As COVID-19 cases begin to rise in areas again, investors are caught between those that believe in a V-shaped rebound and the Federal Reserve Chairman Jerome Powell who warned Congress of the long term effects from the virus. While the Dow, S&P, and Nasdaq were able to post gains this week (1.0%, 1.9%, and 3.7% respectively), Apple’s announcement that it was closing 11 stores sowed a seed of fear within investors. The market dropped quickly after hearing the news.
Prior to the statement, the combination of jobless cases further easing from 1566K to 1508K and retail sales rebounding to 17.7% compared to the previous month’s -14.7% gave investors hope. Economists note that while the economy is currently in a fragile state, the panic and forced selling has weaned off.
Despite the protests and mass gatherings in areas like Minnesota, early testing has not shown a rise in new coronavirus cases. New cases in Florida, California, and Arizona have reached record daily highs, however.
The real estate market did well this week, as mortgage applications inclined 8%. Refinance applications went up 10.3 percent and applications to purchase a home rose 3.5 percent to the highest in more than 11 years. Housing starts and building permits rose 4.3% and 14.4% from the previous month’s -26.4% and -21.4%. This does point to housing recovering slower than expected though.
Travel industries were hit hard after sentiments turned fearful. Carmax shares fell over 6 percent after its earnings report showed a sharp contraction in profits. Entertainment has also experienced rocky roads as theme parks and movie theaters alike struggle with reopening. AMC Entertainment Holdings has put in place plans to mandate movie-goers to wear masks. Companies like AMC need tickets to fill in the multi-billion dollar gap in revenue caused by quarantine procedures.
The US Federal Reserve and Central Banks in Europe have increased buying bonds, pumping money into circulation and increasing liquidity. While this does help the economy keep afloat, expect to see inflation in the longer term.
