. Hong Kong's Hang Seng Index had its worst day since 2015, falling 5.5%. Forecasters continue to lower their projections for economic destruction this quarter, but see a viscous snap back, followed by simmering declines as the realities of mass layoffs and the new normals of social distancing settle in. We've never done this before. We've also never had a Memorial Day weekend quite like the one we are headed into here in the U.S. It's the unofficial start to the summer, but without sleep-away camp, beach parties, ball games and BBQs with lots of friends and family, it will feel different. But, hopefully, we'll focus on the things that matter most and help those who need it. Happy Friday. Headlines: - Oil futures fell on Friday, with U.S. prices set to break the longest winning streak in more than a year over worries about China growth and fresh friction between Washington and Beijing. Prices have doubled since crashing in April.
- The Chinese government declined to provide a 2020 GDP forecast for the country, the first time since 1994, due to uncertainty. Chinese Premier Li said the country intends to focus on six crucial areas including domestic demand, economic development and social stability, and the battle against poverty. While growth has been slowing the last few years, the economy shrank 6.8% year over year in the first quarter of 2020 due to the coronavirus outbreak, marking the first quarterly decline since the survey began in 1992.
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Argentina extended the deadline for negotiations for restructuring $65 billion in debt from May 22 to June 2 after talks with creditors failed yesterday. According to the Congressional Research Service, the South American country has defaulted on its foreign debt nine times since independence in 1816. It has received bailouts from the IMF 21 times since joining the international organization in 1956. Today it missed bond interest payments worth $500 million. - Facebook, Shopify and Spotify have joined the growing list of tech companies allowing employees to work from home on a permanent basis or at least until the end of the pandemic. Yesterday Facebook CEO Mark Zuckerberg said he expects around 50% of the firm's workforce will be working remotely in the next five to 10 years. The company is investing in mixed reality, as seen in this video shared yesterday by its AR/VR head.
- Jio Platforms, owned by billionaire Mukesh Ambani's Reliance Industries, announced that private equity firm KKR is pledging $1.5 billion for a 2.32% stake in the company at a valuation of $65 billion. This comes after Facebook announced a $6.5 billion stake in Jio a few weeks ago.
- IBM is cutting jobs in at least five U.S. states in order to reduce costs amid the pandemic and falling revenue. The tech giant hasn't revealed the number of people let go, but a Bloomberg source said it is likely to be in the thousands.
- Apple sold 3.9 million iPhones in China in April, according to CINNO Research, as reported by CNBC. That's a 160% increase from March, when it sold 1.5 million smartphones. In April, overall smartphone shipments in China rose over 94% versus March and reached 40.8 million.
- The last Monday of May is Memorial Day in the U.S., a national holiday meant to honor those in the armed forces who lost their lives in battle. The history of the celebration dates back to the period following the Civil War in the late 1800s. The parades, beach visits and ceremonies may be cancelled this year, and spending will be a fraction of what it usually is. But we do a lot of eating this weekend, and burgers, hot dogs, and beers are still the food and beverages of choice, according to BofA's BBQ survey. But I'm more interested in what we put on our grilled foods, and which brands we are faithful to (zoom in):
 GDP Breakdown and the Road to Recovery Most people have accepted the fact that there will be no V-shaped recovery in the U.S., or most other developed countries in 2020. The steep economic decline is simply too acute to climb, especially because social distancing guidelines will remain partially in place in major population centers. While manufacturing and industrial production may have bottomed here in the U.S., and is starting to rise, consumption, which makes up around 70% of GDP, will be much slower to rebound, for obvious reasons. Travel and entertainment, two of the main components of consumption, are expected to be at these low levels, for several months.  Snap Back, then a Simmer Consumer spending may snap back hard by the end of the summer, especially for services where there is no online alternative. We are already seeing signs of that through credit card data as consumers have rushed out to get haircuts and other in-person services. BofA Research expects GDP to spike, then fall again through 2021, but not into negative territory. Think long, slow, BBQ recovery with some flare ups. The three phases of the transition to recovery may look like this: - Lockdown deepens contraction as GDP could fall as much as 40% from last quarter as the economy fails to gain traction.
- Transition: A faster snapback as economies reopen and consumers rush out to spend on things they have been deprived of for months.
- Recovery: Slow and bumpy as 25% unemployment will take years to bring down and more households fall into debt.
 Global Markets Scorecard We are about halfway through the second quarter of what has been a year for the books. The economic devastation has been historic, to say the least. The impact on the capital markets of major economies around the world has also been significant, with around $10 trillion in market value disappearing at the lows in March. The rebound for most markets has also been noteworthy. Investors like to look ahead, and it is interesting to see where they see the brightest futures. - China's stock market has rebounded the most and the swiftest, given that it was the country of origin for the coronavirus. The recent saber rattling with Hong Kong and the U.S. may add a new wrinkle to its trajectory.
- The U.S. has also rebounded swiftly, despite the worst economic downturn since the Great Depression. There are plenty of risks ahead, including its relationship with China and the upcoming presidential election in November.
- Australia's economy is highly dependent on mining and materials, and its two biggest customers, China and the U.S., are having demand issues. It could take awhile for a sustained recovery.
- Brazil is in the throes of the pandemic right now. South America's largest economy and a huge exporter, is facing health and economic challenges that could derail the economy for years. Argentina, one of its main trading partners, is also in the midst of a crisis.
What to Expect Next Week First though, here's a look at how different asset classes have been performing:  Here's a list of economic events for the week ahead: Monday, May 25: - Market Holiday in the U.S. for Memorial Day
- Market Holiday in the United Kingdom for Bank Holiday
- Market Holiday in India for Ramzan (Id-Ul-Fitar)
- German Gross Domestic Product (GDP) (Q1)
- German Business Expectations (May)
- German Ifo Business Climate Index (May)
- Brazilian Central Bank Focus Market Readout
Tuesday, May 26: - Mexican GDP (Q1)
- U.S. Standard and Poors-Case Shiller HPI Composite (March)
- Russian Unemployment Rate (April)
- U.S. New Home Sales (April)
Wednesday, May 27: - European Central Bank Financial Stability Review
- Canadian Building Permits (April)
- U.S. Federal Reserve Beige Book
Thursday, May 28: - Spanish Preliminary Consumer Price Index (CPI) (May)
- German Preliminary CPI
- Brazilian Unemployment Rate
- U.S. Core Durable Goods Orders (April)
- U.S. Preliminary GDP (Q1)
- U.S. Pending Home Sales (April)
- U.S. Weekly Initial Jobless Claims
- Japanese Tokyo Core CPI (may)
- Japanese Retail Sales (April)
- Japanese Preliminary Industrial Production (April)
Friday, May 29: - U.K. Nationwide Housing Price Index (May)
- German Retail Sales (April)
- French Consumer Spending (April)
- French Preliminary CPI (May)
- French GDP (Q1)
- Italian Preliminary CPI (May)
- Eurozone Preliminary CPI (May)
- Indian GDP (Q4)
- Brazilian GDP (Q1)
- U.S. Core Personal Consumption Expenditure (PCE) Price Index (April)
- U.S. Retail Inventories (Ex. Auto) (April)
- U.S. Goods Trade Balance (April)
- U.S. Chicago Purchasing Managers' Index (May)
- U.S. Michigan Consumer Sentiment (May)
- Canadian GDP (Q1)
Beige Book
This upcoming Wednesday, the Fed will release it's Beige Book, a review of U.S. economic conditions put together by interviewing business leaders, economists, and other people knowledgeable about the economy and markets. Because the Federal Open Markets Comittee (FOMC) uses the Beige Book to help them judge how the economy is doing, looking at it can help us try to predict what the Fed may do next. U.S. PCE Price Index
Last week, week, the Eurozone narrowly avoided falling to deflation as it just managed to eke out a 0.3% rate of CPI growth. This upcoming Friday, the Bureau of Economic Analysis (BEA) will release the April PCE Price Index. The PCE Index is a less well-known inflation measure used by the Federal Reserve's inflation target. Year-over-year PCE growth fell from 1.8% in February down to 1.3% in March, when the pandemic only shut down the U.S. economy for the second half of the month. The reading for April, when quarantine shut down the country for the entire month, is likely to be lower. How much lower it is may, like the Beige Book, be a good indicator of what steps the Fed might take next. Shares of L Brands are up by 18.5% after the fashion retailer announced it was closing 250 Victoria's Secret stores. This move was seen by investors as affirming L Brands' commitment to separate its successful Bath & Body Works brand from the struggling Victoria's Secret. Gap's stock price rose by 11.5% as the clothing and accessories retailer quickens its rollout of robotic assemblies for its warehouses. This will allow Gap to meet rising online orders while still abiding by social distancing. Shares of National Oilwell Varco are down by 7% after the oilfield services and equipment provider announced it would no longer be paying its dividend. Shares of TakeTwo (TTO) fell 6% following its quarterly earnings release on concerns that growth won't be sustained once the pandemic has subsided. Word of the Day Credit Card Delinquency Credit card delinquency occurs when a cardholder falls behind on making required monthly payments. While being 30 days late is generally considered delinquent, it typically takes two months of missed payments before the information is reported to credit reporting agencies. If an account is reported delinquent, the event can have a negative effect on your credit score and curtail your ability to borrow in the future. image courtesy https://ethernethistory.typepad.com/ Today in History May 22, 1973: The development of the Internet accelerates as computer scientist Robert Metcalfe, working at Xerox's Palo Alto Research Center (PARC), drafts a memo describing what he calls "The ETHER! Network," or Ethernet. Michael Hiltzik, Dealers of Lightning Enjoy the Market Sum? Share it with a friend. CONNECT WITH INVESTOPEDIA |
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