April 20-24, 2020

What happened last week

Oil prices fell below zero for the first time in history

On Monday, the price per barrel of West Texas Intermediate crude oil plummeted 306% (US$55.90), closing at negative US$37.63. It was the first time in history that oil has traded below zero since data was first collected in 1870. The drop occurred because of an overwhelming supply of oil around the world, reduced demand throughout the pandemic, and a lack of storage space for excess oil, especially in the United States.

Recognizing the economic implications, U.S. President Donald Trump instructed the Secretary of Energy and Secretary of the Treasury to draft a plan that would make funds available to the oil and gas industry.

In Canada, the federal government announced a $2.45 billion aid package to help support the country’s energy sector, but Alberta Premier Jason Kenney said, “Significantly more action is urgently needed to ensure a future for an enormous part of Canada’s economy.”

North American markets bounced back mid-week as oil prices recovered

Markets displayed resilience after a turbulent week that included the historic drop in oil prices, mixed corporate earnings, pandemic optimism, and more government relief to support the economy.

Tuesday saw the week’s sharpest declines with the Dow Jones Industrial Average and S&P 500 both closing at their lowest levels since April 7. By Wednesday, markets recovered as oil prices showed signs of stabilizing and investors digested a new US$480 billion relief package for small businesses impacted by COVID-19. News that several states are also preparing to lift restrictions on local businesses gave markets a bump.

Corporate earnings season continued with IBM reporting a decline in revenue, setting a negative tone and weighing down technology stocks, including Microsoft and Apple Inc. Netflix and Chipotle were the bright spots. The online streaming service added its highest number of new subscribers during the first quarter, and Chipotle reported an 81% spike in online orders.

Canadian economic data and relief aid announced

Statistics Canada released February’s retail sales numbers, which rose for the fourth month in a row, climbing 0.3% to $52.2 billion. March’s inflation rate fell to its lowest level since 2015, down to 0.9% from 2.2% the month prior. The decline was tied to volatility in the energy sector as Saudi Arabia and Russia were entrenched in an oil price war at the time.

On Wednesday, Prime Minister Justin Trudeau announced a $9 billion aid package to support students and recent grads who have seen their job prospects vanish. The package includes a $1,250 monthly payment for post-secondary students running through August. Students with disabilities and students who care for others are eligible for an increase of up to $1,750.


The stock and bond market*
INDEX CLOSE WEEK YTD
S&P/TSX Composite 14,420.36 0.42% -15.49%
Dow Jones Industrial Avg. 23,775.27 -1.93% -16.69%
S&P 500 Index 2,836.74 -1.32% -12.20%
NASDAQ Composite 8,634.52 -0.18% -3.77%
MSCI EAFE 1,588.69 -2.07% -22.01%
10-yr GoC Yield 0.58% -0.06% -1.12%
10-yr U.S. Treasury Yield 0.60% -0.05% -1.32%
WTI Crude Oil (US$/bbl) 16.94 -7.28% -72.32%
Canadian Dollar US$0.7097 -0.38% -7.82%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending April 24, 2020. Sources: www.bloomberg.com, www.msci.com, www.bankofcanada.ca and www.treasury.gov.


What’s ahead

U.S. GDP and Federal Reserve meeting on the books

First quarter U.S. gross domestic product data is scheduled for release this week.

A Federal Open Market Committee meeting, followed by a press conference with chairman Jerome Powell, is planned for Wednesday. The meeting is expected to stray from its standard agenda to focus on the rise in unemployment and the ongoing impact of COVID-19.

Key take-away

There are countless factors that influence the market. The best defense against market downturns is having an investment plan geared towards your individual goals and objectives – and sticking to it.

Circle these dates

  • May 14: Bank of Canada Financial System Review released
  • June 1: 2019 income-tax filing deadline
  • June 3: Bank of Canada interest-rate announcement

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