Market Brief – Thursday 4/30/20

Stocks and Treasury yields fell in overnight trading and held their overnight losses following today’s initial unemployment claims which showed another three million Americans filed for claims last week. Investors are hoping today will be a repeat of the last four weeks where stocks rallied on more Americans losing their jobs.

Initial jobless claims came in higher-than-expected at 3,839k, bringing the four-week average for jobless claims up to 5,033.25k. Continuing claims rose to 17,992k. Investors are betting big on stocks that these 30 million unemployed Americans will be back to work very soon. If 25% of these jobs are permanently lost, the U.S. economy will have lost the same number of jobs in five weeks than it did in the Great Financial Crisis.

Core Personal Consumption Expenditures (PCE), the Fed’s preferred gauge of inflation, which excludes food and energy, fell -0.1% in March and slowed to +1.7% from this time last year. The PCE price index fell -0.3% in March and slowed to +1.3% from this time last year.

Personal incomes fell -2.0% in March and personal spending fell -7.5% in March, the largest contraction in spending in history. Inflation-adjusted personal consumption fell -7.3% in March. The personal savings rate rose from +8.0% to +13.1% in March. The March PCE and personal savings rate data is disinflationary.

Stocks closed lower on the day, but investors remain optimistic the U.S. economy will be back to normal in a matter of weeks. Sellers aggressively pushed Treasury yields higher despite the disinflationary economic data that was released this morning. Treasury bond sellers are desperate to get yields up to validate stock prices. Key support on 30-year Treasury yields is 1.2%.