We’re not out of the woods yet, but optimism is far outweighing pessimism on Wall Street. Remember, the market isn’t a perfect mirror of the economy, it’s a relative-to-expectations tool — we don’t need to recoup all lost GDP or job losses, we just need to begin climbing out of this economic valley.

And anecdotal evidence indicates we’re doing just that. So much so, the NASDAQ on Thursday erased all of 2020’s historic decline and turned positive on the year. Much remains uncertain (a vaccine is likely the silver bullet), but let’s dig into some of key events that drove markets higher last week and get you ready for the week ahead.

WALL STREET WRAP

Climbing the Economic Valley in the U.S.: No, we aren’t in the clear and risks are still elevated, but here are a few stories that fueled tempered optimism last week:

  • Bank of America CEO Bryan Moynihan said over the past two few weeks the bank is starting to see spending grow on the commercial and consumer side.

  • That gels with earnings from PayPal, which reported that May 1 was the highest single-day volume of transactions in its history.

  • Uber has seen week-over-week growth in ridership for the past three weeks. Last week, the increase was 12 percent.

  • Ford will restart North American production May 18, bringing 12,000 workers back.

  • Disneyland Shanghai opened Monday with limited capacity (tickets sold out in minutes).

  • Home loan applications ticked up for the third straight week, and housing analysts are seeing evidence of pent-up demand.

And in China: In an upside surprise, China exports rose 3.5 percent in April, smashing analysts’ expectations of an 18 percent decline. The China Association of Automobile Manufacturers also reported a 1 percent increase in auto sales to 1.98 million, following a 43 percent drop in unit sales in Q1. Several automakers independently confirmed the positive turn in China.

Vaccine Candidates Going Through the Paces: Pfizer last week launched human trials of a potential coronavirus vaccine in the U.S. that contains genetic instructions that “teach” the body to attack the coronavirus. Another company, Moderna, is prepping a phase 2 vaccine trial (with 600 people) and could reach phase 3 by summer. According to the World Health Organization, there are more than 100 vaccines currently in development as of April 30 with at least 8 in clinical trials (including Pfizer and Moderna).

It’s early, but it’s encouraging to see scientists taking plenty of shots on goal. A vaccine is the critical final step on the road to normal, and we’re optimistic science will win — it’s just hard to say when.

A 122-month Streak Ends: Economic activity in the services in the U.S. — which represents the largest share of the economy — contracted for the first time since 2009 in April, ending a 122-month period of positive readings. The Institute for Supply Chain Management’s survey of non-manufacturing companies reached 41.8 in April, down from 52.5 in March (any reading below 50 indicates contraction). Businesses are facing challenges adjusting to new restrictions, while uncertainty about the severity and duration of coronavirus impacts to supply chains, finances and workers continues to weigh on sentiment.

Unemployment Spikes: Unemployment surged to 14.7 percent in April, eclipsing the post-WWII record of 10.8 percent reached in 1982. A total of 20.5 million Americans lost their jobs in April, in what was the steepest decline in payrolls since the Great Depression. However, about 18.1 million of those unemployed persons believe their job loss is temporary. When, and how many of those 18.1 million people ultimately return to work will determine our trajectory out of this valley.

The fact that most job losses are considered temporary is partly why stocks rose last week despite historically dismal numbers. Another factor: April’s unemployment report may prove as bad as it’s going to get. Now that we’re slowly reopening, expectations are building for better economic growth and job figures in May and June.

THE WEEK AHEAD

How Are Small Businesses? Small businesses bore the brunt of the downturn, and this week we’ll see how deeply virus-related factors impacted operations when the NFIB Small Business Index is released Tuesday. We expect profound impacts, but we’ll be more interested in comments and color around owners’ expectations for the months ahead.

Boom or Bust in Retail: Retailers with robust online platforms, such as Amazon and Walmart, reported surges in digital orders over the past several weeks. Meantime, Neiman Marcus and J Crew filed for bankruptcy. Ecommerce, already a secular consumer trend, has shifted into overdrive during the pandemic and April sales will show just how much consumers have shifted spending.

Consumer Sentiment: This may be one of the more interesting reports this week, given evidence of an uptick in business activity late in April and into May. How are consumers feeling about the coming weeks and months? Are consumers more, or less, pessimistic than expected? Consumer spending is a major driver of the U.S. economy, so better-than-expected sentiment would be a plus for markets.

Insights About a Vaccine? Pfizer, Moderna and a host of other health care CEOs will be speaking Tuesday at CNBC’s Healthy Returns Virtual Summit. Some of the most influential voices in medicine will discuss where we are and where we’re going in terms of combating the pandemic, and that could be another shot of optimism for markets this week.

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