The major markets experienced losses last week as US-China tensions and coronavirus concerns were renewed. The tech centric Nasdaq fell about the same as the MSCI Emerging Market index. Meanwhile, the Dow, S&P 500 and MSCI World Indices all fell down in the mid 2% range.
The losses were fairly consistent at the sector level with only Healthcare ending in positive territory for the week. Energy suffered the greatest losses but was followed closely by real estate. The losses in the Energy sector were despite gains made in the GSCI Crude Oil Index totaling 8.63% for the week. It was the GSCI Natural Gas Index that was hit with a loss of 11.9% for the week.
Real Estate and Financials both suffered last week as the Mortgage Bankers Association reported another increase in the weekly mortgage forbearance rate to 7.91% An increase was expected as a new month began and more borrowers requested forbearance on their home loans. Mike Fratantoni, MBA's Chief Economist and Senior Vice President of Research and Industry Technology, said that “FHA and VA borrowers have been most impacted by the job losses thus far, with the share of Ginnie Mae loans in forbearance at almost 11 percent.”
The economic instability has cause some to wonder if we might see negative rate in the Fed Funds Rate by next year. Midweek, Fed Chair Jerome Powell squelched the idea of negative interest rate in the U.S. stating, “The committee’s view on negative rates really has not changed. This is not something that we’re looking at.”
Finally, on Friday the U.S. Department of Commerce announced plans to restrict Huawei from using American made technology and software in its manufacturing of semiconductors. The rule change is set to go in effect in September. “Despite the Entity List actions the Department took last year, Huawei and its foreign affiliates have stepped-up efforts to undermine these national security-based restrictions through an indigenization effort. However, that effort is still dependent on U.S. technologies,” said Secretary of Commerce Wilbur Ross.
This news echoes last years trade war headlines as the US, along with much of the world, looks to China for explanation for the handling of information and mitigation for the early days of the coronavirus pandemic.
JeffCoxCNBCcom. “Powell Says the Federal Reserve Is Not Considering Negative Interest Rates.” CNBC, CNBC, 13 May 2020, www.cnbc.com/2020/05/13/powell-says-the-federal-reserve-is-not-looking-at-negative-interest-rates.html.
The S&P 500® Index is a capitalization index of 500 stock-designed to measure performance of the broad domestic economy through changes in the aggregate market value of stock representing all major industries.
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