A surge in new COVID-19 cases swept across the country this week, causing some states to put a pause on reopening efforts and a pullback in stocks. The U.S. hit a record number of new cases lead by California, Arizona, Florida, and Texas, with total cases in the U.S. now exceeding 2.4 million according to data compiled by John Hopkins University.

The death rate has not climbed at the same pace, but it is not clear if this is due to a lag in the data or other demographic considerations. At the same time, New York, the recent epicenter of the U.S. outbreak, continues to slow the spread. New restrictions are being put in place across the country requiring mask wearing in public places indoors, and some states are mandating two-week quarantines for visitors coming from hotspots.

The European Union is also considering restricting travel from the U.S. into the region even after travel restrictions plan to be lifted for some countries on July 1.

In summary, high levels of uncertainty around the recovery and reopening efforts are once again weighing on the stock market. After unprecedented levels of stimulus from the Federal government provided immediate support to both the greater economy and stock market, it is unclear how sustainable it is and what lies ahead.

Weekly Returns

• S&P 500: 3009.05 (-2.86%).
• FTSE All-World ex-US (VEU): (-1.21%).
• US Ten Year Treasury Yield: 0.64 (-0.06).
• Gold: $1,770.40 (+1.54%).
• EUR/USD: 1.1219 (+0.37%).

Major Events

• Monday, June 22 – An order was signed by President Trump temporarily restricting work visas like the H-1B for new immigrants, which took effect Wednesday and is set to last through the end of 2020.
• Tuesday, June 23 – The former CEO of Wirecard, a German fintech company, was arrested for fraud after the company admitted that the $2.1 billion reported on its balance sheet did not exist.
• Wednesday, June 24 – The International Monetary Fund lowered its global economic outlook for the year, now expecting the global economy to shrink 4.9% compared with its 3% estimate in April.
• Thursday, June 25 – Weekly jobless claims came in at 1.48 million holding steady so far in June, while continuing claims totaled 19.5 million, slightly down from a week prior.
• Friday, June 26 – Consumer spending rose 8.2% in May, the highest amount on record, after falling the most on record in April.
• Friday – Facebook (FB) dropped 8% and Twitter (TWTR) dropped 7% after consumer giant Unilever NV (UN) stated they would halt U.S. ads on social media platforms for the rest of 2020 due to concerns over hate speech and political polarization.

Our Take

Stock market volatility was back this week with a vengeance. Amidst the backdrop of major uncertainty around the pandemic, the market seemed especially vulnerable to headline risk. It started June 21, with stock futures going haywire after confusion over comments made by White House trade advisor Peter Navarro.

Initially stock futures fell sharply after concerning remarks were made by Navarro that the trade deal was “over." Futures then quickly recovered all losses when President Trump tweeted the trade deal remained “fully intact." June 23, the Nasdaq rallied to another new all-time high as it was driven by optimism in tech shares and a pickup in business activity.

June 24, stocks plunged as several states reported new daily case records. June 25, stocks recorded a strong rally lead by financials as regulators eased some restrictions on big banks around Volcker rule restrictions put in place after the Financial Crisis. This move was ahead of annual stress test results released after the close that were positive at face value, yet new restrictions on buybacks and dividend payouts on banks by the Fed caused bank stocks to plug leading Friday’s sell off.

The annual rebalancing of the FTSE Russell U.S. indexes also took place June 26, which tends to be one of the largest trade volume days of the year.

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