April 29, 2020 - Market Update

Today’s economic calendar kicked off with MBA mortgage applications for the week ending April 24^th , which posted a decline of -3.3% from the prior week. Purchases were actually up 11.6% week-over-week, but refis saw a -7.3% drop.

Treasuries reversed course on Tuesday and saw a bull flattening of the yield curve in advance of today’s Fed policy meeting. The 2yr yield was marginally lower (-0.01) at 0.21% while the 10yr yield dropped (-0.05) to 0.61%.

US equities moved lower on Tuesday, mainly driven by losses in the technology sector with healthcare following suit. The consumer confidence release was also a drag on stocks, falling to its lowest point since 2014 from 120.0 to 86.9. The decline in technology shares was a preemptive move ahead of earnings reports from industry leaders later this week. Alphabet, Microsoft, Facebook, Amazon, and Apple together make up 20% of the S&P 500’s market capitalization and all 5 report earnings within the next 2 days (Alphabet Inc. posted earnings last night with sales beating estimates). Yesterday’s losses indicate that investors are planning accordingly given concerns that these companies won’t weather the storm as well as initially anticipated. The stock market is currently up ~25% from its 2020 lows in mid-March and some states are now reopening businesses to phase out of the lockdown period. The question being asked is whether everything is improving as it should be or if we should instead be waiting for the other shoe to drop amid fears of additional economic fallout or a second iteration of the outbreak. Market participants will search for answers in today’s FOMC statement at 2pm ET and the press conference that follows. At yesterday’s close, the DJIA had declined -32.23 to 24,101.55, the S&P 500 was lower -15.09 at 2,863.39, and the tech-heavy Nasdaq Composite fell -122.43 to 8,607.73.

During the week of 3/2/20, before Covid-19 had much impact on the US economy, 0.25% of all mortgage loans were in forbearance. During the week of 4/19/20 the rate was 6.99%, up from 5.95% the previous week! At 6.99%, 3.5 million mortgages are in forbearance. Forbearance requests peaked the week of 3/30/20 and have declined since but will again spike the week of 4/27/30 as mortgage payments are due 5/1/20. 

Market Levels (May):