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As the country and its sports events are shut down, we find ourselves watching shows about how past dynasties played out. In light of current global conditions, even Dennis Rodman’s antics seem like a weird but missed part of the ‘old normal.’ We entered the year with unemployment at multi–decade lows and stocks at all–time highs. In April, the U.S. Unemployment Rate rose from 4.4% to 14.7% – its highest level since the post–World War II winddown, but stocks are curiously still within reach of all–time highs. If that happened over time, it wouldn’t make any sense. With it happening over 3 months, it just doesn’t make much sense! Chicago has its Bulls and Bears teams for the markets. The special covers the breakup of the Bulls. We just hope it’s not one of those ‘life imitates art’ scenarios.

We recall when the streak of initial jobless claims under 300K was important news. Back in the BMR (3/22/2017) we were still counting as claims had been under 300,000 for 106 straight weeks. When claims fell closer to 200K, we quit counting! Through the week ending March 14th, they had been under the 300K threshold for a 263rd week. They rose another 3.169 million last week – passing 33.492 million since March. We look forward to lower numbers again!

The European Central Bank is in it for the ‘long stall’ as they don’t see pre–virus conditions returning until the end of 2022. Dallas FRB President Robert Kaplan said: “This is a historic contraction, very severe. There’s going to be a need for stimulus in the future.” He said that would likely have to come from fiscal authorities. He said stimulus would have to continue this year and into next year to work down the unemployment rate. St. Louis’ James Bullard said the economy needs to reopen, albeit gradually, or it risks a depression. Raphael Bostic (Atlanta) and Neel Kashkari (Minneapolis) each think the U.S. can avoid a ‘Great Depression’ scenario. Bostic said the Fed should err on the side of “being engaged and providing too much support.” Kashkari thinks, as does the Bond Market Review, that the real unemployment number is closer to 23% or even 24%. He said: “It’s devastating.” He sees a “long, gradual recovery, which is unfortunate” but thinks they’re on top of the crisis and contends that policy makers in the 1930s did the wrong thing. We wonder what policy makers will think of 2020 and this Fed – 90 years from now?


Looking Ahead

  • Equity cycles show lows near May 13th with a larger downdraft following a high near May 20th.

  • Bond cycles show yields remaining low until an upturn due near May 8th/11th, then rising into the 21st.

Treasuries, Agencies, and MBS

The big story this week in bonds was another drop to record lows – for short rates. The 2–year note closed under .13% yesterday for its lowest yield on record. 3 and 5–year notes also dropped to their lowest closing yields on record. With short T–Bills trading near .03%, can negative rates be far behind? We think it’s a question of when, not if! The New York Fed is now projecting GDP for Q2 to plunge by 31.22%. The Atlanta GDP forecast was similar, falling this week from –17.6% to –34.9%. Last week, the yield curve twisted steeper with 2 and 5–year rates dropping by 3.5 and 2.5 bps while the 10 and 30–year rates were higher by 1 and 7.5 bps.

As we said, shorter yields fell sharply into Thursday and the 2–year fell under .10% today. The 2 and 5–year sector yields dropped by 5 and 4.5 bps while the 10 and 30–year sectors were again higher by 3 and 8 bps (in another steepening twist). The Fed again slowed its buying but still expanded its balance sheet by $65.5 billion to $6.721 trillion. The biggest spender of all time (Fed Chair Jerome Powell) now has the largest balance sheet of all the central banks – having passed the Bank of Japan and the European Central Bank.

In March, there was a $12 billion decrease in Consumer Credit for the biggest decline in over a decade! February’s increase was revised $2.4 billion less to a still–healthy $19.918 billion. Americans (and their government) are all about buying on credit – but they’re not!!! Revolving credit fell $28.2 billion – the largest drop in records going back to the ‘60s. After 2 months of declines, the March Trade Balance deficit widened from $39.8 billion to $44.4 billion. While imports fell by 6.2%, exports fell by 9.6%!

Last week, MBS spreads (FNMA 30–year 2.5%) widened by 3 bps. The Treasury will add a 20–year bond auction on May 20th. It’s scheduled to fall between the 3, 10, and 30–year (which usually fall around the second week of each month) and the 2, 5, and 7–year auctions (which are usually around the last full week). Next week, the U.S. Treasury will auction $42 billion 3–year notes on Monday (05/11), $32 billion 10–year notes on Tuesday (05/12), and $22 billion 30–year bonds on Wednesday (05/13).

Treasury Yield Curve

2-Year: 0.191%

5-Year: 0.350%

10-Year: 0.614%

30-Year: 1.250%

Weekly Yield Change –.035%



Support 0.143/ 0.163/ 0.183/ 0.203

0.317/ 0.332/ 0.347/ 0.362

0.682/ 0.702/ 0.722/ 0.742

1.387/ 1.406/ 1.425/ 1.444%


0.123/ 0.103/ 0.093/ 0.083

0.303/ 0.288/ 0.273/ 0.258

0.663/ 0.643/ 0.624/ 0.603

1.351/ 1.333/ 1.315/ 1.297%



Initial Jobless Claims rose by 3.169 million but were lower for a 5th week – showing a little relief. I know folks that have yet to claim benefits, so these numbers are surely understated. Nevertheless, since the week of March 21st the economy has now lost 33.492 million jobs. Continuing Claims (which lag a week) rose from 18.011 million to 22.647 million – nearly 21 million over the pre–crisis total. Coming into the April jobs numbers, ADP Employment Change showed a 20.336 million loss in private payrolls (which fell 19.520 million in the official Bureau of Labor Statistics data for April) and Challenger Job Cuts rose 1,576.90% (more cuts) versus April 2019.

The jobs losses for April reflected the elevated jobless claims and related data. The ISM Employment (manufacturing) index dropped from 43.8 to a 71–year low 27.5. The Non–farm payroll losses for April represented the largest decline in history. A record 103.415 million Americans were out of the labor force and the economy lost 20.5 million jobs. 169K job losses were added to the March totals to result in an 870K loss, and the 2–month revision was a net loss of 214K jobs. The worst previous decline (on record) was about 10 times less in September 1945 as the nation shutdown wartime production after World War II. The U.S. Unemployment Rate rose from 4.40% to 14.70% – also the highest since data going back to the 1940s. The Labor Force Participation Rate fell 2.5% to 60.2% – the lowest reading since the early 1970s. Manufacturing lost 1.33 million jobs. Retailers cut 2.1 million positions and Health Care lost 1.44 million workers – as regular office visits and elective procedures were suspended. The Underemployment Rate rose from 8.70% to 22.80%. Average Hourly Earnings rose 4.674% and they surged 7.91% year–over–year – as a loss in lower–wage workers and limited hours tweaked the numbers higher. Average Weekly Hours rose from 34.1 to 34.2. Bloomberg Consumer Comfort fell for a 7th week (from 39.5 to 36.9 – the lowest since October 2014). Sentiment on finances fell the most since 2012. The buying climate fell to the lowest level since 2014.

The weaker data is starting to prevail as we move into the March and April numbers. Many auto makers said sales dropped by 50% or more versus their April 2019 units. In April, Vehicle Sales fell from 11.37 million annual units to 8.58 million – which was the lowest monthly total since some data points began in 1980. As we’re all aware from the ads, deep discounts, delayed payments, and near zero percent financing are compressing any kind of decent profit margins. The auto sales numbers also spill over to the industry, which has lost workers and limited production. In March, Factory Orders fell 10.30% and 3.70% ex transportation. Orders for Durable Goods dropped by 14.70% and .40% ex transportation. Orders for Capital Goods were .10% lower.

ISM Manufacturing fell from 49.1 to an 11–year low of 41.5 (below 50 signaling contraction). New Orders fell from 42.2 to 27.1 – the lowest level since 1951! Factory Production fell at its fastest pace on record – dropping from just under 50 to 27.5. The service sector (ISM Non–Manufacturing), which had slight growth in March, fell from 52.5 to 41.8 (contracting). Q1 Nonfarm Productivity fell 2.50% while Unit Labor Costs rose 4.80%. Construction Spending rose .90%. Wholesale Inventories fell .80% and Trade Sales dropped 5.20%.

Next week is set for Q1 Mortgage Delinquencies and MBA Mortgage Foreclosures. Those numbers could still be non–threatening – it’s Q2 that will cause concern! Tuesday brings NFIB Small Business Optimism, Consumer Prices (April CPI and earnings data), and the Treasury’s Monthly Budget Statement for April. Wednesday gives us MBA Mortgage Applications (which rose .10% last week) and Producer Prices (April PPI). Import/Export Prices for April and jobless claims data follows on Thursday. Don’t forget Mother’s Day this Sunday!


Stocks have moved mostly sideways since the May 4th/5th time window for a high. Even though they are making new highs for the week this morning, stocks are well under the highs made on April 29th. However, the Nasdaq edged to a gain for 2020 yesterday – if only by .08% (and it’s also higher today). The cycles show a low near May 13th followed by another rally into a high near May 20th. The downward energy from May 20th into June 18th is fairly significant, and we’ll of course update as we go. Last week’s net change of –.22% for the Dow Industrials was the first time under 1% result (either way) since early January. The volatility is still there however as the Dow was up and then down over 4% (nearly 1,000 points) into (and from) last Wednesday (04/29).

The Dow Industrials fell 51.58 points or .22% last week to 23,723.69. It was up .64% for the week through yesterday. The S&P lost .21% but gained 1.78% coming into today. The Nasdaq lost .34% but has rallied 4.35% into today to go black for 2020. The Dow Transports gained .65% last week but are now among the weaker sectors having lost 1.16% through yesterday. Bank stocks rose a strong 2.81% to be among the leaders last week but have since fallen by 2.55%. 





Resistance: 24,406/ 24,719/ 25,035/ 25,352

9,124/ 9,220/ 9,316/ 9,412

2,924/ 2,951/ 2,978/ 3,005


24,094/ 23,786/ 23,477/ 23,173

8,935/ 8,841/ 8,747/ 8,653

2,897/ 2,871/ 2,844/ 2,817

Other Markets

Crude Oil surged 16.77% last week after its nosedive under $10/barrel the previous week. It added another 19.06% through yesterday to $23.55/barrel! Commodities gained 4.32% last week and another 4.21% coming into today. Gold lost 1.31% but recovered 1.46% through yesterday. The U.S. Dollar lost 1.33% but was .81% higher through Thursday. The Japanese Yen rose .56% and then added another .59% through yesterday. The Euro surged 1.46% last week but gave most of that gain back with a 1.34% loss through Thursday. Corn lost 1.35% but gained 1.44% into today. Cotton countered by rising 2.97% and then losing 2.07% through yesterday.

“Life can only be understood backwards; but it must be lived forwards.” Soren Kierkegaard

“Trouble is only opportunity in work clothes.” Henry J. Kaiser


Doug Ingram, Financial Economist

Additional Information is Available on Request